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Old 02-16-2008, 06:56 PM   #21
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The tinfoil comments, does that mean you don't want to hear it? I'm not sure how to take it but it comes off as being rude.

Independent, I haven't said it's been 6% for 10 years, it might be 6% for 2 or 3 years though. Factor that in with the housing ATM and I think it could be that people are getting behind that much. If BLS would have calculated inflation was 2% instead of zero (or negative) in 2002, the Fed wouldn't have lowered the fed rate to 1% and we'd be better off.
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Old 02-16-2008, 07:22 PM   #22
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The tinfoil comments, does that mean you don't want to hear it? I'm not sure how to take it but it comes off as being rude.
But in a nice way...

One way to win a tinfoil hat award is to see conspiracy where others just see imcompetency.

I think the board has, ahem, come to the collective conclusion that the CPI is probably kinda sorta accurate enough for government work, but is unlikely to match your personal inflation rate...

He said, ducking...
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Old 02-16-2008, 07:30 PM   #23
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The tinfoil comments, does that mean you don't want to hear it? I'm not sure how to take it but it comes off as being rude.
I'm wondering why the crew hasnt shown up yet that complains when someones non mainstream idea is slammed and open discussion is suppressed.

Seems their arrival is dependent on who is doing the slamming.

As far as the topic, I dont doubt for a moment that the CPI-U does an exemplary job of measuring the effects of inflation on an urban worker that rents and doesnt pay for health care, and whose budget roughly reflects the one that the BLS employs to make the measurement.

I just dont think that profile fits everyone, and especially not retirees who may be paying their own health care, be spending more on food, energy and insurance, along with other areas that are rising at a faster than 'average' rate. I dont doubt that some retirees find their rate of budget inflation to coincidentally run at the same rate as the CPI-U, and I dont doubt that for a good many its "close enough".

I've long suggested that people familiarize themselves with their budget and its changes so they understand how inflation is effecting their spending and how they can mute its effects.

Because after return on investment and taxes, inflation is the biggest potential retirement killer. What sucks is that it'll take 2-3 decades to really knock the wind out of you.
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Old 02-16-2008, 08:02 PM   #24
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HWFR, Thanks for the clarification, I didn't know if it was an inside the board insult. "Close enough for government work", it could be that.

I however, do not think it is believable that inflation is 2.3%/4% and that we should just be accepting they could be off a little because of a little incompetency. When I read about how they make the adjustments, when they started doing it, and put that together with what was going on in the economy at the time, it seems like intentional fudging to me. From what I read the inflation rate would be much higher right now if it were calculated like it was in 70's and 80's. The government is almost forced to say inflation will be low forever because of their debt, payment to retirees, and the turmoil it would cause in the markets if they were to say differently. If Bernacke couldn't take a 15% correction in the stock market without freaking out, what would happen if inflation could not be masked anymore and the 10yr bond goes to 10% (like Greenspan recently predicted is possible) and we have a real bear market in stocks?

Anyway, there is nothing to be done about it except (in my mind) to carefully consider that inflation could be popping up sometime soon. It didn't stop easily in the 70's after the fire was lit.

We may escape the inflation problem if we go into a deflationary phase due to the insolvency problems and that day may not come.
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Old 02-16-2008, 08:07 PM   #25
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RockOn, my smilie wasn't a comment on your post or this thread, merely a response to Brewer's request:

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I swear, we need a tinfoil helmet emoticon...
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Old 02-16-2008, 08:21 PM   #26
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Old 02-16-2008, 09:02 PM   #27
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REWahoo, I see, don't change the religion. The guru's have spoken.
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Old 02-16-2008, 09:08 PM   #28
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So how does one compute a personal inflation rate? Do you schedule out your expense categories line by line and apply an inflation rate to each one? Is the inflation rate for each cost category found by drilling down to find each component rate that makes up the total CPI-U? I think I recall seeing that info on some website.
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Old 02-16-2008, 09:35 PM   #29
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My question is why people are willing to buy 10-year bonds yielding 3.78% when the CPI is running at 4%?

You don't have to believe the government is fudging the numbers to believe you're getting a negative return from bonds over the next few years.
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Old 02-16-2008, 09:38 PM   #30
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Old 02-16-2008, 09:54 PM   #31
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Hamlet,
It doesn't make sense does it?
It must be because of the flight to safety (treasury notes) going on because of the huge insolvency mess that was primarily caused by the intentional under-reporting of inflation by our government.
It could be because of the huge demand coming from the fact that a treasury note is the only bond investment that is considered to be prudent by those who are afflicted by the ERF religion.

Kidding of course. I wouldn't buy it.
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Old 02-16-2008, 10:01 PM   #32
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My personal CPI since I started keeping track of my expenses 9 years ago has been close to zero (in the noise). My annual expenses each year have been ...

1999 ($30,915)
2000 ($33,454)
2001 ($27,325)
2002 ($31,751)
2003 ($29,757)
2004 ($25,510) [plus 18K in veterinary bills]
2005 ($29,424) [plus 5K in veterinary bills]
2006 ($30,735)
2007 ($29,703)

I've made no significant lifestyle changes during this time. Unconsciouses adjustments, yes. Significant changes, no. Some costs have gone up (gas), some costs have stayed the same (mortgage), some costs have gone down (auto insurance dropped 15-20% from last year to this year.

For the general population, inflation is not 10-15%. Despite increases in some commodities, inflation is still relatively low. Also, keep in mind that housing costs have recently dropped. The doom and gloom media is a strong contributor to the idea of rampaging inflation. Especially at this election time, they focus on the negatives and ignore the positives.
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Old 02-16-2008, 10:02 PM   #33
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rockon, I'm confused... you think the credit crunch is caused by the intentional under-reporting of inflation?
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Old 02-16-2008, 10:09 PM   #34
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Seriously?
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Old 02-16-2008, 10:11 PM   #35
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Shawn, that is great news, if I have that CPI-P when I retire, I will be well off. I do not know how you do it. I spend a lot more and all of my stuff goes up.

I am not saying 10-15%, but if it were 6% that would make a significant difference on TIPS and bond rates. The guy at ShadowStatistics (who may be a idiot I do not know) says inflation is around 12% if we calculate it like we did before 1990. Can he be off that far? Was everything that happened in the 70's just an illusion or this the illusion? "It's different this time", I remember something about that.

Marquette, yes to some degree I think it was. If the Fed was really watching inflation (even though it was pretty low) instead of acting like there was no inflation and that there never would be any inflation again, they would not have lowered rates to 1% for two years causing all types of subprime and leveraged buyout junk loans. Is that not possibly true?
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Old 02-16-2008, 10:11 PM   #36
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rockon, I'm confused... you think the credit crunch is caused by the intentional under-reporting of inflation?
But doesn't his tinfoil hat look nice...
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Old 02-16-2008, 10:13 PM   #37
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But doesn't his tinfoil hat look nice...
It's so shiny I'm blinded.
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Old 02-16-2008, 10:17 PM   #38
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So how does one compute a personal inflation rate? Do you schedule out your expense categories line by line and apply an inflation rate to each one? Is the inflation rate for each cost category found by drilling down to find each component rate that makes up the total CPI-U? I think I recall seeing that info on some website.
The way I would do it is the way Shawn implied -- I'd keep track of my spending over the years to determine what my actual rate of increase in overall spending has been in the past. I'd then try to guess if I thought my future would look like my past to determine my personal inflation rate.

I've been in a stable financial situation for about 13 months, and over that period of time my inflation rate has been negative, as I've mentioned on this board before. I also expect my overall rate to continue to be negative, although my planning spreadsheet uses 3%.

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Old 02-16-2008, 10:31 PM   #39
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HWFR, I'm not really convinced it was "intentional" under-reporting. Lets just say it was sort-of-planned incompetence, I can live with that. I didn't want this to be a conspiracy theory discussion, it seems to be going that way.

Let's just say it was like when nothing was done to stop mortgage lenders from giving out those junk loans, or when Greenspan told us ARM's were the way to go at the bottom of the rate cycle, or when the stimulus package was passed giving away our own "borrowed" $150B while the economy was still doing "very well" according to the Treasury. That kind of incompetence.

Marquette, purge the word "intentional" on that under-reporting. I can live with irresponsible, or incompetent, or "not knowing what the affects would be of changing how they calculated it", I decided intentional is over the line.
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Old 02-16-2008, 11:11 PM   #40
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HWFR, I'm not really convinced it was "intentional" under-reporting. Lets just say it was sort-of-planned incompetence, I can live with that. I didn't want this to be a conspiracy theory discussion, it seems to be going that way.

Let's just say it was like when nothing was done to stop mortgage lenders from giving out those junk loans, or when Greenspan told us ARM's were the way to go at the bottom of the rate cycle, or when the stimulus package was passed giving away our own "borrowed" $150B while the economy was still doing "very well" according to the Treasury. That kind of incompetence.
You seem to be meandering a bit...first you post info. about 12% inflation and then try to make it a little easier to swallow with discussion of 6. There are entire threads on inflation and I am still not convinced that you are making a new ground breaking argument...
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