Inflation still pegged at 4.4%

heroineworshipper · Posted: Wed Feb 20, 2008 2:10 pm Post subject: Inflation still pegged at 4.4%

For the 3rd month in a row, official inflation was over 4%. Is Bernanke playing politics or is he playing politics? Interest rates will keep falling until November. Not only will the first casualty in McCain's term B Bernanke, but he may get overruled before then.
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emersonbiggins

You know inflation is bad when the bullshit hedonics numbers are high.
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smallpoxgirl · Moderator Joined: Nov 08, 2004 Posts: 5640

4% is bad? Seems really low to me. I don't understand with the rapidity that the dollar seems to be loosing value how inflation can be that low.
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I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS

sdcoyote · Tar Sands Joined: May 24, 2005 Posts: 56

It's not...

With food and energy factored in we are at 7-9%.

The numbers presented by our gov't financial folks remind me of the guy who used to be the PR minister for Iraq.

emersonbiggins

Construction materials are up 30% over the last 3 years.
You know, the stuff we build stuff with.

Thirty. Percent.

(*edit* - percentages)
_________________
"It's called the American Dream because you'd have to be asleep to believe it."

George Carlin

skyemoor

tick66 · Tar Sands Joined: Apr 23, 2005 Posts: 25

I think the best guide for inflation is to go take a trip to the grocery store.

Tyler_JC

emersonbiggins

While we're comparing graphs here...

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"It's called the American Dream because you'd have to be asleep to believe it."

George Carlin

yesplease · Fission Joined: Oct 03, 2006 Posts: 2275

Tyler_JC

The purpose of a cost of living index is to measure the cost of attaining a given level of happiness at current prices relative to the cost of attaining the same level of happiness at base year prices.

In 2000 if you could buy 100 units of happiness for $100 and now that same level of happiness costs $200, the cost of living has doubled.

Unfortunately, happiness is rather hard to measure.

One way of measuring this is to find out the cost of buying a particular bundle of goods today with the cost of buying that same bundle of goods in 2000. (Paache index)

Or we could take a bundle of goods in 2000 and compare that to the cost of buying the same bundle of goods today. (Laspeyres index)

A Paache index tends to underestimate the change in the cost of living while a Laspeyres index (like the one we used before 1995) tends to overestimate the cost of living.

If you drag the base year of a Laspeyres index back far enough, you end up trying to find the cost of bell bottoms and pet rocks. Cool

The government currently uses a "chain weighted index" to calculate the change in the cost of living. This index reflects changes in consumption patterns.

Adjusting for the quality of a good is a must. A first generation iPod cost $400 and was capable of storing 5GB of music...and not much else.

A fourth generation iPod also cost $400 but could store 40GB of music or pictures.

An iPhone costs also $400 but can do all kinds of crazy crap.

Has the real price of iProducts stayed the same over the past 8 years? I'd say iProducts have gotten cheaper relative to their quality over time.
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oldstyle

emersonbiggins

emersonbiggins

Tyler_JC

Using 1950 as the base year for the house size index (100) , the house size index has reached a staggering 238.

In 1950, the median family could expect to pay $8450 for this house and earned an income of $3,210

Now that median house costs $220,000 and the median family earns $48,210.

Dividing the numbers out gives you a house/income ratio of 4.56 today but only 2.63 in 1950.

What's wrong with that picture?

Time for the house size index to come into play.

Divide the current price by the quality adjustment and the house/income ratio today is only 1.92!

But the "house size index" is just a figure I came up with. Here's the math:

Cost per square foot.

In 1950:

$8450/983sqft = $8.6 per square foot

Today:

$220,000/2349sqft = $93.7 per square foot.

The price per square foot has increased by a factor of 10.89.

In order for incomes to keep up, we'd need to see a median family income of $34,974 ($3210*10.89).

Actual median family income? $48,210.
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"www.peakoil.com is the Myspace of the Apocalypse."