Who would have thought only 2 years later after the biggest credit crisis in history that the cost of living would be higher than it was in 2007 when the economy had record stock prices, soaring housing prices, high consumer confidence and huge job growth. wow this is just unfuckingbelievable at this point in the game. Let Bubble ben bernanke continue to ignore the high prices of energy and food and let him continue to believe there is no inflation just like he thought there was no housing bubble or economic recession. Everyone thinks that the way out of this credit crisis is to spend more trillion, only a bunch of fucking dumb fools believe that. This can only be ignored for so long!!! Keep pushing for more QE 3, 4, 5, etc etc, keep pushing for more easy money policies and watch what happens to this economy going forward. US Cost of Living Hits Record, Passing Pre-Crisis High CNBC.com | March 17, 2011 | 04:09 PM EDT One would think that after the worst financial crisis since the Great Depression, Americans could at least catch a break for a while with deflationary forces keeping the cost of living relatively low. Thatâs not the case. A special index created by the Labor Department to measure the actual cost of living for Americans hit a record high in February, according to data released Thursday, surpassing the old high in July 2008. The Chained Consumer Price Index, released along with the more widely-watched CPI, increased 0.5 percent to 127.4, from 126.8 in January. In July 2008, just as the housing crisis was tightening its grip, the Chained Consumer Price Index hit its previous record of 126.9. âThe Federal Reserve continues to focus on the rate of change in inflation,â said Peter Bookvar, equity strategist at Miller Tabak. âSure, itâs moving at a slower pace, but the absolute cost of living is now back at a record high in a country that has seven million less jobs.â The regular CPI, which has already been at a record for a while, increased 0.5 percent, the fastest pace in 1-1/2 years. However, the Fedâs preferred measure, CPI excluding food and energy, increased by just 0.2 percent. âThis speaks to the need for the Fed to include food and energy when they look at inflation rather than regard them as transient costs,â said Stephen Weiss of Short Hills Capital. âPerhaps the best way to look at this is to calculate a moving average over a certain period of time in order to smooth out the peaks and valleys.â The so-called core CPI is used by the central bank because food and energy prices throughout history have proven to be volatile. However, one glance over the last two years at a chart of wheat or corn shows theyâve gone in one direction: up. And many traders say Fed Chairman Bernankeâs misplaced easy money policies are to blame. Over time, the Bureau of Labor Statistics has made changes to the regular CPI that it feels make it a better measure of inflation and closer to a cost of living index. It improved the way it averages out prices for items in the same category (e.g., apples) and also uses the often-criticized method of hedonic regression (if you're curious, you can learn more about that here) to account for increases in product quality. In 2002, the BLS created this often-overlooked cost of living index in order to account for the kinds of substitutions consumers make when times are tough. It is supposed to be even closer to an actual âcost of livingâ measure than the regular CPI. âFor example, pork and beef are two separate CPI item categories,â according to the BLS web site. âIf the price of pork increases while the price of beef does not, consumers might shift away from pork to beef. The C-CPI-U (Chain Consumer Price Index) is designed to account for this type of consumer substitution between CPI item categories. In this example, the C-CPI-U would rise, but not by as much as an index that was based on fixed purchase patterns.â âAs the cost of living increases, we are headed toward a bigger problem with the slowing of housing permits,â said JJ Kinahan, chief derivatives strategist at thinkorswim, a division of TD Ameritrade. âAs the staples start to cost more, this could lead to a quick slowdown in the auto and technology sectors as an iPad is an easy thing to pass on if you are paying more for your gas and food and need to cut back somewhere.â To be sure, itâs nearly impossible to get a perfect âcost of livingâ measure, and the BLS acknowledges this on their web site: âAn unconditional cost-of-living index would go further, and take into account changes in non-market factors, such as the environment, crime, and education.â Still, states will be cutting back services drastically this year at the very same time they are raising taxes in order to close enormous budget deficits and avoid a muni-bond defaults crisis. So while it may be the missing link to a perfect cost of living measure, one can assume that Americans will be paying more for unquantifiable services such as police enforcement and education, but getting them at a lesser quality. Bottom line: The cost of living for Americans is now above where it was when housing prices were in a bubble, stock prices at a record, unemployment low and consumer confidence was soaring. Something has gotta give.