carlislematthew, “I’m not sure how 600 bucks a month is 10% of 100K a year, especially as healthcare premiums are pre-tax. If the percentages are using pre-tax salaries then this is more like 5%.”
People who pay their own health insurance do so out of their after-tax pay, so $100K/year is about $75K after FICA and taxes, and $7200/year for health insurance is 10%. Our family pays 0 for health insurance, not even a copay, but we are the exception I believe. My husband’s employer pays the entire $8000 for our family, and that is a cost they have to bear, and for them, that is a big percentage of his wages, and a component that is rising 10-15% annually.
If you earn the median wage, then health care would be 15% or more of wages. That’s why so few people have health care insurance. But the CPI still has to consider the cost, whether you buy it or not. Thus, the CPI seriously underreports the impact of rising health care. The CPI should allocate health care premiums as the realistic percentage that is makes up of a median employer’s or householder’s income. It falls far short.
Bernanke admitted at his Senate hearing this month, that gas was removed from core CPI because it fluctuated so much. But now it no longer fluctuates. Therefore, he consider the CPI and many other measures to get a full picture of price impacts. He also relies on anecdotes. I once read that Greenspan regularly checked in with the FedEx CEO, because that guy was at the front end of the economy, and had his pulse on what was going on with prices and sales. I am sure Ben talks with various CEOs as well. He has much more data available to him that we will ever have, and he is very smart. But he cannot tell all that he knows, because his job is to maintain price stability.
Maintaining the CPi in its perverted form is necessary to maintain this price stability, IMO. Those of us who realize it, we are at the leading edge and should figure out how to profit. When the Fed pauses, stocks will probably rally, and some short players will get squeezed. Next, foreigners will be less interested in our Treasury bonds and dollars, so the prices of both will fall somewhat. This is a good month to diversify out of dollars, if anyone has plans to do so. Do it before they lose another 3%. Any comments?
