Williams’ Shadow Statistics – Thoughts?

[Arraya]

one reason for the disconnect comes to mind; cost of living wage increases. if inflation is underreported, cost of living raises can also be under sized.

I don’t think that is a reason as much as a sympton along with many others. The reason would be to make people think things are not as bad as they are. The why would be population control.

Read or re-read “1984”.

[drunkle]

chicken or the egg.

[drunkle]

chicken or the egg.

[drunkle]

chicken or the egg.

[drunkle]

chicken or the egg.

[drunkle]

chicken or the egg.

[Daniel]

Just for the record, I disagree with this. I believe that, although the CPI is not perfect, it’s pretty close to reality compared to what others say. It would take a very, very long post to fully justify my position, and unfortunately I don’t have the time and energy to write it, so I’ll just mention the most relevant points:

– inflation is not the same everywhere; in San Diego, the local CPI has probably been substantially higher than the national CPI for a very long time. Think Europe: a few years back Ireland was at 7% inflation, while Germany was at 1%, both with same currency. I’m sure the Irish felt their inflation rate was higher than the 3% average reported by the ECB. That doesn’t mean the ECB was lying.

– most people don’t fully grasp what the CPI measures; it measures changes in the price of the SAME goods or services. The best example is health insurance. Most critics say “health insurance is going up 10%/year, how is that not inflation?”. Well, it is not. It is going up 10%/year because we “consume more health care” than we used to. The price of a single medical procedure doesn’t go up 10%/year. It maybe goes up 3%/year, but we get 7% more of them done. And that will continue, as the population gets older.

These, IMHO, are the main misconceptions. People assume that inflation is the same everywhere (which is not), and that all increased expenses are due to inflation, which is again not true. We simply consume more of everything than we used to (bigger cars, houses, etc), and that is reflected in the prices we pay.

PS: the majority here will probably disagree with my position. That’s fine. I mostly wrote this to raise awareness to the opposing point of view, not to win converts.

[Daniel]

Just for the record, I disagree with this. I believe that, although the CPI is not perfect, it’s pretty close to reality compared to what others say. It would take a very, very long post to fully justify my position, and unfortunately I don’t have the time and energy to write it, so I’ll just mention the most relevant points:

– inflation is not the same everywhere; in San Diego, the local CPI has probably been substantially higher than the national CPI for a very long time. Think Europe: a few years back Ireland was at 7% inflation, while Germany was at 1%, both with same currency. I’m sure the Irish felt their inflation rate was higher than the 3% average reported by the ECB. That doesn’t mean the ECB was lying.

– most people don’t fully grasp what the CPI measures; it measures changes in the price of the SAME goods or services. The best example is health insurance. Most critics say “health insurance is going up 10%/year, how is that not inflation?”. Well, it is not. It is going up 10%/year because we “consume more health care” than we used to. The price of a single medical procedure doesn’t go up 10%/year. It maybe goes up 3%/year, but we get 7% more of them done. And that will continue, as the population gets older.

These, IMHO, are the main misconceptions. People assume that inflation is the same everywhere (which is not), and that all increased expenses are due to inflation, which is again not true. We simply consume more of everything than we used to (bigger cars, houses, etc), and that is reflected in the prices we pay.

PS: the majority here will probably disagree with my position. That’s fine. I mostly wrote this to raise awareness to the opposing point of view, not to win converts.

[Daniel]

Just for the record, I disagree with this. I believe that, although the CPI is not perfect, it’s pretty close to reality compared to what others say. It would take a very, very long post to fully justify my position, and unfortunately I don’t have the time and energy to write it, so I’ll just mention the most relevant points:

– inflation is not the same everywhere; in San Diego, the local CPI has probably been substantially higher than the national CPI for a very long time. Think Europe: a few years back Ireland was at 7% inflation, while Germany was at 1%, both with same currency. I’m sure the Irish felt their inflation rate was higher than the 3% average reported by the ECB. That doesn’t mean the ECB was lying.

– most people don’t fully grasp what the CPI measures; it measures changes in the price of the SAME goods or services. The best example is health insurance. Most critics say “health insurance is going up 10%/year, how is that not inflation?”. Well, it is not. It is going up 10%/year because we “consume more health care” than we used to. The price of a single medical procedure doesn’t go up 10%/year. It maybe goes up 3%/year, but we get 7% more of them done. And that will continue, as the population gets older.

These, IMHO, are the main misconceptions. People assume that inflation is the same everywhere (which is not), and that all increased expenses are due to inflation, which is again not true. We simply consume more of everything than we used to (bigger cars, houses, etc), and that is reflected in the prices we pay.

PS: the majority here will probably disagree with my position. That’s fine. I mostly wrote this to raise awareness to the opposing point of view, not to win converts.

[Daniel]

Just for the record, I disagree with this. I believe that, although the CPI is not perfect, it’s pretty close to reality compared to what others say. It would take a very, very long post to fully justify my position, and unfortunately I don’t have the time and energy to write it, so I’ll just mention the most relevant points:

– inflation is not the same everywhere; in San Diego, the local CPI has probably been substantially higher than the national CPI for a very long time. Think Europe: a few years back Ireland was at 7% inflation, while Germany was at 1%, both with same currency. I’m sure the Irish felt their inflation rate was higher than the 3% average reported by the ECB. That doesn’t mean the ECB was lying.

– most people don’t fully grasp what the CPI measures; it measures changes in the price of the SAME goods or services. The best example is health insurance. Most critics say “health insurance is going up 10%/year, how is that not inflation?”. Well, it is not. It is going up 10%/year because we “consume more health care” than we used to. The price of a single medical procedure doesn’t go up 10%/year. It maybe goes up 3%/year, but we get 7% more of them done. And that will continue, as the population gets older.

These, IMHO, are the main misconceptions. People assume that inflation is the same everywhere (which is not), and that all increased expenses are due to inflation, which is again not true. We simply consume more of everything than we used to (bigger cars, houses, etc), and that is reflected in the prices we pay.

PS: the majority here will probably disagree with my position. That’s fine. I mostly wrote this to raise awareness to the opposing point of view, not to win converts.

[Daniel]

Just for the record, I disagree with this. I believe that, although the CPI is not perfect, it’s pretty close to reality compared to what others say. It would take a very, very long post to fully justify my position, and unfortunately I don’t have the time and energy to write it, so I’ll just mention the most relevant points:

– inflation is not the same everywhere; in San Diego, the local CPI has probably been substantially higher than the national CPI for a very long time. Think Europe: a few years back Ireland was at 7% inflation, while Germany was at 1%, both with same currency. I’m sure the Irish felt their inflation rate was higher than the 3% average reported by the ECB. That doesn’t mean the ECB was lying.

– most people don’t fully grasp what the CPI measures; it measures changes in the price of the SAME goods or services. The best example is health insurance. Most critics say “health insurance is going up 10%/year, how is that not inflation?”. Well, it is not. It is going up 10%/year because we “consume more health care” than we used to. The price of a single medical procedure doesn’t go up 10%/year. It maybe goes up 3%/year, but we get 7% more of them done. And that will continue, as the population gets older.

These, IMHO, are the main misconceptions. People assume that inflation is the same everywhere (which is not), and that all increased expenses are due to inflation, which is again not true. We simply consume more of everything than we used to (bigger cars, houses, etc), and that is reflected in the prices we pay.

PS: the majority here will probably disagree with my position. That’s fine. I mostly wrote this to raise awareness to the opposing point of view, not to win converts.

[bubba99]

I have read the various primers on Shadowstats, and I agree with most of the methodology, and criticisms of changes to basic numbers like employment, and inflation. The governments methodology is seriously flawed and shadow stats points out where.

It must be hard for bureaucrats to argue with a straight face that inflation should be reduced for factors like the greater pleasure derived from digital readouts on a washer, or MTBE in gasoline from the pump. Even harder is the buyers choice benefit from selecting hamburger when steak gets too expensive. Even worse is removing the “volitle” food and energy impact on inflation. This would only be good for someone who is starving and freezing in the dark. Food and energy are integral to survival. The geometric weighting of cost increases is so prone to political manipulation, it renders the quality of the entire CPI suspect.

The 7% adder to CPI suggested by John Williams seems to be much closer to what I experience at the store. The employment numbers sare likewise better in shadowstats than from the BLS. I had no idea that 80% of the employment number was a population model with a 150k upward bias each month.

Take away the political crap and un-employment is closer to the range of 10 to 13 percent. The higher numbers are way closer to the impact I see on american college graduates who cannot obtain career types of employment in our so called 4.5% unemployment market.

[bubba99]

I have read the various primers on Shadowstats, and I agree with most of the methodology, and criticisms of changes to basic numbers like employment, and inflation. The governments methodology is seriously flawed and shadow stats points out where.

It must be hard for bureaucrats to argue with a straight face that inflation should be reduced for factors like the greater pleasure derived from digital readouts on a washer, or MTBE in gasoline from the pump. Even harder is the buyers choice benefit from selecting hamburger when steak gets too expensive. Even worse is removing the “volitle” food and energy impact on inflation. This would only be good for someone who is starving and freezing in the dark. Food and energy are integral to survival. The geometric weighting of cost increases is so prone to political manipulation, it renders the quality of the entire CPI suspect.

The 7% adder to CPI suggested by John Williams seems to be much closer to what I experience at the store. The employment numbers sare likewise better in shadowstats than from the BLS. I had no idea that 80% of the employment number was a population model with a 150k upward bias each month.

Take away the political crap and un-employment is closer to the range of 10 to 13 percent. The higher numbers are way closer to the impact I see on american college graduates who cannot obtain career types of employment in our so called 4.5% unemployment market.

[bubba99]

I have read the various primers on Shadowstats, and I agree with most of the methodology, and criticisms of changes to basic numbers like employment, and inflation. The governments methodology is seriously flawed and shadow stats points out where.

It must be hard for bureaucrats to argue with a straight face that inflation should be reduced for factors like the greater pleasure derived from digital readouts on a washer, or MTBE in gasoline from the pump. Even harder is the buyers choice benefit from selecting hamburger when steak gets too expensive. Even worse is removing the “volitle” food and energy impact on inflation. This would only be good for someone who is starving and freezing in the dark. Food and energy are integral to survival. The geometric weighting of cost increases is so prone to political manipulation, it renders the quality of the entire CPI suspect.

The 7% adder to CPI suggested by John Williams seems to be much closer to what I experience at the store. The employment numbers sare likewise better in shadowstats than from the BLS. I had no idea that 80% of the employment number was a population model with a 150k upward bias each month.

Take away the political crap and un-employment is closer to the range of 10 to 13 percent. The higher numbers are way closer to the impact I see on american college graduates who cannot obtain career types of employment in our so called 4.5% unemployment market.

[bubba99]

I have read the various primers on Shadowstats, and I agree with most of the methodology, and criticisms of changes to basic numbers like employment, and inflation. The governments methodology is seriously flawed and shadow stats points out where.

It must be hard for bureaucrats to argue with a straight face that inflation should be reduced for factors like the greater pleasure derived from digital readouts on a washer, or MTBE in gasoline from the pump. Even harder is the buyers choice benefit from selecting hamburger when steak gets too expensive. Even worse is removing the “volitle” food and energy impact on inflation. This would only be good for someone who is starving and freezing in the dark. Food and energy are integral to survival. The geometric weighting of cost increases is so prone to political manipulation, it renders the quality of the entire CPI suspect.

The 7% adder to CPI suggested by John Williams seems to be much closer to what I experience at the store. The employment numbers sare likewise better in shadowstats than from the BLS. I had no idea that 80% of the employment number was a population model with a 150k upward bias each month.

Take away the political crap and un-employment is closer to the range of 10 to 13 percent. The higher numbers are way closer to the impact I see on american college graduates who cannot obtain career types of employment in our so called 4.5% unemployment market.

[Author]

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