I don't have a dog in this fight and did not know the BLS did this so don't give me a hard time. Funny thing is my household did exactly that: Whenever the price of a favorite staple went up we tried to find a cheaper substitute. "Beef vs chicken" was actually a good example of what we did.
That website is showing 50 to 85% cost of living inflation since 2011 (if you compound the yearly figures) Is that really the reality in most US cities? Wear i live in London,uk, i have noticed about a 50% inflation rate in most thing over the last 20 years, but obviously not in real estate prices. That has gone up 500%.
Good lord Martin, if you showed the CPI a fraction of the indignation you show here, you would have long thrown it in the garbage. It is obvious that the "sales" is a typo, when considering that the other 499 items are defined and are only intended to give an indication of what is being tracked and not the exact item's description. (They track the exact item's price movements over time) The more I read you, the more it really does seem like you have an a priori bias against other approaches to measuring the decline in real world purchasing power. Further, according to a recent interview given by Ed Butowsky, the Chapwood Index items are weighted according to percentage of income spent on the item's category. Do you really think a Wharton educated, ex Morgan Stanley guy would do otherwise? Sorry mate, you've got blinders on. Wake up. Once again flawed logic. Let's assume that what you say is correct, that OER vs housing costs proper would have resulted in a lower COLA for recent history. I don't think you can demonstrate that, but at any rate: who cares when what came before recent history were housing prices inflated by an utterly foolish and unsound monetary policy? When people had to fork out housing bubble like prices for their homes in the further back than recent past, via mortgages (not OER), they took on a permanent cost of living increase that most of them are stuck with for the rest of their lives because the mortgage is paid monthly, both on the inflated principal and by extension therefore incurs inflated interest expense. Even if some of them may refinance lower along the way, they still have to pay closing costs which OER doesn't capture, and more importantly, they're still paying that refinanced interest on an inflated house price. I'm surprised that you can't appreciate common sense and would rather drift off into the fantasy land of equations and unfounded assumptions such as homo economicus. The arithmetic matters little when the overall methodology stinks. A realistic CPI would, by Occam's Razor select between competing methodologies (to find a solution to the problem of measuring CPI) the one with the fewest assumptions. There's no need to introduce substitution, even if it's within a category to 'maintain constant satisfaction'. That introduces a level of discretion to the analysis that is unnecessary. My motives are based on both my own well being, and also that of others. And as I explained to you earlier and contra your implicit earlier claim, one need not be a socialist to seek the well being of others. Along the lines of Hume and the problem of induction, all I need to do to prove your assertion wrong is to point to one conservative who gives to charity with the right motives. Are you going to deny that such a person exists? Yes or no? The government needs to level with the people re inflation and tell them what's really going on, because at this point, the emperor has no clothes. Oh wow, so you were actually for a Brexit?
Southall, You shocked at 50% cost of living increase over the last 5 years? Do you want to know where people get the money to foot that? 15k in credit card, 27k in auto debt, 49k in student debt. And no, we're told that everyone is only seeing 1.64586% increases in their cost of living annually, lol. Why all the debt then? It's been reported recently that the vast majority of Americans do not have $500 saved for an emergency. Where did all the savings go if inflation was a mere sub 2% number? https://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/ What items are you referring to, re 50% inflation rate over the last 20 years? Re London real estate, exactly. Let me ask you, when you go out to the city to find a place to rent, do you think to yourself "Hmmmm, I wonder if I can afford owners equivalent rent on this?" Do you start wondering whether you can find someone on airbnb to share your living space with you and your wife and kids in exchange for owners equivalent rent? Or do you wonder if you can afford the rent, period? Which one is it?
A few personal examples: Increase in price of a new car, same make and model. Increase in price of McDs meal. Weekly grocery shop. Cost of furniture. Cost of new kitchen. Cost of a new gas boiler. These things have all gone up in the last 20 year, in the circa 50% range, definitely not 100% more. Housing seems to be the only thing that is going much more than that every year. But that gets fixed when you buy a house, then you have zero inflation in your cost of buying real estate after that, unless you want a slightly bigger house that is.
This just aimed at southall, not trying to get into the inane circular conversation. One thing to consider is that in many cases you're not actually replacing like with like. As I've brought up as a thought experiment in another thread, if I was to offer you a 1986 Camry that had been magically preserved in factory new condition versus a 2016 Camry, you'd be willing to pay much less for the 1986 version (assuming no collectible value which I'd guess an 86 Camry has little to none). That's because the 1986 version is an inferior product in almost every aspect (longevity, required repairs, gas mileage, pollution...). So once you factor in the fact that not even an '86 Camry is the same as a 2016 Camry let alone a generic '86 car (Yugo anyone?) versus a generic 2016 car, "car inflation" isn't as great as a naive math equation would suggest. This obviously isn't the case for things like flour, but other highly "inflated" things like medical care are very susceptible to this. If you were to satisfy yourself with only the medications, tests, and procedures available in 1986 your medical care would be far cheaper today than it was then. Obviously we don't restrict ourselves to that and the price tag on healthcare reflects that. This concept is somewhat accounted for in the official numbers, but it's also something to take into account when you're doing a more intuitive look at what things cost around you.
I'd have to see real numbers to believe you on the items you mentioned above, I'm afraid simply stating that something is the case doesn't make it so. But regardless of what the numbers are, you might want to ponder that your wallet doesn't know the difference between a dollar/pound spent on larger ticket items which are unavoidable such as a mortgage, vehicle, property taxes, health insurance premiums, prescription drugs, college tuition and lower ticket items such as a dollar spent on your weekly grocery bill, furniture, a new kitchen, or a water heater! It also doesn't know the difference between changes in technology or improvements in the product's efficiency such as in a vehicle. In the real world, your dollar is still coming out of the same old wages that have been notoriously stagnant for decades now and you still have to fork out for the car, for the house or for rent for the other large ticket items, you don't have much of a choice, regardless of what improvements have been made in these. In 1986 a Dodge light pickup truck cost $5,600 vs today's price of $40,000 at the low end for a same brand light pickup truck. That's a 20% annual increase over 30 years. Do you think that your wallet cares that your McDonald's meal has gone down or up over the last 30 years in comparison to the increase in the price of the vehicle? Yes or no? Your wallet/purchasing power has still gotten killed on balance! Re housing and rent, I asked you a question. Can you answer it? Regarding your comment that "once you buy the house", that's the whole point. Your dollar's spending power on each square foot of property that you buy has been decimated relative to where it was 20 or 30 years ago, before monetarism went ballistic. It is irrelevant that you don't have to buy another house after you've already dished out an arm and a leg. Again, there is a reason why people are still in debt to their eyeballs and don't have any money saved for an emergency. And you can rest assured that it's not because inflation as gone up by 1.3487508% every year according to the government.
Well i was talking about a regular car that average people might own, something like a 1996 $17K Honda civic costs about $27K in 2016. My mortgage payments have been falling massively since 2009. Negative inflation for me there. Someone wants to buy a house now, they better work hard and save a decent deposit. But they will find it gets easier to service the mortgage as time goes by as inflation erodes the value of debt. But Renters will always get screwed as inflation will work against them, ever higher rents.
Ok, let's use your example, which his 3% a year for a 60% increase in 20 years. The CPI in the US reported in 2013 that the price of a new car had risen by 46% since 1983, that would be 1.5% per year. Your example has it at DOUBLE that. Given that the Honda Civic is the quintessential average man's car, can you please answer this question: is the CPI understating or accurately reflecting real world price increases? You are obviously not representative of the average consumer. How does it get "easier" to service the mortgage when incomes are trailing the effect of 'inflation' on debt by a million miles? Can you explain?
Please note that I have given you more than one example of the idiocy of the Chapwood Index. As to its construction, I am getting the information directly from the Methodology section of the website. And no, my ardent friend, I don't have a bias against other inflation measurements (if you looked at my past posts, you would have seen that I am a big fan of the MIT BPP, now PriceStats, EPI, etc). I do, however, have a bias against idiocy. As to Wharton & Morgan Stanley, I trust you are familiar with the fallacy of "argument from authority"? Erm, when I talk about recent history, I am referring to the 80s, 90s and the 00s, prior to the crisis. I have just told you that there is no discretion in the analysis, but I guess you didn't listen. And arithmetic matters, since different formulae produce different effects. And these different formulae have been studied, examined and discussed in great detail by a great number of people. Your ignorance regarding these things and unwillingness to understand the basics suggests,... wait for it..., a certain a priori bias. Well, this isn't very logical... Are you suggesting that a conservative cannot possibly ever labeled a "socialist"? In answer to your question, I can neither confirm nor deny the existence of a person such as you describe. The burden of proof, as you have stated yourself, is on you. Whatever you say, mate... Again... Huh? At any rate, I don't think there's any point to continuing this charade much further. I seemingly find myself engaging in these discussions every few years, with amazing regularity. Pls feel free to avail yourself of this site's excellent "Search" functionality.