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Old 10-23-2007, 04:53 AM   #61
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twaddle, the argument of the "CPI malcontents" is that shying away from real or perceived "volatility" is throwing the baby out with the bathwater. It's disingenuous.

So what that there's short term volatility that's higher for those categories than for durable goods? It would be strange if it were otherwise.

The "volatile" goods DO go up --maybe not always month-on-month which seems to interest whomever is wont to examine the "core" inflation tea-leaves -- but long term.

If spending patterns are what become skewed (more debt) how does that help in assessing the real price of consumption? If people buy more crap, how does that help us ascertain the core inflation figure I want to see: the Cost Of Real Existence?

Michael puts it nice and succinctly:
Quote:
..essentials are going up fast, and non essentials are going up slowly. If you are a LBYM type person, your CPI may be higher than the official one. If you are a prodigious spender, your CPI may be lower than the official one. Most Americans are prodigious spenders, so the official CPI attempts to track that spending pattern. 75k/yr earners who spend every cent, and borrow to spend more on top of it. I think I get it now.
I hope I'm not the only person who thinks that's kind of scary: the more 'we' spend and waste, the less things appear to cost!?

I don't want to throw around the "c" word (conspiracy) but now we've come back full circle to SS and other gov./business COLA which increase based on the lowball calculation (2.3%) of the "big debt spender/grasshopper" profile, and not the "LBYM retiree/ant" profile whose inflation is (seemingly paradoxically) much higher.

---
Nords/clifp, I see what you are saying.. but not everyone lives next to Wal*Mart. When I lived in the suburbs of a major US city just a few years back.. I had never seen one, and have still not been in one to this day! And not everyone takes the time to scout out bargains like the people here. I'm sure dedicated bargain-hunters of times past, pre-Internet, were able to get deals. In fact, the MORE information, the more efficient the xaction.. and the less likelihood of a superb deal for EITHER side (that requires an imbalance of information). Don't forget to deduct the several-hundred-$ yearly investment in the computer and Internet service from your shopping savings.

Wal*Mart is probably a relatively poor example anyway since:

-you buy cheaper (probably crappier) widget at Wal*Mart than at the mom & pop store

-Wal*Mart pays poverty-level wages

-Wal*Mart workers apply for Medicaid (this is acknowledged official Wal*Mart health-care "policy")

-Wal*Mart heirs angle for estate tax reduction that would save them on the order of $30 billion (and spend a few million a year on lobbying to this end.. if it goes their way that's about the whoppingest ROI in history).

-you then get to pay back the few cents' or the few dollars' of "savings" a few times over when you next go to pay your federal/state/local tax bill or your ins. co. premiums or look at your crappy T-bill rate or cash in your "inflation-adjusted' bonds or pension check.

W*M is just a shell game.

--
Cheap laundering tips date back to Heloise and beyond. Those things are always around for seekers. I had an old 1950s magazine that described how to fold sheets so as not to weaken and consume them along the folds (back when sheets were linen, I gathered, since linen is more susceptible to weakening along a fold). You were supposed to wash them one time and fold in quarters. The next time you washed them you were to fold them in thirds. Then quarters, then thirds. A pain -- but they had linen sheets and not ones that got pills on them. What middle-class person can afford linen sheets today? Or a stay-at-home mom or housekeeper to keep track of the folding?
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Old 10-23-2007, 01:13 PM   #62
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Quote:
Originally Posted by ladelfina View Post
twaddle, the argument of the "CPI malcontents" is that shying away from real or perceived "volatility" is throwing the baby out with the bathwater. It's disingenuous.

So what that there's short term volatility that's higher for those categories than for durable goods? It would be strange if it were otherwise.

The "volatile" goods DO go up --maybe not always month-on-month which seems to interest whomever is wont to examine the "core" inflation tea-leaves -- but long term.
I don't think anybody has argued that the volatile stuff doesn't go up or reflect true inflation. Obviously those volatile components are important. The only reason "core" inflation is reported is because it's a better macroeconomic indicator than "headline" inflation.

You don't want Helicopter Ben to base his monetary policy on a volatile metric. And since those volatile components are "essential," they slowly work their way into the core numbers. If energy prices go up and stay up, every product we buy is affected. If energy prices go up quickly and then go back down quickly, then the economy doesn't get a lasting hit.

Last time we had energy prices go up this fast, the CPI did skyrocket. It is interesting to see how the economy is absorbing the blow. Same with the falling dollar. If these trends continue for much longer, I think you'll get your wish, and the CPI will reflect rising prices.
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