Do you think US treasuries are still safe?

[LARS]

This is indeed one of the risks I think treasuries carry. Treasuries have enjoyed very high investor confidence for decades, and playing games could easily undermine that confidence. And we have seen that, in the case of Greece, once investor confidence goes it's a death spiral.

The time to worry will be IF (when?) the US $ loses its world reserve currency status. Until then all this is noise. Moreover, it makes no sense to draw any conclusions about the US's fate from that of Greece's current predicament.

Again all this is seperate and apart from the issue of whether US treasuries are "good" investments at these yields. IMHO, they are clearly not.

 

[slazenger]

Hi Everybody...

I would appreciate some input and opinions re: what we have in our Roth IRA accounts, which is a substantial portion of the total portfolio (40%)

Hers: Vanguard TIPS fund only
His: Vanguard Intermediate treasury fund only

I have safety concerns about treasuries because of the ballooning deficit. Maybe it's just me, but I have concerns about the economy as a whole

What do you think? How do you address the issue of diversification within your non-taxable accounts?

Relative to other investment choices, T-Bills are particularly suited to preserving principle, both in the past and will be in the future. It is also a strength for T-Notes/Bonds, but slightly less so than T-Bills.

They are taking a lot of heat because of both low yield, as well as the imminence of rising prime interest rate. But the alternatives aren't all that great either. A strong argument could be made that both domestic and foreign stock markets are overvalued, using a variety of metrics. My point is you've got to put your money somewhere. The choice is you might just have to end up picking the least of the evils.

If you're concerned about the economy, the first investment choice to fear is stocks, not any sort of bond.

 

[Nords]

Such as? I would very much appreciate one or two to start with, Nords.

My point about "fringe voices" is that we don't realize that they're "on the fringe" until the debate is over and the history books have been written. When you're reading the newspaper headlines, and you don't know how the story ends, then it's very difficult to distinguish the fringe from the mainstream.

"Official history" is also full of "facts" that are not in the majority or even just plain wrong.

This is pulled from my list of library books that I've read over the last few years, so they should still be available. I don't have all the authors at hand but I think the titles are unique.

With that theme in mind there should be something here for everybody.

Start with my favorites:
Triumph of the Optimists by Elroy Dimson, Paul Marsh, and Mike Staunton
and
William Bernstein's "The Birth of Plenty" and "A Splendid Exchange".

Next would be:
"The Lords of Finance" by Liaquat Ahamed, about world fiscal policy during the 1920s... I won't spoil the story by telling you how it ends.

In no particular order there's:
"The Way We Never Were" by Stephanie Coontz, and her followup "The Way We Really Are"
AC/DC: The Savage Tale of the First Standards War. (Edison vs Tesla.)
Influence: The Psychology of Persuasion by Robert Cialdini
Founders at Work: Stories of Startups' Early Days [Hardcover] by Jessica Livingston
The Snowball: Warren Buffett And The Business Of Life by Alice Schroeder
"The Eleven Days of Christmas: America's Last Vietnam Battle" by Marshall Michel
Sudden Sea: The Great Hurricane of 1938, R.A. Scotti, the most destructive natural disaster in U.S. history that nobody remembers anymore
The "What They Didn't Teach You About" series-- particularly the Civil War, WWII, and the 1960s
Origins of the Crash: The Great Bubble and Its Undoing by Roger Lowenstein
Too Big to Fail by Andrew Ross Sorkin
The Big Short by Michael Lewis
BULL! A History of the Boom, 1982-1999. By Maggie Mahar.
1912: Wilson, Roosevelt, Taft, & Debs-- The Election That Changed a Country
Frank Lloyd Wright by Ada Louise Huxtable
"The Showman of the Pacific: 50 Years of Radio and Rock Stars", by Tom Moffatt with Jerry Hopkins
The Wal-Mart Effect, Charles Fishman
"Broken Trust: Greed, Mismanagement and Political Manipulation at America's Largest Charitable Trust", Samuel King & Randall Roth
Marc Freedman's "Encore" and "Prime Time", the parts about social programs of the 1960s and 1970s
iWoz by Steve Wozniak
"Complications" and "Better: A Surgeon's Notes on Performance" by Atul Gawande
The Illusions of Entrepreneurship, Scott A. Shane
Predictably Irrational: The Hidden Forces That Shape Our Decisions, by Dan Ariely
Panic: The Story of Modern Financial Insanity by Michael Lewis
50 Great Myths of Popular Psychology: Shattering Widespread Misconceptions about Human Behavior, by Scott O. Lilienfeld

 

[antmary]

My point about "fringe voices" is that we don't realize that they're "on the fringe" until the debate is over and the history books have been written. When you're reading the newspaper headlines, and you don't know how the story ends, then it's very difficult to distinguish the fringe from the mainstream.

How insightful, Nords. Thank you for the list

 

[Gumby]

If there is any default, it will be an act in aid of domestic politics, not of economic reality. No country that issues debt in its own currency can default unless it chooses to. In my opinion, the pro-default crowd is playing with fire. In my years as a bankruptcy lawyer, I saw many companies think that they could stare down their creditors, only to find themselves in Chapter 11 and not entirely in control of the process or certain of their future existence. A default, even a technical one, triggers many rights on the part of bondholders. I would not take the chance. Even a near miss may result in a downgrade and raise borrowing costs in a manner that we do not like.

 

[Nords]

In my opinion, the pro-default crowd is playing with fire.

Right up until mid-July, when they get a look at their latest polling numbers...

 

[veremchuka]

That's an impressive list Nords! Would you suggest a book that I could obtain via inter library loan (ie isn't obscure) that explains what went on during the 1920's that lead to the crash in 1929? How about another book about what caused the depression? Is it possible to find 2 such books that aren't opinion but based upon actual facts? I'd like to understand what happened. I'm aware buying on margin was the cause of the collapse when people couldn't meet their margin calls. But what events lead to the depression and kept us there?

The only book on that list I read was BULL! A History of the Boom, 1982-1999. By Maggie Mahar, it was in my library. I felt the author was anti capitalist and anti wall Street but I read it anyway. I found it fascinating to read about the events that fueled the greatest bull market in modern if not all time. Can't say if it is more opinion than fact but it was interesting.

 

[GusLevy]

"We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty or profusion and servitude. If we run into such debt, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our calling and our creeds...[we will] have no time to think, no means of calling our miss-managers to account but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers... And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for[ another]... till the bulk of society is reduced to be mere automatons of misery... And the fore-horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression." - Thomas Jefferson

The current discussion has predictably splintered into a political bully session in the schoolyard as the ad hominem attacks of "crazy" and "fringe" are applied to those who would have the gall to intellectually debate whether default by the US Trsy may actually be a more prudent and optimal path to take then the course which leads to hyper-inflation and the ultimate debasement of the legal tender currency issued by the US Trsy. If I HAD to choose one of the two options - the US Govt is not quite at the point where we only have these two options today - I would choose to default. The US Govt owns more land assets, commodities, investments, etc. than it fundamentally should IMO while it continues to recklessly increase deficit spending on programs that are politically structured to grow geometrically - until they can't, of course. Rather than this wealthy entity, the US Govt, continuing to own it's assets while it forces higher taxes and a debased currency upon it's citizens I wouldn't consider it "crazy" or "fringe" to force the US Govt to maintain the value of the currency that it forces it's citizens to use by paying off it's debts through asset sales. It should be clear that default and recovery through asset sales would eventually lead to a stronger currency and an ability to ultimately borrow again in the future as opposed to political and economic policies which erode and debase the currency to the point of hyperinflation. Hyperinflation will destroy wealth for all citizens except those with hard assets, will make it impossible for the US Trsy to ever borrow again and will topple the democratic form of government: There is no other scenario since no other entity - not the IMF, the World Bank, Brussels, etc. - would have the resources nor the will to bail out the US Govt.

In a forum that is comprised of ER folks I would hope that many here would see that the dangers of hyperinflation far exceed that of a default. On a personal level, US Trsy default would probably keep you retired whereas hyperinflation would most likely not.

Hi Everybody...

I would appreciate some input and opinions re: what we have in our Roth IRA accounts, which is a substantial portion of the total portfolio (40%)

Hers: Vanguard TIPS fund only
His: Vanguard Intermediate treasury fund only

I have safety concerns about treasuries because of the ballooning deficit. Maybe it's just me, but I have concerns about the economy as a whole

What do you think? How do you address the issue of diversification within your non-taxable accounts?

With regards to the original query in this discussion, imo, the best free lunch in the investment world - which rarely gives out free lunch tickets - is to invest in BAB bonds in your non-taxable accounts. The US Govt subsidized the taxable portion of the coupon to the issuer in order to create liquidity in the muni mkt but taxed those bonds as if they were regular taxable bonds to the investor. Therefore, by placing them in non-taxable accts, the investor is literally getting free yield for the same credit risk.

Of course, given this discussion, if you are worried about US Trsy default or hyperinflation then the muni mkt may seem like the Golden Nugget so even the free steak dinner and magic show coupon may not be enough to make you enter...

Good luck.

 

[GaryInCO]

Regarding your concerns, how would you diversify out of US treasuries?

I honestly don't know. Some very knowledgeable writers I follow claim the stock market is setting up for a major fall once QE2 comes to an end. Another writer (in the same newsletter group) says stocks are a better bargain now than they've been in 20 years, except for March 2009.

I am 100% certain that Treasuries will be a Bad Thing to hold. Interest rates HAVE to go up. Only the Treasury's massive buying of US debt has kept the rates artificially low. Once that huge demand leaves the market, the ever-increasing supply will flood the market, and you know what happens when supply exceeds demand. The only alternative is for the Treasury to keep buying up all the debt, and that way lies hyperinflation.

Consider that Bill Gross, the head of the largest bond fund in the WORLD, has fled the Treasury market. Gross is known as the "Bond King." As recently as last year he held almost $150 billion in US bonds. Now he's not only dumped all his bonds (a good trick with that big a pile), his Pimco Total Return fund is partially SHORT US bonds. Gross didn't get where he is by being dumb, and he thinks Treasuries are a bad bet.

I am *not* a guns-and-bomb-shelters kind of guy, but what I see coming scares the bejeezus out of me. I'm starting to think holding a nontrivial part of your assets in gold and silver might not be such a bad idea. I really wish I'd started collecting some several years ago, but ohwell.

The downside of that is that the hard commodities may take a fall, too. Much of the upward price pressure in gold, silver, oil, copper, etc comes from huge amounts of buying from China, and to a lesser extent India. China has decided they have WAAAYYY too much US debt, and they don't like the trend they see happening with that debt. They've pretty much quit buying our debt. Now when China receives mountains of US$ from selling us their lead-contaminated plastic crap, instead of buying Treasuries they're buying gold, they're buying up oilfields and natural gas fields, they're locking in commitments for oil and coal and uranium for decades. Which makes a lot of sense if they think the dollar is going into the toilet -- use their dollars NOW to buy hard goods before the dollar tanks.

BUT... China is not invulnerable. They've been overbuilding their overheated economy for years. A lot of people think they're setting up the biggest bubble in history, one that would make our 2008 crisis look like a teddy bear picnic. If that happens, then overnight the biggest buyer of gold, silver, etc might disappear from the market. Which could cause a major crash in commodity prices. Which could lead to deflation and even depression. (Ain't I just a cheery guy though??)

So what to do? I really don't know. I don't know if there IS any safe "buy it and forget it" asset any more.

See e.g. these articles from the past week:
You Owe $534,000
A Serious Warning: The Facts Behind America's Coming Collapse
The Beginning of the Panic
A Secret About U.S. Finances You Won't Read Anywhere Else

 

[Gone4Good]

It seems Godwin's Law applies equally well to Weimar Republic references as it does to Hitler references these days.

The U.S. of the 21st Century is not Germany of the 20th.

1) Weimar printed money to pay reparations denominated in gold or foreign currencies. Meanwhile all of the U.S. obligations are in its own currency.
2) Devaluing the currency increased the Weimar's real debt burden increasing the number of Marks that needed to be printed, which further devalued the currency; not so with the U.S.
3) Inflation in the U.S. actually shrinks the real debt burden for both the government and families.
4) We've learned a fair amount about monetary policy and the sources of inflation over the past 90 years. So yes, hyper-inflation would be a conscience choice.
5) Extraordinary low interest rates and moderate inflation in the face of massive federal deficits and a zero fed funds rate are not enigmas, they are predictions of liquidity trap economics. There is no reason to expect this to change until the situation that gives rise to the liquidity trap (in the U.S. case, an over leveraged consumer) is remedied. Which is 'funny' because inflation actually helps in that regard, but you can't manufacture inflation because of the over leveraged consumer - thus a 'trap'.

 

[Gone4Good]

Interest rates HAVE to go up. Only the Treasury's massive buying of US debt has kept the rates artificially low. Once that huge demand leaves the market, the ever-increasing supply will flood the market, and you know what happens when supply exceeds demand.

What's the chances you'll change your mind when interest rates don't spike in the next couple of months after the Fed purchases come to an abrupt halt (some have calculated that the program has already ended)? My guess is zero chance.

 

[Gone4Good]

The current discussion has predictably splintered into a political bully session in the schoolyard as the ad hominem attacks of "crazy" and "fringe" are applied to those who would have the gall to intellectually debate whether default by the US Trsy may actually be a more prudent and optimal path to take then the course which leads to hyper-inflation and the ultimate debasement of the legal tender currency issued by the US Trsy.

The argument that we must preemptively destroy the economy today to prevent a far-from-certain destruction some time in the unknowable future, which is entirely avoidable through other means, is not a defensible position, in my view. And not really worthy of debate.

 

[GaryInCO]

I agree things have changed, and the US is in a privileged position. That's what's allowed us to build this house of cards as high as we have. But it doesn't mean we can keep building it to the sky, forever.

I hadn't thought about the distinction of debt-in-own-currency vs. not, and how printing marks increased Weimar's debt. I agree that does make a significant difference. I don't agree that we could only fall into hyper-inflation by choice. I also wonder how long anyone will loan us money in USD if they know we're going to inflate it to toilet paper before we pay them back.

Yes, inflation shrinks the debt burden, which is of course a lot of why they're doing it. (Though I've never understood how that really helps any, if you continue piling on massive amounts of new debt at the newly-inflated rate.) But inflation definitely tends to destroy the value of savings, which is a major concern of the folks here.

I don't think we need to "manufacture" inflation. It's already here, in spite of the government's rosy figures. Look at this chart of actual price changes, compared to the claimed CPI-U number:

The CPI has been pulled down a lot by collapsing house prices. But of course not everybody buys a house every year. Whereas the things you DO buy all the time have been going up, a LOT. Ask anyone who buys food, or gas, or medical care. They've seen a whole lot more than 1-2%/yr inflation over the last few years. Gas took a dive in late 2008 but it's been rising at about a 40%/yr rate since then, and we're back near the 2008 peaks. Averaged over the last 6 years, gas has gone up over 10%/yr.

 

[Gone4Good]

I don't think we need to "manufacture" inflation. It's already here, in spite of the government's rosy figures. Look at this chart of actual price changes, compared to the claimed CPI-U number:

If you don't believe CPI, then how about the folks at MIT who created their own inflation index. Don't fall into the fallacy of defining inflation by looking only at prices that go up (MIT Billion Price Index in Red, CPI in Blue).

 

[brewer12345]

That's an impressive list Nords! Would you suggest a book that I could obtain via inter library loan (ie isn't obscure) that explains what went on during the 1920's that lead to the crash in 1929? How about another book about what caused the depression? Is it possible to find 2 such books that aren't opinion but based upon actual facts? I'd like to understand what happened. I'm aware buying on margin was the cause of the collapse when people couldn't meet their margin calls. But what events lead to the depression and kept us there?

The depression I don't have a handy one for, but a fascinating book about the history of speculation would fit the bill for the 1920s: "Devil Take the Hindmost," by Edward Chancellor.

 

[GaryInCO]

If you don't believe CPI, then how about the folks at MIT who created their own inflation index.

Hey, no fair! Quit making such good arguments!!

That's a very good point. I was pretty confused when the BPP came out and it matched the CPI so closely. That makes no sense to me, unless the MIT folks tweaked their results to match CPI, which seems unlikely. I suspect it's because they're adjusting the "basket" of commodities they use the same way the govt does, which would tend to give you the same answers the govt gets.

Enter ShadowStats. According to the **government's own way of calculating CPI** as of 1980 -- before Greenspan started fudging the calculations to make them look better -- we're currently seeing an inflation rate of over 10%, instead of the ~2.5% claimed by the current CPI-U.

The CPI used to be a measure of the cost of maintaining a constant standard of living. So if the cost of steak went up, it was reflected in the CPI. That's how the govt USED to calculate CPI, and it's reflected in the blue line above. The govt changed the CPI calculation to assume that you'd start buying hamburger instead of steak, and hash if hamburger got too expensive. That assumption of reduced spending habits depressed the resulting CPI, as shown by the red line.

According to that explanation, the current CPI-U is accurate if you're willing to switch to an Alpo diet. If you want to maintain your same standard of living, the blue line -- the way the government USED to calculate it, assuming a steady standard of living -- is a more accurate indicator of inflation.

Gary

 

[Nords]

That's an impressive list Nords! Would you suggest a book that I could obtain via inter library loan (ie isn't obscure) that explains what went on during the 1920's that lead to the crash in 1929? How about another book about what caused the depression? Is it possible to find 2 such books that aren't opinion but based upon actual facts?

"Lords of Finance" for all three questions.

Here's the short answer: Gold standard = bad.

The depression I don't have a handy one for, but a fascinating book about the history of speculation would fit the bill for the 1920s: "Devil Take the Hindmost," by Edward Chancellor.

Also an excellent book. Once you figure out the 1920s it doesn't take much to see why everyone reflexively tightened up on fiscal policy in the 1930s. Oops.

In defense of 1920s-30s economists and policy makers, there was hardly any data to show the immediate effects. Instead of driving while watching the rear view mirror it was more like driving while blindfolded and hoping to feel the bumps in the road...

 

[GaryInCO]

"Lords of Finance" for all three questions.
Here's the short answer: Gold standard = bad.

I'll have to look that one up. Can you summarize it a bit less succinctly? I know the gold standard has problems -- e.g. you can't expand the money supply to finance growth in good economic times -- but obviously a non-gold standard has problems too. Like the USD losing about 93% of its purchasing power since WWII, thanks to inflationary fiat-money policies. (Of course, to be fair, the USD lost a lot of purchasing power between 1900 and 1920, too, when we were ostensibly still on a gold standard.)

 

[brewer12345]

I'll have to look that one up. Can you summarize it a bit less succinctly? I know the gold standard has problems -- e.g. you can't expand the money supply to finance growth in good economic times --

Even worse: every time there was another gold strike in the 1800s the country had an economic boom shortly thereafter due to an exogenous increase in the money supply.

Thanks, I prefer dollars.

 

[Gone4Good]

Enter ShadowStats.

Do me a favor. Go grab some actual prices from 1987 (here I'll help you out - Morris County, NJ historic prices published in their paper) inflate those prices to today using both the CPI index and ShadowStats. See which index gives you prices closer to what's available on store shelves.

Report what you find. I eagerly await your results.

 

[DoraM]

Do me a favor. Go grab some actual prices from 1987 (here I'll help you out - Morris County, NJ historic prices published in their paper) inflate those prices to today using both the CPI index and ShadowStats. See which index gives you prices closer to what's available on store shelves.

Report what you find. I eagerly await your results.

I'll bite! That shadowstat chart shows the blue line always above 5% since 1987, so I will use constant 5% inflation and get a lowball number
1.05^24 = 3.25x more expensive items according to the shadowstats in 2011 vs 1987.

Ok, from that link: Milk, 2% low fat, 1.79/gallon

Today: Milk, 2% low fat, 3.59/gallon

Hmmm...according to a lowball 5% inflation, milk should be $5.77/gallon

I think I will go with the CPI.

 

[Gone4Good]

I'll bite! That shadowstat chart shows the blue line always above 5% since 1987, so I will use constant 5% inflation and get a lowball number
1.05^24 = 3.25x more expensive items according to the shadowstats in 2011 vs 1987.

Ok, from that link: Milk, 2% low fat, 1.79/gallon

Today: Milk, 2% low fat, 3.59/gallon

Hmmm...according to a lowball 5% inflation, milk should be $5.77/gallon

I think I will go with the CPI.

5% is a really, really, lowball, too. The actual average looks more like 7%-8%, which calls for a 5x-6x adjustment. Therefore a gallon of milk should cost somewhere around $9-$11.

CPI meanwhile is up 1.9x since 1987, so that $1.79 gallon should cost somewhere around $3.42 today according to CPI.

 

[Independent]

My point about "fringe voices" is that we don't realize that they're "on the fringe" until the debate is over and the history books have been written. When you're reading the newspaper headlines, and you don't know how the story ends, then it's very difficult to distinguish the fringe from the mainstream.

"Official history" is also full of "facts" that are not in the majority or even just plain wrong.

This is pulled from my list of library books that I've read over the last few years, so they should still be available. I don't have all the authors at hand but I think the titles are unique.

With that theme in mind there should be something here for everybody.

Start with my favorites:
Triumph of the Optimists by Elroy Dimson, Paul Marsh, and Mike Staunton
and
William Bernstein's "The Birth of Plenty" and "A Splendid Exchange".

Next would be:
"The Lords of Finance" by Liaquat Ahamed, about world fiscal policy during the 1920s... I won't spoil the story by telling you how it ends.

In no particular order there's:
"The Way We Never Were" by Stephanie Coontz, and her followup "The Way We Really Are"
AC/DC: The Savage Tale of the First Standards War. (Edison vs Tesla.)
Influence: The Psychology of Persuasion by Robert Cialdini
Founders at Work: Stories of Startups' Early Days [Hardcover] by Jessica Livingston
The Snowball: Warren Buffett And The Business Of Life by Alice Schroeder
"The Eleven Days of Christmas: America's Last Vietnam Battle" by Marshall Michel
Sudden Sea: The Great Hurricane of 1938, R.A. Scotti, the most destructive natural disaster in U.S. history that nobody remembers anymore
The "What They Didn't Teach You About" series-- particularly the Civil War, WWII, and the 1960s
Origins of the Crash: The Great Bubble and Its Undoing by Roger Lowenstein
Too Big to Fail by Andrew Ross Sorkin
The Big Short by Michael Lewis
BULL! A History of the Boom, 1982-1999. By Maggie Mahar.
1912: Wilson, Roosevelt, Taft, & Debs-- The Election That Changed a Country
Frank Lloyd Wright by Ada Louise Huxtable
"The Showman of the Pacific: 50 Years of Radio and Rock Stars", by Tom Moffatt with Jerry Hopkins
The Wal-Mart Effect, Charles Fishman
"Broken Trust: Greed, Mismanagement and Political Manipulation at America's Largest Charitable Trust", Samuel King & Randall Roth
Marc Freedman's "Encore" and "Prime Time", the parts about social programs of the 1960s and 1970s
iWoz by Steve Wozniak
"Complications" and "Better: A Surgeon's Notes on Performance" by Atul Gawande
The Illusions of Entrepreneurship, Scott A. Shane
Predictably Irrational: The Hidden Forces That Shape Our Decisions, by Dan Ariely
Panic: The Story of Modern Financial Insanity by Michael Lewis
50 Great Myths of Popular Psychology: Shattering Widespread Misconceptions about Human Behavior, by Scott O. Lilienfeld

Thanks for the list. I've only read a couple, so I'll take this list along to the library next time I go.

 

[GaryInCO]

Even worse: every time there was another gold strike in the 1800s the country had an economic boom shortly thereafter due to an exogenous increase in the money supply.

And now we get an economic boom/bubble any time the Fed thinks inflation isn't low enough. Is it really that different?

G4G, you persist in posting excellent counterarguments. Quit that.

Looking at the prices from 1980 and from 2010, it does indeed look like the shadowstats numbers are off. Which, if you accept their explanation, must mean that the current CPI-U calculation is more accurate than the previous 1980 method.

The price change in milk from 1987 - 2011 almost precisely matches the results from the BLS inflation calculator. Same with coffee. Laundry detergent should be $0.1081/oz in 2010, but it's actually $0.1759. Excedrin in 2010 is about 2x more expensive than expected from inflating Anacin in 1987. Other than that it's really hard to find things that are truly apples-to-apples comparisons. (Except Rome apples in 1987 are $1.29/3lb, should be $2.55 in 2010, and Macintosh in 2010 are $2.99. )

So some things match the CPI very well, some are much more expensive than the CPI would predict. You'd have to do a much broader comparison to get an accurate picture.

But it's clear the CPI is a lot closer than ShadowStats. Very interesting. Thanks for the excellent link!

 

[M Paquette]

Do me a favor. Go grab some actual prices from 1987 (here I'll help you out - Morris County, NJ historic prices published in their paper) inflate those prices to today using both the CPI index and ShadowStats. See which index gives you prices closer to what's available on store shelves.

Report what you find. I eagerly await your results.

Oof. That's sort of hard. Looking back on older CPI data to price their component items in today's market, I can't find any current pricing on 5 vacuum tube desktop radios or 16" B&W televisions, for starters.

I wonder how ShadowStatistics does it? Oh, I don't wonder so much that I'll pay the gonif $175 for access to his shadow data, but it is a puzzle. Meanwhile, the BLS continues to publish all the details of how they do it.