Williams’ Shadow Statistics – Thoughts?

[gandalf]

Factors to consider, in terms of inflationary pressure:

A. Rise in productivity, real wage growth and earnings
B. Changes in consumer expectations regarding pricing
C. Currency devaluation and fluctuations in money supply
D. Leveraged creation of wealth through asset bubbles

Improvements to underlying goods and services would be reflected in productivity and subsequent real wage growth. Earnings growth is non-existent outside the boardroom. (GDP is overstated?)

The other three factors, B, C and D are clearly in evidence. What Williams is saying is, with respect to CPI as a measure of inflation, the variance with economic reality is mostly likely a result of:

E. Bias introduced by changing reporting methodology

His explanations sounds fairly rational to me. What am I missing?

[drunkle]

“That’s my main point: the increase in cost of living that people “feel” is not necessarily inflation. They do get more or better goods or services.”

i dont know about you, but my steaks taste worse today than they did 10 years ago. my gasoline is about the same, my gold is exactly the same.

my insurance premiums have gone up, but my deductible remains the same. my rent has gone up, but my house hasn’t been made over with granite and berber.

my tv and computer have improved but i certainly paid for the improvement. the costs of the improvements come down with productivity and manufacturing process improvements; the majority of “durable goods” are manufactured overseas by laborers who do not have the same quality of life as we do. so that’s a terrible standard of comparison.

by measuring inflation only in terms of imported goods, goods that are not daily purchases, you’re only measuring the cost inflation of those goods and not the general changes in cost of living. the consumer price index is therefore a misnomer and more accurately should be called the imported goods price index.

[drunkle]

“That’s my main point: the increase in cost of living that people “feel” is not necessarily inflation. They do get more or better goods or services.”

i dont know about you, but my steaks taste worse today than they did 10 years ago. my gasoline is about the same, my gold is exactly the same.

my insurance premiums have gone up, but my deductible remains the same. my rent has gone up, but my house hasn’t been made over with granite and berber.

my tv and computer have improved but i certainly paid for the improvement. the costs of the improvements come down with productivity and manufacturing process improvements; the majority of “durable goods” are manufactured overseas by laborers who do not have the same quality of life as we do. so that’s a terrible standard of comparison.

by measuring inflation only in terms of imported goods, goods that are not daily purchases, you’re only measuring the cost inflation of those goods and not the general changes in cost of living. the consumer price index is therefore a misnomer and more accurately should be called the imported goods price index.

[drunkle]

“That’s my main point: the increase in cost of living that people “feel” is not necessarily inflation. They do get more or better goods or services.”

i dont know about you, but my steaks taste worse today than they did 10 years ago. my gasoline is about the same, my gold is exactly the same.

my insurance premiums have gone up, but my deductible remains the same. my rent has gone up, but my house hasn’t been made over with granite and berber.

my tv and computer have improved but i certainly paid for the improvement. the costs of the improvements come down with productivity and manufacturing process improvements; the majority of “durable goods” are manufactured overseas by laborers who do not have the same quality of life as we do. so that’s a terrible standard of comparison.

by measuring inflation only in terms of imported goods, goods that are not daily purchases, you’re only measuring the cost inflation of those goods and not the general changes in cost of living. the consumer price index is therefore a misnomer and more accurately should be called the imported goods price index.

[drunkle]

“That’s my main point: the increase in cost of living that people “feel” is not necessarily inflation. They do get more or better goods or services.”

i dont know about you, but my steaks taste worse today than they did 10 years ago. my gasoline is about the same, my gold is exactly the same.

my insurance premiums have gone up, but my deductible remains the same. my rent has gone up, but my house hasn’t been made over with granite and berber.

my tv and computer have improved but i certainly paid for the improvement. the costs of the improvements come down with productivity and manufacturing process improvements; the majority of “durable goods” are manufactured overseas by laborers who do not have the same quality of life as we do. so that’s a terrible standard of comparison.

by measuring inflation only in terms of imported goods, goods that are not daily purchases, you’re only measuring the cost inflation of those goods and not the general changes in cost of living. the consumer price index is therefore a misnomer and more accurately should be called the imported goods price index.

[drunkle]

“That’s my main point: the increase in cost of living that people “feel” is not necessarily inflation. They do get more or better goods or services.”

i dont know about you, but my steaks taste worse today than they did 10 years ago. my gasoline is about the same, my gold is exactly the same.

my insurance premiums have gone up, but my deductible remains the same. my rent has gone up, but my house hasn’t been made over with granite and berber.

my tv and computer have improved but i certainly paid for the improvement. the costs of the improvements come down with productivity and manufacturing process improvements; the majority of “durable goods” are manufactured overseas by laborers who do not have the same quality of life as we do. so that’s a terrible standard of comparison.

by measuring inflation only in terms of imported goods, goods that are not daily purchases, you’re only measuring the cost inflation of those goods and not the general changes in cost of living. the consumer price index is therefore a misnomer and more accurately should be called the imported goods price index.

[gandalf]

This is an interesting point. We actually have deflationary pressures on the one hand, result of globalization and lower costs for consumer goods, textiles, electronics, etc. CPI seems to be accurately capturing the deflationary impacts of globalization.

Meantime, non-global goods, services, education, healthcare and also various commodities, food, energy, construction materials, etc. have been increasing in price at a rapid clip. CPI seems to be significantly understating pricing pressures in asset, commodity and service-related areas.

[gandalf]

This is an interesting point. We actually have deflationary pressures on the one hand, result of globalization and lower costs for consumer goods, textiles, electronics, etc. CPI seems to be accurately capturing the deflationary impacts of globalization.

Meantime, non-global goods, services, education, healthcare and also various commodities, food, energy, construction materials, etc. have been increasing in price at a rapid clip. CPI seems to be significantly understating pricing pressures in asset, commodity and service-related areas.

[gandalf]

This is an interesting point. We actually have deflationary pressures on the one hand, result of globalization and lower costs for consumer goods, textiles, electronics, etc. CPI seems to be accurately capturing the deflationary impacts of globalization.

Meantime, non-global goods, services, education, healthcare and also various commodities, food, energy, construction materials, etc. have been increasing in price at a rapid clip. CPI seems to be significantly understating pricing pressures in asset, commodity and service-related areas.

[gandalf]

This is an interesting point. We actually have deflationary pressures on the one hand, result of globalization and lower costs for consumer goods, textiles, electronics, etc. CPI seems to be accurately capturing the deflationary impacts of globalization.

Meantime, non-global goods, services, education, healthcare and also various commodities, food, energy, construction materials, etc. have been increasing in price at a rapid clip. CPI seems to be significantly understating pricing pressures in asset, commodity and service-related areas.

[gandalf]

This is an interesting point. We actually have deflationary pressures on the one hand, result of globalization and lower costs for consumer goods, textiles, electronics, etc. CPI seems to be accurately capturing the deflationary impacts of globalization.

Meantime, non-global goods, services, education, healthcare and also various commodities, food, energy, construction materials, etc. have been increasing in price at a rapid clip. CPI seems to be significantly understating pricing pressures in asset, commodity and service-related areas.

[cr]

As far as the delflationary effects of globalization, I think we have passed the point where that will drive CPI down.

Globalization helped when the dollar was strong. Now the China RMB has gained 10% on the dollar in the last year, and that’s w/o the VAT.

It will take a few more months before that hits retail prices, but it will. India is gaining value over us too. About the only places that aren’t right now are arguably Japan and Taiwan.

Core inflation is a joke, and everything else here (health care, services, education, materials) are sky rocketing.

Inflation numbers are manipulated to make wall street feel like the net GDP numbers are okay.

[cr]

As far as the delflationary effects of globalization, I think we have passed the point where that will drive CPI down.

Globalization helped when the dollar was strong. Now the China RMB has gained 10% on the dollar in the last year, and that’s w/o the VAT.

It will take a few more months before that hits retail prices, but it will. India is gaining value over us too. About the only places that aren’t right now are arguably Japan and Taiwan.

Core inflation is a joke, and everything else here (health care, services, education, materials) are sky rocketing.

Inflation numbers are manipulated to make wall street feel like the net GDP numbers are okay.

[cr]

As far as the delflationary effects of globalization, I think we have passed the point where that will drive CPI down.

Globalization helped when the dollar was strong. Now the China RMB has gained 10% on the dollar in the last year, and that’s w/o the VAT.

It will take a few more months before that hits retail prices, but it will. India is gaining value over us too. About the only places that aren’t right now are arguably Japan and Taiwan.

Core inflation is a joke, and everything else here (health care, services, education, materials) are sky rocketing.

Inflation numbers are manipulated to make wall street feel like the net GDP numbers are okay.

[cr]

As far as the delflationary effects of globalization, I think we have passed the point where that will drive CPI down.

Globalization helped when the dollar was strong. Now the China RMB has gained 10% on the dollar in the last year, and that’s w/o the VAT.

It will take a few more months before that hits retail prices, but it will. India is gaining value over us too. About the only places that aren’t right now are arguably Japan and Taiwan.

Core inflation is a joke, and everything else here (health care, services, education, materials) are sky rocketing.

Inflation numbers are manipulated to make wall street feel like the net GDP numbers are okay.

[Author]

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