June 26, 2006 at 6:40 AM #6771powaysellerParticipant
From the Bubble blogger section today. You’ve got to read this one.
“Today’s case in point is from The Economist, a publication that ought to know better. They not only focus on the Core CPI, but they take it a step further: Core CPI ex Housing OER.
First off, I need someone to explain why food and energy is considered volatile — if the volatility has been exclusively in one direction. That’s not merely volatility, that’s a trend.
Second, let’s credit The Economist with creating a whole new category of measuring increasing prices: Inflation ex inflation (ex inflation). That’s right, we take the basic measure of inflation, remove the vital components of life consumed by every living human being (food and energy). Then, just in case that is still too inflationary, remove Housing (see chart below).
That’s Inflation ex inflation (ex inflation).
We should take it a step even further. I propose a whole new category to measure inflation: CPI Null Set. Start with the basic CPI, then go to the Core, removing food and energy. Then take out housing. Then remove everything else. Ta-da! No inflation!”
This is funny. But also sad. Will the CPI ever represent the cost of living for a real person, or will it keep being manipulated?June 26, 2006 at 7:38 AM #27408yooklidParticipant
I think the ex-housing thing is already used in the UK – but I could be very very wrong.June 26, 2006 at 9:55 AM #27415AnonymousGuest
It probably is. UK housing is really volatile and it doesn’t just go up in value either!! Imagine a whole country where until recently everyone was on month to month adjustable rate mortgages with no caps.
Having said that I agree with the opening comment. It’s part of the Fed’s trick to fool everybody into thinking there’s no inflation AND that inflation is pretty stable. Both ideas are bogus, but its better for all of us if we all drink the same Kool-Aid.June 26, 2006 at 11:44 AM #27420powaysellerParticipant
Ben Bernanke stated that inflation is a concern.
I am puzzled why Bill Fleckenstein and Peter Schiff say Ben is going to pause. How can he? Inflation is rearing its head. Rents, which are 30 or 40% of CPI (?), are rising as housing cools, and will keep pushing up the CPI.
If the Fed lets inflation get out of control, our economy will be in a world of hurt. Inflation must be contained at all costs.
Does anyone else see a 6% Federal funds rate?
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