It's a bit confusing what he's arguing against. But his 2nd-last graph is the good one, [1]. That's only 20 years but [2] is the same thing since 1950.
Some things have become much cheaper, other things have become more expensive. Attempting to summarize that in one number seems like it hides more than it exposes, no matter what number you pick.
I find it interesting to look at this graph against Maslow's hierarchy of needs.
First layer, shelter and food, have increased almost perfectly in line with wages. That's reasonable.
Second layer, security - including healthcare in the US - "feels like it’s experienced hyperinflation", according to the author. And, as you age, your healthcare needs increase.
So if you're low in this hierarchy, being relatively poor, then inflation might feel much more punishing to you.
As a poor person, you might have experienced inflation as averaging 6% over these 20 years, even if the underlying figure averages 2%.
The thing he's arguing against is the Chicago/Austrian school of economics, whose response to just about every monetary policy measure is "But inflation!" UBI would cause inflation; raising the minimum wage would cause inflation; worker protections would cause inflation; government borrowing causes inflation.
That kind of economics gained popularity in the 1970s, when inflation caused genuine hardship. It left a kind of economic PTSD -- especially among people who have money, because inflation erodes the value of savings. The response is a trickle-down economics, where the best way to help the poor is to ensure that the rich have lots of money so that they can give poor people jobs.
So the Internet is full of "But inflation!" and often "But hyperinflation!", usually based on an argument from the first two weeks of economics class where you're shown supply and demand curves. But economics classes go past two weeks. There's a lot more to it than that, and the data simply don't support that argument. The fact is that consumer inflation is very low, and has been for a long time, despite intensive intervention from the central banks.
It is more complicated, and there has been inflation -- most notably in the stock market, and to a lesser degree in other assets (including real estate and cryptocurrency). The stock market has inflated to ludicrous levels, not just in tech assets but as a whole. But not at the consumer level, for a variety of reasons -- a lot of things have become cheaper to produce, and despite tax cuts for the wealthy wages haven't gone up. The wealthy don't eat more or live in more houses with that money, so they're not competing all that much for regular consumer goods. They take all that extra money and buy stocks -- trading them to each other rather than actually starting new businesses.
Anyway, that's what he's arguing against. It should shortcut a whole line of knee-jerk "but inflation!" arguments. But it's been true for decades, and this isn't a new observation, so it doesn't really change anything.
The final graph on median home mortgage payments is misleading too. That can be propped up by REITs and increasing institutional ownership of consumer homes.
There’s also the issue of more millennials living with parents and relatives, unable to afford their own homes, which can be hidden in that.
Definitely can’t conclude from it that wages and purchasing power have kept up with mortgage costs.
> Unfortunately, the pandemic has permanently broken every economic chart in existence.
> But if we take away the outlier 2020 data points, the average real annual GDP growth from 2010-2019 was 2.3%. The inflation rate in that time averaged roughly 1.8% per year.
> If you’re one of the conspiracy people who believe inflation has actually been running at 5-6% per year, that would assume the economy has been contracting by 1-3% per year over the past 10 years.
> And if you’re a full tinfoil hat person who assumes inflation is actually 10-12% per year[fn2], that’s like saying we’ve been in a full-blown depression and the economy has lost 80% of its value.
> This is absurd and patently false but that’s the claim you’re making if you really think inflation is this high.
His connection to reality seems to be tenuous in some aspects:
> In June 2018, Butowsky filed a defamation lawsuit in U.S. federal court seeking $57 million in damages from NPR and one of its reporters, David Folkenflik. Butowsky accused Folkenflik of pushing a "false narrative" of Butowsky's involvement in a now-retracted Fox News story alleging that the murder of Democratic National Committee staffer Seth Rich was connected to the 2016 leak of DNC emails to WikiLeaks. Butowsky also alleged that Folkenflik conspired with an attorney to extort money from Fox. Butowsky told Courthouse News Service that he still believes the Fox News story was accurate.[12] The case is scheduled to go to trial in mid-2021.[13]
> By August 2020, Butowsky still insisted that the retracted Fox News story was accurate.[2] He claimed without evidence that the Seth Rich family were "not innocent bystanders" and that they were "in possession of material evidence indicating that Seth Rich downloaded the DNC emails, sent them to Wikileaks, and requested payment."[2]
So if the GDP grew "only" ~2.5%, then any inflation above that (as the 'truthers' claim), would mean were actually in a recession/depression for the last decade... which makes no sense. If inflation is >5% (per the truthers), then the economic growth would have had to been on top of that, for a nominal growth rate of >7%.
These lines cluster in interesting ways. Is this a mere coincidence? Is this a weird selection bias in how the graph was created? Is this an actual correlation in where these prices come from?
One gotcha about how inflation is calculated (at least in Germany, I assume it to be the same in the US), is that they try to compare identical products. So if this years cars do not have air conditioning, but next years cars do, the prices can increase accordingly without showing up as inflation, because you are getting "more car for more money". The problem appears at the point, when there are no cars without air conditioning anymore: You actually have to pay more to get a car, while your inflation statistics still say, prices have not risen.
This is a fundamental problem with inflation calculation. How much would an iPhone be worth in the 1800's? How much would the Federal government have paid for a gigabit internet connection 100 years ago? Considering they spent tens of millions of dollars developing the Arpanet, I would say that the cost of internet has fallen dramatically.
Inflation calculations are only meaningful over short time periods. When chained over decades and centuries, we may as well be comparing two foreign currencies and societies.
This is the same in the US, yes. And it's still the correct thing to do.
Inflation can't be a measure of every dimension of economic hardship at once. As the article points out, healthcare has risen in cost dramatically more than most other things. Does that mean that somehow the inflation rate must reflect the pains of those households not in the average and aggregate?
Less capable goods may no longer be available. You can no longer purchase a Model T, and must purchase a car that's faster, safer, more comfortable, and more reliable. Even if you don't particularly value that, your car objectively is faster, safer, more comfortable, and more reliable. The inflation rate can't change because your preferences are for a cheaper, but inferior good.
I once read an article that claimed official statistics radically over-estimated how healthy US manufacturing was - because the official statistics considered a factory making CPUs with 16MB cache to have 1000x the output of a factory making CPUs with 16kB cache.
Is the author debating a strawman or something? Actually, they just seem confused. At the start, they state asset price increase is not inflation, then, at the end, agree that there is some inflation going on in the real estate space.
So the author is agreeing with the people they're supposedly countering. I don't understand the point of this piece.
Yes, the author is debating a straw man. The argument that the government is understating inflation is a pretty simple one.
1) The government is heavily incentivized to understate inflation in order to limit its expenditures for social security and TIPS, both of which are indexed to inflation. Social security in particular would explode in costs if, say, the official rate had been 1% higher on average over the past 30 years since the inflation measure got significantly changed during the late 80s and early 90s. In fact, if you look back at the discussion surrounding those changes, bringing down the costs of social security was an explicit reason for the redesign.
2) Complexity and obscurity. None of the input data is released, and there's this thing called 'hedonic quality adjustments' which is the umbrella beneath which economists decide how much to lower inflation when the quality of goods gets a little bit better. The FED economists point out that a car from 2018 is better than a car from 2012 and they adjust inflation downwards in order to account for the increase in value that consumers are getting in their car. Consumers counter by pointing out that they still have to spend the actual money...
Analysis) With transparency and a lack of incentive to cheat (see 1) hedonic quality adjustments would be an allowable modification, but with opacity and a strong incentive to cheat, they pretty much guarantee that inflation is fudged downwards. The debates around changing the inflation measure have focused heavily on reducing social security payments. In short, any time you have excessive complexity, lack of transparency, and an incentive to cheat, you can expect cheating.
Why should we care? First and foremost, Anyone who has a relative collecting social security would probably be upset to hear that grandma is getting about 60% of what she should be getting, given the promises made and the value of the money she contributed.
Second, and the big point that the article missed entirely, is that real gdp per capita HAS been declining, reflecting that decrease in standard of living that one would expect to see if inflation were understated.
If that's your only explicit criticism, then that's not much of a criticism.
The author was clearly referring to stocks, bonds, and other financial instruments when discussing asset price inflation (he refers specifically to "risk assets"). And then, at the end, he didn't "agree" that there is some inflation in the real estate space:
> Of course, there are areas of the country where housing prices are out of control. But this is how averages work. Some data points are above average while others are below average.
In any case, I don't believe that he's arguing against a strawman. I've seen plenty of discussions on HN alone that the "true" inflation is much higher than the reported inflation, and that this can only be measured by looking at BitCoin prices, for instance.
I found the “Price Changes” graph about 2/3 down the page really alarming.
Virtually all of the gains in the form of lowered prices are purely in discretionary consumption and subsistence goods. Cheap entertainment, toys, staple foods.
Meanwhile the insane price increases are in critical needs, medical care, housing, college education.
In my mind that graph is pretty strong evidence that there really is massive inflation and the idea of “asset inflation” does exist, contrary to the author’s lead point that it should be seen as normal growth of value.
For most people, if you show them this data and said, “see, low inflation, don’t worry...” they are rightfully going to be pissed off. “Low inflation” except in everything that really matters for health, home ownership and betterment for my children.
I guess I should just thank the monetary policy overlords for my cheap Netflix while we all die of cancer under the thumb of landlords and all our economic participation from labor dwindles and continues to lose purchasing power for what we most need.
This is just it ; The author doesn't compare to CPI as calculated using the methodologies for the 1990s or the 1980s - he just builds a straw man and throws cheap consumer electronics at it. What he fails to realize, is that this is precisely the argument of those who believe real inflation to be higher than reported; Namely, that without including cheap electronics and luxury items the picture is much much worse - which it is. This article built a nice strawman and burnt it - what I'd like to see is the author actually tackle the claims of his opponents rather than gross mischaracterizations of them.
This was a point I made when the pandemic shortages kicked off. The entire world's purchasing habits shifted towards guns, food, prepping gear, and TP. The prices of those items skyrocketed (when they could be found). I predicted at the time that, even though everyone was experiencing massive price inflation in the stuff we were actually buying, largely due to increased demand, it was not going to show up in the numbers because of the way inflation is calculated.
Put another way, if I'm in the market for housing, healthcare, groceries and gardening supplies, and the prices of all those things around skyrocketing, then it doesn't matter much to me if the price of cars is down 20% since the crisis began. The inflation measures, however, don't account for the shifts in purchasing demand, which should weight the measure heavily.
The price elasticity of higher education is 0, and healthcare is also very low. We see my more inflation in things that we're not willing to go without.
Isn't this entire article missing the difference between a luxury item and an essential item? A smartphone 10 years ago was a luxury for just about everyone who owned one (that is, bought with extra money) now it's a requirement.
The luxury purchase folks are certainly getting a better deal as apples:apples prices go down; but if you're paycheck to paycheck and used to be able to not buy a smartphone but now have to - you're just running on tighter margins.
I would imagine measuring economic well being directly through something like a "economic desperation index" makes more sense than doing a bunch of calculus on comparing the price and quality of items in two different years since the latter would only apply to people who own the item in both domains. Especially in the context of this article which is discussing if people have it better now or then.
Essential? Really? Many of us leave our phones off, leave them at home or in the car, and are only marginally impacted. The difference between 'any phone' and a smart phone is quite small. Except for folks addicted to them, who can't last a day without constant updates.
The problem with measuring inflation is that you can cherry-pick the goods in your basket to paint the picture that you want to see. If I make a basket full of housing, healthcare, college education, and fresh produce, I can show you that inflation is out of control.
If you look at the "price changes" chart, prices for the red line items have gone up 4-6% per year over 20 years. While it's nice that you can buy a 55" flatscreen for the price of a 15" crt from 1998, TVs (and cars, furniture, clothing) are occasional purchases and can be cost-controlled by choosing cheaper options. Unlike healthcare/insurance, where you're stuck with paying for what you can get.
I'm not saying the article is wrong in general, but I don't get this last bit:
> The government isn’t suppressing the “actual” inflation number. And if they were, they would also be suppressing reported economic growth...
Surely by suppressing inflation they are increasing reported economic growth.
If the dollar value of the economy increases 10% with no inflation, then that's 10% growth, but if inflation was also 10%, then that's 0% real growth. So if the economy grows at the same dollar rate, but you manipulate the inflation number lower, you get more apparent real growth.
I think his point is that the same source numbers are used to calculate both inflation and GDP. If you suppress inflation by undervaluing goods and services you also suppress GDP. You could get away with divergence if your didn't provide your data, but at least in the US, you can see all the input data.
Isn't the federal reserve intentionally propping up markets? I thought in one of the reports they argued that there was higher inflation but it was restricted to certain markets like housing and so over all inflation was ~2%.
Others have claimed that the author buried the lede by placing the chart which shows runaway healthcare (hospital and medical care services) inflation at the end of the article.
However, there are sound arguments for why healthcare costs have not actually inflated much. Essentially, the argument goes, you're not buying the same thing that was available in the past. It's an apples to oranges comparison.
There are many problems with mainstream ideas about inflation, but one key problem is that it does not take into account the disastrous decline in the quality of public services that Americans have experienced over the last couple of decades. How do you measure the inflationary impact of the fact that in many cities, the public schools have declined in quality so much that people are faced with the choice of either moving to the suburbs, or paying for private school? What about the impact of the transformation of the built landscape from nice walkable towns to disgusting exurban sprawl?
He's also ignoring how the substitution effect, which normally serves to tamp down realized inflation as folks change the composition of the basket of goods and services they consume, is not applicable or less applicable to most of the red lines (food, housing, medical care).
On a long enough timeline if food and housing prices keep outpacing other prices, the proportion of consumer money devoted to such items will trend towards 100%. And if the basket is 100% stuff that keeps quickly going up in price, then CPI is also quickly going up in price (ipso fact).
The big difference people need to understand is between "core" inflation, and consumer price index, and whether that index includes super volatile items like food and fuel, and how they are weighted. It's one of those torturing data until it gives you the policy you want exercises.
You can make inflation say whatever you want it to say with selected goods and index weighting, so I don't get into arguments about it because it's mainly an obfuscation proxy for ideological conflicts.
> That emissions chart looked good. Half as much as 1970. Too bad we have 5 times as many vehicles
Yes, which is a problem environmentally, but from a basket-of-goods measure for the individual consumer, the number of cars is irrelevant: we as buyers are getting a better product.
Population has approximately doubled while simultaneously huge swaths of the globe have gone from "only the rich can afford cars" to "the middle class can afford cars."
While the CO2 certainly isn't good one would need to do some Olympic level mental gymnastics to argue that an increase in wealth to the point where billions more people can afford an expensive complex good like a car is a bad thing overall.
Also, all those changes were wrought by government fiat, and have been accomplished almost completely by reducing the weight of the cars, not by quality improvements as the article implies.
Also: the items in the category with decreasing prices are almost all automatically mass-producable and will have the advantage of learning (i.e. increased production efficiency and decreased cost with increasing number of items produced) while the ones in the other category aren’t necessarily. Childcare/nursery isn’t going to become cheaper just because you’ve more experience with the job.
College textbooks really stand out though. These should not have to become more expensive. They are written once and printed cheaply thereafter. I wonder what the curve for other types of books looks like but my guess is that other books have not seen these increases and this is purely money-making.
I'm not sure that college textbooks are written once. It depends on the subject, but they are often replaced frequently e.g. as technology or laws are updated, and each one makes only a small number of sales. Yes, printing costs are relatively low, but they are also a relatively small part of the cost of many kinds of book.
Ask Japan. Their M1/2 has growth bigly over the last few decades and they've had next no inflation. Remember, the 'general' equation is: Inflation = Money_supply x Velocity.
Yes, there's a big tank of money sitting around, but it's not sloshing around the economy that much. And if it does start, there's at least one tool to cool things down: raise interest rates.
I think the author is confused about what inflation is, vs the benefits reaped from the advancement of technology. The author also seems to have a bias against the people screaming "inflation". That is pretty obvious from the title. To show real inflation, I like using the Burger King whopper as an example. In the early 90's I remember being able to buy 4 whoppers for $1. With the advancement of farming technology, transportation technology, preservation technology, etc.... Why do we see the whopper cost over $7 now?
So that's a 4.3x change, not a 28x change as claimed, and represents an "inflation" of about 7.5%/yr over the past two decades (or 5.5%/yr since 1990).
On one hand, he's not wrong, overall inflation for 2020 was on par for a normal year, we're not headed into hyperinflation territory just yet. But you also have to realize that some people are affected quite a bit harder by the crazy shifts in deflated and inflated costs this year.
Look at the breakdown of the line items that make up the US inflation rate for 2020 and you see that the massive drop in fuel cost (-19%) caused a massive offset to the overall number. Meanwhile food cost has gone up over 3%, medical expenses also went up over 3%. As we head out of this hell hole it will be interesting to see if inflated sectors return to more normal levels again.
There probably aren't publicly-available studies on the subject, but, in general it is true.
1. Material science has improved dramatically, even since the 90s. We now have oils that don't break down for years, even under extreme temperatures, and tolerances within engines are tight enough that oil can go 10,000 miles without meaninful gasoline contamination. Also, rust-proofing, rubbers, and plastics (!) are much, much better.
2. Solid state electronics have replaced mechanical systems. This is a big one: vacuum lines were a nightmare, carburetors were fickle, distributors wore out, etc. All of these systems have been replaced by maintenance-free electronic versions.
3. Better computer-aid modeling. This is kind of a good and bad, since now components aren't overbuilt like in the 90s, but they are also less likely to be underbuilt.
There are absolutely manufactures who still make unreliable heaps, but generally, reliability has improved. Most of that reliability comes in the form of less maintenance: no car needs the valves adjusted every 30k miles anymore (except maaaybe exotics).
Jay Leno likes to joke about how cars used to come with 90 day warranties in the 70s. 90 days!
Based on recent sales, our house has been appraised in the low $700,000 range for the last few years. We just put it up for sale and received three offers. $1,025,000, $1,030,000, and $1,050,000.
> You used to pay $14.99 for a single CD that may have had 2-3 songs at most that you enjoyed. Now you can pay $14.99 a month for literally all the music in history.
Strong language, name calling, no real argument. The conse sus is that inflation is not here now because of low money velocity but wil come next years inevitably.
[+] [-] iguy|5 years ago|reply
Some things have become much cheaper, other things have become more expensive. Attempting to summarize that in one number seems like it hides more than it exposes, no matter what number you pick.
[1] https://awealthofcommonsense.com/wp-content/uploads/2021/01/...
[2] https://marginalrevolution.com/marginalrevolution/2019/05/wh...
[+] [-] throwaway2245|5 years ago|reply
First layer, shelter and food, have increased almost perfectly in line with wages. That's reasonable.
Second layer, security - including healthcare in the US - "feels like it’s experienced hyperinflation", according to the author. And, as you age, your healthcare needs increase.
So if you're low in this hierarchy, being relatively poor, then inflation might feel much more punishing to you.
As a poor person, you might have experienced inflation as averaging 6% over these 20 years, even if the underlying figure averages 2%.
[+] [-] jfengel|5 years ago|reply
That kind of economics gained popularity in the 1970s, when inflation caused genuine hardship. It left a kind of economic PTSD -- especially among people who have money, because inflation erodes the value of savings. The response is a trickle-down economics, where the best way to help the poor is to ensure that the rich have lots of money so that they can give poor people jobs.
So the Internet is full of "But inflation!" and often "But hyperinflation!", usually based on an argument from the first two weeks of economics class where you're shown supply and demand curves. But economics classes go past two weeks. There's a lot more to it than that, and the data simply don't support that argument. The fact is that consumer inflation is very low, and has been for a long time, despite intensive intervention from the central banks.
It is more complicated, and there has been inflation -- most notably in the stock market, and to a lesser degree in other assets (including real estate and cryptocurrency). The stock market has inflated to ludicrous levels, not just in tech assets but as a whole. But not at the consumer level, for a variety of reasons -- a lot of things have become cheaper to produce, and despite tax cuts for the wealthy wages haven't gone up. The wealthy don't eat more or live in more houses with that money, so they're not competing all that much for regular consumer goods. They take all that extra money and buy stocks -- trading them to each other rather than actually starting new businesses.
Anyway, that's what he's arguing against. It should shortcut a whole line of knee-jerk "but inflation!" arguments. But it's been true for decades, and this isn't a new observation, so it doesn't really change anything.
[+] [-] mlthoughts2018|5 years ago|reply
There’s also the issue of more millennials living with parents and relatives, unable to afford their own homes, which can be hidden in that.
Definitely can’t conclude from it that wages and purchasing power have kept up with mortgage costs.
[+] [-] throw0101a|5 years ago|reply
> Unfortunately, the pandemic has permanently broken every economic chart in existence.
> But if we take away the outlier 2020 data points, the average real annual GDP growth from 2010-2019 was 2.3%. The inflation rate in that time averaged roughly 1.8% per year.
> If you’re one of the conspiracy people who believe inflation has actually been running at 5-6% per year, that would assume the economy has been contracting by 1-3% per year over the past 10 years.
> And if you’re a full tinfoil hat person who assumes inflation is actually 10-12% per year[fn2], that’s like saying we’ve been in a full-blown depression and the economy has lost 80% of its value.
> This is absurd and patently false but that’s the claim you’re making if you really think inflation is this high.
[fn2] then points to a tweet:
* https://twitter.com/tanayj/status/1345080274107785216?s=20
Which has inflation at 10-12%, per:
* https://chapwoodindex.com/
The creator of this report is Ed Butowsky:
* https://chapwoodindex.com/contact-us/
His connection to reality seems to be tenuous in some aspects:
> In June 2018, Butowsky filed a defamation lawsuit in U.S. federal court seeking $57 million in damages from NPR and one of its reporters, David Folkenflik. Butowsky accused Folkenflik of pushing a "false narrative" of Butowsky's involvement in a now-retracted Fox News story alleging that the murder of Democratic National Committee staffer Seth Rich was connected to the 2016 leak of DNC emails to WikiLeaks. Butowsky also alleged that Folkenflik conspired with an attorney to extort money from Fox. Butowsky told Courthouse News Service that he still believes the Fox News story was accurate.[12] The case is scheduled to go to trial in mid-2021.[13]
> By August 2020, Butowsky still insisted that the retracted Fox News story was accurate.[2] He claimed without evidence that the Seth Rich family were "not innocent bystanders" and that they were "in possession of material evidence indicating that Seth Rich downloaded the DNC emails, sent them to Wikileaks, and requested payment."[2]
* https://en.wikipedia.org/wiki/Ed_Butowsky#Murder_of_Seth_Ric...
So if the GDP grew "only" ~2.5%, then any inflation above that (as the 'truthers' claim), would mean were actually in a recession/depression for the last decade... which makes no sense. If inflation is >5% (per the truthers), then the economic growth would have had to been on top of that, for a nominal growth rate of >7%.
[+] [-] saurik|5 years ago|reply
[+] [-] allendoerfer|5 years ago|reply
[+] [-] dahfizz|5 years ago|reply
Inflation calculations are only meaningful over short time periods. When chained over decades and centuries, we may as well be comparing two foreign currencies and societies.
[+] [-] aetherson|5 years ago|reply
Inflation can't be a measure of every dimension of economic hardship at once. As the article points out, healthcare has risen in cost dramatically more than most other things. Does that mean that somehow the inflation rate must reflect the pains of those households not in the average and aggregate?
Less capable goods may no longer be available. You can no longer purchase a Model T, and must purchase a car that's faster, safer, more comfortable, and more reliable. Even if you don't particularly value that, your car objectively is faster, safer, more comfortable, and more reliable. The inflation rate can't change because your preferences are for a cheaper, but inferior good.
[+] [-] michaelt|5 years ago|reply
[+] [-] hackeraccount|5 years ago|reply
[+] [-] maest|5 years ago|reply
So the author is agreeing with the people they're supposedly countering. I don't understand the point of this piece.
[+] [-] PhaedrusV|5 years ago|reply
1) The government is heavily incentivized to understate inflation in order to limit its expenditures for social security and TIPS, both of which are indexed to inflation. Social security in particular would explode in costs if, say, the official rate had been 1% higher on average over the past 30 years since the inflation measure got significantly changed during the late 80s and early 90s. In fact, if you look back at the discussion surrounding those changes, bringing down the costs of social security was an explicit reason for the redesign.
2) Complexity and obscurity. None of the input data is released, and there's this thing called 'hedonic quality adjustments' which is the umbrella beneath which economists decide how much to lower inflation when the quality of goods gets a little bit better. The FED economists point out that a car from 2018 is better than a car from 2012 and they adjust inflation downwards in order to account for the increase in value that consumers are getting in their car. Consumers counter by pointing out that they still have to spend the actual money...
Analysis) With transparency and a lack of incentive to cheat (see 1) hedonic quality adjustments would be an allowable modification, but with opacity and a strong incentive to cheat, they pretty much guarantee that inflation is fudged downwards. The debates around changing the inflation measure have focused heavily on reducing social security payments. In short, any time you have excessive complexity, lack of transparency, and an incentive to cheat, you can expect cheating.
Why should we care? First and foremost, Anyone who has a relative collecting social security would probably be upset to hear that grandma is getting about 60% of what she should be getting, given the promises made and the value of the money she contributed.
Second, and the big point that the article missed entirely, is that real gdp per capita HAS been declining, reflecting that decrease in standard of living that one would expect to see if inflation were understated.
[+] [-] SamBam|5 years ago|reply
The author was clearly referring to stocks, bonds, and other financial instruments when discussing asset price inflation (he refers specifically to "risk assets"). And then, at the end, he didn't "agree" that there is some inflation in the real estate space:
> Of course, there are areas of the country where housing prices are out of control. But this is how averages work. Some data points are above average while others are below average.
In any case, I don't believe that he's arguing against a strawman. I've seen plenty of discussions on HN alone that the "true" inflation is much higher than the reported inflation, and that this can only be measured by looking at BitCoin prices, for instance.
[+] [-] intotheabyss|5 years ago|reply
[+] [-] mlthoughts2018|5 years ago|reply
Virtually all of the gains in the form of lowered prices are purely in discretionary consumption and subsistence goods. Cheap entertainment, toys, staple foods.
Meanwhile the insane price increases are in critical needs, medical care, housing, college education.
In my mind that graph is pretty strong evidence that there really is massive inflation and the idea of “asset inflation” does exist, contrary to the author’s lead point that it should be seen as normal growth of value.
For most people, if you show them this data and said, “see, low inflation, don’t worry...” they are rightfully going to be pissed off. “Low inflation” except in everything that really matters for health, home ownership and betterment for my children.
I guess I should just thank the monetary policy overlords for my cheap Netflix while we all die of cancer under the thumb of landlords and all our economic participation from labor dwindles and continues to lose purchasing power for what we most need.
[+] [-] throwawayinflat|5 years ago|reply
[+] [-] PhaedrusV|5 years ago|reply
Put another way, if I'm in the market for housing, healthcare, groceries and gardening supplies, and the prices of all those things around skyrocketing, then it doesn't matter much to me if the price of cars is down 20% since the crisis began. The inflation measures, however, don't account for the shifts in purchasing demand, which should weight the measure heavily.
[+] [-] nahname|5 years ago|reply
[+] [-] defertoreptar|5 years ago|reply
[+] [-] BlueTie|5 years ago|reply
The luxury purchase folks are certainly getting a better deal as apples:apples prices go down; but if you're paycheck to paycheck and used to be able to not buy a smartphone but now have to - you're just running on tighter margins.
I would imagine measuring economic well being directly through something like a "economic desperation index" makes more sense than doing a bunch of calculus on comparing the price and quality of items in two different years since the latter would only apply to people who own the item in both domains. Especially in the context of this article which is discussing if people have it better now or then.
[+] [-] JoeAltmaier|5 years ago|reply
[+] [-] mywittyname|5 years ago|reply
If you look at the "price changes" chart, prices for the red line items have gone up 4-6% per year over 20 years. While it's nice that you can buy a 55" flatscreen for the price of a 15" crt from 1998, TVs (and cars, furniture, clothing) are occasional purchases and can be cost-controlled by choosing cheaper options. Unlike healthcare/insurance, where you're stuck with paying for what you can get.
[+] [-] rjmunro|5 years ago|reply
> The government isn’t suppressing the “actual” inflation number. And if they were, they would also be suppressing reported economic growth...
Surely by suppressing inflation they are increasing reported economic growth.
If the dollar value of the economy increases 10% with no inflation, then that's 10% growth, but if inflation was also 10%, then that's 0% real growth. So if the economy grows at the same dollar rate, but you manipulate the inflation number lower, you get more apparent real growth.
[+] [-] jdblair|5 years ago|reply
[+] [-] swiley|5 years ago|reply
[+] [-] xibalba|5 years ago|reply
However, there are sound arguments for why healthcare costs have not actually inflated much. Essentially, the argument goes, you're not buying the same thing that was available in the past. It's an apples to oranges comparison.
Cliff Asness has a great article touching on this topic: https://www.aei.org/articles/the-healthcare-myths-we-must-co...
Higher education on the other hand...
[+] [-] d_burfoot|5 years ago|reply
[+] [-] valuearb|5 years ago|reply
[+] [-] jgalt212|5 years ago|reply
On a long enough timeline if food and housing prices keep outpacing other prices, the proportion of consumer money devoted to such items will trend towards 100%. And if the basket is 100% stuff that keeps quickly going up in price, then CPI is also quickly going up in price (ipso fact).
[+] [-] motohagiography|5 years ago|reply
You can make inflation say whatever you want it to say with selected goods and index weighting, so I don't get into arguments about it because it's mainly an obfuscation proxy for ideological conflicts.
[+] [-] melling|5 years ago|reply
That emissions chart looked good. Half as much as 1970. Too bad we have 5 times as many vehicles
There were 250 million vehicles in the world in 1970. 1.3 billion today and we’re projected to go to 2 billion by 2035.
https://en.m.wikipedia.org/wiki/Motor_vehicle#Ownership_tren...
[+] [-] throw0101a|5 years ago|reply
Yes, which is a problem environmentally, but from a basket-of-goods measure for the individual consumer, the number of cars is irrelevant: we as buyers are getting a better product.
[+] [-] throwaway0a5e|5 years ago|reply
While the CO2 certainly isn't good one would need to do some Olympic level mental gymnastics to argue that an increase in wealth to the point where billions more people can afford an expensive complex good like a car is a bad thing overall.
[+] [-] PhaedrusV|5 years ago|reply
[+] [-] _Microft|5 years ago|reply
Also: the items in the category with decreasing prices are almost all automatically mass-producable and will have the advantage of learning (i.e. increased production efficiency and decreased cost with increasing number of items produced) while the ones in the other category aren’t necessarily. Childcare/nursery isn’t going to become cheaper just because you’ve more experience with the job.
College textbooks really stand out though. These should not have to become more expensive. They are written once and printed cheaply thereafter. I wonder what the curve for other types of books looks like but my guess is that other books have not seen these increases and this is purely money-making.
[+] [-] rjmunro|5 years ago|reply
[+] [-] jchook|5 years ago|reply
The Federal Reserve dumped $4T more (or 26%) into the economy, bringing us up to $19T.
How does this not impact inflation? If you have more dollars representing the same real value, doesn’t that make each dollar worth less of it?
[+] [-] throw0101a|5 years ago|reply
Ask Japan. Their M1/2 has growth bigly over the last few decades and they've had next no inflation. Remember, the 'general' equation is: Inflation = Money_supply x Velocity.
Yes, there's a big tank of money sitting around, but it's not sloshing around the economy that much. And if it does start, there's at least one tool to cool things down: raise interest rates.
[+] [-] helen___keller|5 years ago|reply
Strictly speaking, inflation is defined by price/quality of baskets of goods, not by a measure like M2.
[+] [-] tekcyb-org|5 years ago|reply
[+] [-] SamBam|5 years ago|reply
In 2000 it still cost $0.99.
In 2018 it cost $4.29.
So that's a 4.3x change, not a 28x change as claimed, and represents an "inflation" of about 7.5%/yr over the past two decades (or 5.5%/yr since 1990).
https://www.insider.com/fast-food-burgers-cost-every-year-20...
[+] [-] saul_goodman|5 years ago|reply
https://inflationdata.com/articles/wp-content/uploads/2020/1...
Look at the breakdown of the line items that make up the US inflation rate for 2020 and you see that the massive drop in fuel cost (-19%) caused a massive offset to the overall number. Meanwhile food cost has gone up over 3%, medical expenses also went up over 3%. As we head out of this hell hole it will be interesting to see if inflated sectors return to more normal levels again.
[+] [-] benbenolson|5 years ago|reply
Are there any studies showing the longevity of cars over time? I don't think this is necessarily true.
[+] [-] mywittyname|5 years ago|reply
1. Material science has improved dramatically, even since the 90s. We now have oils that don't break down for years, even under extreme temperatures, and tolerances within engines are tight enough that oil can go 10,000 miles without meaninful gasoline contamination. Also, rust-proofing, rubbers, and plastics (!) are much, much better.
2. Solid state electronics have replaced mechanical systems. This is a big one: vacuum lines were a nightmare, carburetors were fickle, distributors wore out, etc. All of these systems have been replaced by maintenance-free electronic versions.
3. Better computer-aid modeling. This is kind of a good and bad, since now components aren't overbuilt like in the 90s, but they are also less likely to be underbuilt.
There are absolutely manufactures who still make unreliable heaps, but generally, reliability has improved. Most of that reliability comes in the form of less maintenance: no car needs the valves adjusted every 30k miles anymore (except maaaybe exotics).
Jay Leno likes to joke about how cars used to come with 90 day warranties in the 70s. 90 days!
[+] [-] valuearb|5 years ago|reply
I’d say something is going on with home prices.
[+] [-] helen___keller|5 years ago|reply
[+] [-] darepublic|5 years ago|reply
Not if you picked the right album!
[+] [-] biolurker1|5 years ago|reply