Cut-Throat said:
Probably all of the economic experts that claim that CPI is a true measure of inflation are the buffoons, and all of the internet posters with anecdotal evidence really know what the inflation level is.
So what is the level of inflation on average in the U.S.?
I honestly dont know, and if you re-read my 'agenda', thats not really the point i'm trying to make. What I can say for sure is that the average inflation index thats calculated by the CPI is probably not accurate for the vast majority of people...simply because its an average of what the folks who put CPI together have decided to measure. It might be high or it might be low for any given person, and it might be off by a wide margin.
But wouldnt it be good for people to know what their personal inflation level is so they can make informed investing decisions, rather than just take someones word for it that they measured it for themselves and it seemed ok, so its probably ok for everyone, case closed?
For a young couple trying to buy their first house and paying for their own healthcare while trying to work two jobs and keep a couple of kids in daycare, with little time to bargain shop and a lot of commuting miles to drive...CPI is probably woefully low.
For a traditionally retired couple living in a very low cost area, with plenty of time to shop, and very little debt...CPI is probably a higher measure than what they're experiencing.
For an early retiree that lives in a high cost area, travels, eats out, and perhaps enjoys some of the finer things in life...I'm guessing that pinning 30 years of retirement living on an investment product that produces 1-3% "supposed real" without checking their own rate of inflation might produce some poor results in the long haul. Or some great ones.
Anyhow, your point as read by me is "cpi is pretty good because I measured my personal rate of inflation and it matched, if you dont think CPI is pretty good its because you're basing your opinion on anecdotal evidence and dont know what you're talking about".
I did measure my personal rate of inflation. By my non-anecdotal analysis of watching my own rate of spending as it changes from one year to the next and noting the "basket substitutions" and time I've put into lowering my cost of living increases, CPI falls short by quite a bit.
Using CPI to index cost of living for peoples pensions, social security and "inflation protected" bonds seems disingenuous to me, given that some peoples measured personal rate of inflation might show deflationary characteristics or they might run to 10-12%.
The idea is akin to saying that the average temperature in the US in January is 40 degrees, so everyone slap on some warm clothes and a parka. I'm betting that leaves some people a little chilly and some a little on the warm side...