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Real Inflation 10 percent annually

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Real Inflation 10 percent annually

Unread postby bochen777 » Wed 22 Jan 2020, 23:37:02

https://chapwoodindex.com/

https://www.mathwarehouse.com/calculato ... ulator.php


This means if you are making SIX figures NOW (2020) then in less than 14 years for a standard family of four you will be below the US poverty line!!!! (this is assuming the petrodollar hegemony doesn't completely erode)

Basically in less than half a generation the entire middle class will be wiped out ...
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Re: Real Inflation 10 percent annually

Unread postby dissident » Thu 23 Jan 2020, 00:07:03

bochen777 wrote:https://chapwoodindex.com/

https://www.mathwarehouse.com/calculato ... ulator.php


This means if you are making SIX figures NOW (2020) then in less than 14 years for a standard family of four you will be below the US poverty line!!!! (this is assuming the petrodollar hegemony doesn't completely erode)

Basically in less than half a generation the entire middle class will be wiped out ...



In case someone thinks these numbers aren't credible, pay attention to food prices. They are inflating about 10% per year. Maybe some total junkfood composed of sugar is not increasing in cost this fast, but real food is. As far as real estate, the CPI has been engineered to hide the direct inflation of property. Instead some contrived scheme is used to pretend that there is an equivalent rental rate and CPI is assigned based on rental rate dynamics. Utter BS. Over time it is apparent that rents are effectively going up much faster since the size of apartments for similar rates is shrinking. The CPI is totally blind to this as it is blind to downsizing of food containers. The clowns who put out the CPI are too busy with hedonics adjustments that artificially deflate the prices of goods based on new "features". Hedonics adjustments make it impossible to compare, for example TVs, from the past and today in terms of price.
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Re: Real Inflation 10 percent annually

Unread postby jedrider » Thu 23 Jan 2020, 12:08:13

Housing costs has definitely been running at at least 10 percent inflation. Considering that that is the largest outlay of any family, that is what inflation would feel like to them. I'm glad the trade war with China has fizzled. At least, we still have cheap stuff available to us.
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Re: Real Inflation 10 percent annually

Unread postby Outcast_Searcher » Thu 23 Jan 2020, 13:34:45

Gee, if only using social media for only 10 cities reflected general reality. :idea:

This is just like all the arm waving re shadowstats. It doesn't take a lot of brain power to look at real world experience in things like ordinary cars, considering technology improvements, housing in general (NOT just in a handful of expensive crowded cities), the overall shopping list at the grocery store, at Amazon, etc. to see that several decades of claims re shadowstats that real inflation is near 9% over several decades is absolute nonsense.

Same thing here, except the data set is highly skewed AND there is little to no discipline, backing of figures, etc. It's just what people emotionally report -- people wound up about inflation, which are almost certain to exaggerate on social media. :roll:

Re the math, yes, re the rule of 72, IF inflation were over 10% overall, then in 14 years, 100K would become worth 25K. (Inflation in the 70's and early 80's was NASTY. In the latter half of '81, supporting myself for the first time, EVERY TIME I went to the grocery store, I noticed prices had risen. THAT was damn scary. That's what real world 15ish percent inflation was like. NOT LIKE TODAY -- not at all, aside from medical and college expenses.

And, in the real world, long term, US stock investments have outpaced inflation by roughly 7% a year for the past 90 years (since good numbers have consistently been available). So it's not like real world inflation puts solid investors in the poor house, if they invest over the course of their career (vs. cherry picking short term results).

Aren't there enough real world issues to be concerned about without constantly looking for the latest made up thing, and throwing it against the wall, hoping it will stick?

What's next? That we should panic because the earth really is flat?
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Real Inflation 10 percent annually

Unread postby evilgenius » Fri 24 Jan 2020, 07:14:45

Yes, because everyone who sells anything is always trying to see if they can get more for it. If you don't include substitution in the toolkit for dealing with them, then they can raise prices as high as they wish. Economics relies, therefore, upon substitution for it to work. It is expected. Those who merely look at prices, and decry what they see, are taking things too simply. Unless there are forces driving up prices as a whole, across all substitutionary products, then the type of pressure theses inflation hawks talk about doesn't exist.
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Re: Real Inflation 10 percent annually

Unread postby The_Toecutter » Wed 26 Feb 2020, 13:57:25

I keep my receipts.

From what I can tell, inflation regarding food prices is greater than 10% year over year for the things I purchase comparing two receipts in front of me, both from the same grocery store, one from the last time I bought groceries and the other from a year ago to the nearest week(to account for seasonal price differences). About every second time I go to the grocery store, I do see price increases in at least two or three of the things I buy on a regular basis, and I almost never see price declines in any of them on a YoY basis.

I purchase unprocessed or minimally processed foods and spices in their base forms, with minimal or no packaging, and prices have consistently been climbing far in excess of what the CPI claims they are, by at least a factor of 5. As far as I know, a pint of blueberries is still a pint of blueberries($1.39 last week versus $1.19 last year), a pineapple is still a pineapple($1.59 last week versus $1.29 last year), a bundle of cilantro is still a bundle of cilantro($0.89 last week versus $0.79 last year), and a bag of frozen green beans is still a bag of frozen greenbeans($0.99 last week versus $0.89 last year). This trend has occurred for everything I buy, nothing has escaped the price increase, and they've been each of similarly large percentages(10-25% price increase). Try a "substitution" around that one...

...and just because Alan Greenspan claims hamburger is steak, does not make it so...

You know what doesn't go up 10%+ on an annualized basis? My wages from the job I'm working at.

Comparing the amount of hours required to work at both minimum wage and median wage to buy like for like items is IMO a much better way to gauge the real inflation rate. It cuts through all of the adjustments, substitutions, debt availability, and obfuscations inherent in otherwise constantly changing markets and metrics. By this metric, Americans are paid 1/2 to 1/3 as much as they were 50 years ago. We now need twice as many hours worked at the median wage to support a family at a basic bare-bones 1970 level of living standard without luxuries and frivolities(just the basics, food, shelter, utilities, healthcare) versus what it would have taken in 1970.

By the metric of hours of work required at median wage to afford the basics, the average American's living standard is rapidly slipping, The CPI can claim low inflation all it wants, but Americans continue to feel as they are falling further and further behind. I don't think it's their collective imaginations playing tricks on them, even though they will spend many hours a day staring at those shiny new glowing rectangles that didn't exist in 1970 to distract themselves from reality while pundits tell them how great things are...

evilgenius wrote:Unless there are forces driving up prices as a whole, across all substitutionary products, then the type of pressure theses inflation hawks talk about doesn't exist.


Those forces driving up prices include but are not limited to:

-fiat money that is not backed by anything tangible
-modern monetary theory
-central banks
-increasing debt burdens used in substitution for cash
The unnecessary felling of a tree, perhaps the old growth of centuries, seems to me a crime little short of murder. ~Thomas Jefferson
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Re: Real Inflation 10 percent annually

Unread postby jedrider » Wed 26 Feb 2020, 15:35:02

From what I can tell, inflation regarding food prices is greater than 10% year over year...


Yep, you can't eat computer chips.
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Re: Real Inflation 10 percent annually

Unread postby The_Toecutter » Fri 28 Feb 2020, 20:35:35

This guy seems to get it:

https://www.manhattan-institute.org/reevaluating-prosperity-of-american-family

A dramatic divergence between data and experience is confounding America’s policy debates.

...

The explanation is this: inflation does not measure affordability. Key assumptions built in to inflation indexes for the purpose of measuring the underlying, economy-wide upward pressure on prices are different from, and often counter to, the key assumptions necessary for assessing the economic choices and constraints faced by households. When analysts use inflation adjustments to compare household resources over time, they have chosen the wrong vantage point, and their view is obscured.

...

In 1985, the basket cost totaled $13,227, which, at a weekly wage of $443, would require 30 weeks of work to cover. In 2018, the basket cost totaled $54,414, which, at a weekly wage of $1,026, would require 53 weeks of work to cover.

...
The unnecessary felling of a tree, perhaps the old growth of centuries, seems to me a crime little short of murder. ~Thomas Jefferson
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Re: Real Inflation 10 percent annually

Unread postby Outcast_Searcher » Sat 29 Feb 2020, 14:55:05

The_Toecutter wrote:This guy seems to get it:

https://www.manhattan-institute.org/reevaluating-prosperity-of-american-family

A dramatic divergence between data and experience is confounding America’s policy debates.

...

The explanation is this: inflation does not measure affordability. Key assumptions built in to inflation indexes for the purpose of measuring the underlying, economy-wide upward pressure on prices are different from, and often counter to, the key assumptions necessary for assessing the economic choices and constraints faced by households. When analysts use inflation adjustments to compare household resources over time, they have chosen the wrong vantage point, and their view is obscured.

...

In 1985, the basket cost totaled $13,227, which, at a weekly wage of $443, would require 30 weeks of work to cover. In 2018, the basket cost totaled $54,414, which, at a weekly wage of $1,026, would require 53 weeks of work to cover.

...

No matter how hard you try to skew the overall data, the data is what it is. Just going beyond how wildly wrong Shadowstats is, is no more rational than yelling at clouds makes being an anti-vaxxer a good idea.

Selectively measuring a relative handful of goods does NOT indicate anything meaningful about the overall level of inflation. Inflation rates vary MASSIVELY depending on the type of good being measured.

Examples:

Medical care and advanced education -- very high inflation.

Cars -- near zero inflation over time. Rural housing -- modest overall inflation when factoring in improvements, over time.

Electronics and especially computers -- very strong DEFLATION. (Oh, and in the real world where overall numbers and trends matter, computers over time are becoming an extremely MASSIVE part of the economy, including "normal, typical" goods of many types.)
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Real Inflation 10 percent annually

Unread postby The_Toecutter » Sun 01 Mar 2020, 21:15:30

Outcast_Searcher wrote:No matter how hard you try to skew the overall data, the data is what it is.


Agreed. This is why I'm not a fan of hedonic adjustments. While they seem to make sense at first glance, they skew the overall data. Removing the hedonic adjustments at least allows for a closer nominal comparison.

Just going beyond how wildly wrong Shadowstats is, is no more rational than yelling at clouds makes being an anti-vaxxer a good idea.


Shadowstats attempts to use consistent methodology, whereas the official government stats keep changing the methodology. Shadowstats' data, wrong or not, makes it easier to do like for like comparisons by allowing more direct comparisons to statistics from decades ago when the methodology with which they were calculated differed with today's methodology.

Selectively measuring a relative handful of goods does NOT indicate anything meaningful about the overall level of inflation. Inflation rates vary MASSIVELY depending on the type of good being measured.


True, but it would make sense to look at the cost of necessities like food, shelter, utilities, healthcare, ect. and then examine them as a percentage of living expenses for various income groups. In the event that these items consume the majority of one's living expenses, high inflation in these areas more than makes up for price declines in luxuries and frivolities, even though when the latter are factored in, the official statistics would show living costs are stable or declining.

Thus, the divergence between the official statistics and real-world experiences of the poor, working class, and lower middle class. When the necessities are expensive enough to impose a paycheck to paycheck existence just to afford them(or even constant unavoidable debt accumulation), the dramatically cheaper price of luxuries really makes no difference in the quality of someone's life because they have no spare money to afford the luxuries anyway without piling on more debt.


What I'm seeing in the real world is rapidly increasing costs for the necessities, and declining costs for luxuries. Removing the hedonic adjustments, the statistics also bear this out. Peoples' experiences also seem to bear this out: what once was an economy that allowed one parent to work a full time job and raise a family while saving for both college and retirement, is now an economy where both parents must work while being able to set aside very little savings and require constant accumulation of debt to afford it. All of the high-tech new cars, the smart phones, the PCs, and "quality improvements" do not make up for this.

My problem with adjustments is that no matter how many times Alan Greenspan says hamburger is now steak, it does not make it so. The official statistics ARE skewed data.
The unnecessary felling of a tree, perhaps the old growth of centuries, seems to me a crime little short of murder. ~Thomas Jefferson
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Re: Real Inflation 10 percent annually

Unread postby mousepad » Mon 02 Mar 2020, 16:44:18

Outcast_Searcher wrote:Cars -- near zero inflation over time.

That's not entirely true. The price increases because of feature creep.
For example, a basic car like the model T is not available for purchase anymore. Practically every model nowadays comes with power windows, automatic shifting, lane keeping, cruise control, abs, traction control, big LCD touch screen, and tons of other unneeded features.
If you don't want any of these, you're out of luck.

Electronics and especially computers -- very strong DEFLATION.

Same story here.
Technically the MIPS per $$ increased dramatically, suggesting strong deflation.
However, again, you don't have much of a choice. You have to buy additional MIPS just to be able to use the computer with new software. This negates the effect of deflation mostly.
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Re: Real Inflation 10 percent annually

Unread postby Outcast_Searcher » Tue 03 Mar 2020, 16:34:59

mousepad wrote:
Outcast_Searcher wrote:Cars -- near zero inflation over time.

That's not entirely true. The price increases because of feature creep.
For example, a basic car like the model T is not available for purchase anymore. Practically every model nowadays comes with power windows, automatic shifting, lane keeping, cruise control, abs, traction control, big LCD touch screen, and tons of other unneeded features.
If you don't want any of these, you're out of luck.

Electronics and especially computers -- very strong DEFLATION.

Same story here.
Technically the MIPS per $$ increased dramatically, suggesting strong deflation.
However, again, you don't have much of a choice. You have to buy additional MIPS just to be able to use the computer with new software. This negates the effect of deflation mostly.

Denying that electronics have massive deflation over time doesn't change that reality. Oh, and the reality is the durability, features, etc. ALSO get a lot better, even as the deflation occurs. If you want "choice", buy used products dirt cheap. That's how I buy computers.

However, complaining that you don't have a choice but to get much better products much cheaper doesn't change the reality re depreciation of electronic costs -- it confirms it. 8)

Re cars, yes, I should have been clearer. The measurements re inflation take the type of feature improvements you cite into account. Some conspiracy theorists try to claim this is government cover-up, instead of reflecting the very reality you are describing.

For one real world example, re my age and experience with typical family sedans over time:

For a typical base midsize family car, like a bottom of the line Toyota Camry has a HELL of a lot of great features compared to the 1970 family sedan from the big three, which cost roughly $3000. However, there is 50 years of inflation in there.

So a 1970 dollar has depreciated to $6.65 in 2020, due to inflation, without any adjustments for technology.

So a $3000 family sedan in 1970 would cost $19,950 in 2020, just using the historical annual inflation rate in the US. And in reality, that car might now cost $25,000. Given all the safety features, the vast increases in reliability, plus all the creature comfort and entertainment features, plus easy access to great brands aside from the (former) big 3 US brands, my statement that cars are in the middle of the pack stands.

https://www.usinflationcalculator.com/

https://www.in2013dollars.com/New-cars/price-inflation

https://www.investopedia.com/financial- ... -cars.aspx

In terms of the most fundamental of currencies - time spent toiling, rather than dollars handed over - today's basic cars are unquestionably less expensive than yesterday's. They're also more stylish, safer, better equipped, faster, more powerful and longer-lasting.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Real Inflation 10 percent annually

Unread postby mousepad » Tue 03 Mar 2020, 17:34:44

Outcast_Searcher wrote:However, complaining that you don't have a choice but to get much better products much cheaper doesn't change the reality re depreciation of electronic costs -- it confirms it.

again, that's not entirely true.
A cell phone nowadays lasts a few years.
The phone my grandmother used was practically nuclear bomb proof.

Today I can't use a pulse dial phone anymore, the network doesn't support it.
Also society practically requires that I own a cell phone. Otherwise I cannot participate in a "normal" way anymore. Social events, meetings, friends, employer, all expect you own a cell phone.

From that point of view there is no deflation. I'm forced to upgrade technology, pay more for features I don't need. I don't have a choice. You understand what I mean?

In terms of the most fundamental of currencies - time spent toiling,

No doubt about it. But my goal is to limit toiling, not to keep toiling the same, while increasing features.
20 years ago I bought a brand new base model truck, it cost me $14k.
The same base model truck today costs more than $25k. Yes, it now has power windows, traction control, automatic 4WD and tons of other shit I don't need. I asked the dealer to remove the power windows, I wanted manual. I got a loooong stare.

So again, I agree with you, on the paper there's no inflation or even deflation, but in terms of "toiling" that's not the true.
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