[ltokuda]

“I hear people mentioning “going back to 2003 prices” does that statement assume that it’s 2003 prices + 3.03% per year for inflation?”

No. When people say “going back to 2003 prices”, they are generally talking about nominal values. So if your house was worth $400,000 in 2003, they believe it will eventually fall back down to $400,000 in the future.

[ltokuda]

“I hear people mentioning “going back to 2003 prices” does that statement assume that it’s 2003 prices + 3.03% per year for inflation?”

No. When people say “going back to 2003 prices”, they are generally talking about nominal values. So if your house was worth $400,000 in 2003, they believe it will eventually fall back down to $400,000 in the future.

[ltokuda]

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The wealth effect is commonly applied to two groups of people: those who perceive themselves to be richer and those who actually are richer.  The slate article is really only trying to address the first group.  Its questions whether feeling richer (due to assets like your house going up in price) really lead individuals to spend more money.  For a piece that's supposed to "debunk" a myth, it does a horrible job.  It doesn't provide any convincing data or give any detailed analysis.  It jumps to the conclusion without any proof at all.

The article doesn't address the other group related to the wealth effect: Those who actually are richer.  It doesn't try to touch that at all.  Yet we're supposed to believe that the wealth effect has been officially debunked!?

[ltokuda]

The wealth effect is commonly applied to two groups of people: those who perceive themselves to be richer and those who actually are richer.  The slate article is really only trying to address the first group.  Its questions whether feeling richer (due to assets like your house going up in price) really lead individuals to spend more money.  For a piece that's supposed to "debunk" a myth, it does a horrible job.  It doesn't provide any convincing data or give any detailed analysis.  It jumps to the conclusion without any proof at all.

The article doesn't address the other group related to the wealth effect: Those who actually are richer.  It doesn't try to touch that at all.  Yet we're supposed to believe that the wealth effect has been officially debunked!?

[ltokuda]

The wealth effect is commonly applied to two groups of people: those who perceive themselves to be richer and those who actually are richer.  The slate article is really only trying to address the first group.  Its questions whether feeling richer (due to assets like your house going up in price) really lead individuals to spend more money.  For a piece that's supposed to "debunk" a myth, it does a horrible job.  It doesn't provide any convincing data or give any detailed analysis.  It jumps to the conclusion without any proof at all.

The article doesn't address the other group related to the wealth effect: Those who actually are richer.  It doesn't try to touch that at all.  Yet we're supposed to believe that the wealth effect has been officially debunked!?

[ltokuda]

The wealth effect is commonly applied to two groups of people: those who perceive themselves to be richer and those who actually are richer.  The slate article is really only trying to address the first group.  Its questions whether feeling richer (due to assets like your house going up in price) really lead individuals to spend more money.  For a piece that's supposed to "debunk" a myth, it does a horrible job.  It doesn't provide any convincing data or give any detailed analysis.  It jumps to the conclusion without any proof at all.

The article doesn't address the other group related to the wealth effect: Those who actually are richer.  It doesn't try to touch that at all.  Yet we're supposed to believe that the wealth effect has been officially debunked!?

[ltokuda]

The wealth effect is commonly applied to two groups of people: those who perceive themselves to be richer and those who actually are richer.  The slate article is really only trying to address the first group.  Its questions whether feeling richer (due to assets like your house going up in price) really lead individuals to spend more money.  For a piece that's supposed to "debunk" a myth, it does a horrible job.  It doesn't provide any convincing data or give any detailed analysis.  It jumps to the conclusion without any proof at all.

The article doesn't address the other group related to the wealth effect: Those who actually are richer.  It doesn't try to touch that at all.  Yet we're supposed to believe that the wealth effect has been officially debunked!?

[ltokuda]

Besides what BobS said, another possible reason is that the economy wasn’t really doing as well as we had thought. Here’s a chart from http://www.shadowstats.com which shows the U.S. GDP, using the historical calculation of CPI (as opposed to the tweeked versions used since the 1980’s).

[img_assist|nid=7776|title=
ShadowStats GDP|desc=|link=node|align=left|width=466|height=324]

By tweeking the definition of CPI, you can effectively manipulate the reported GDP. The chart illustrates the effects of all those tweeks.

So its possible that the economy was doing much worse than what was officially reported. Notice that GDP could have gone negative around 1995/1996.

What’s also interesting to me is that the ShadowStats GDP says that the 2001 recession actually lasts until 2003. I think its interesting because that’s exactly what it felt like to me. This experience gives me reason to believe that the ShadowStats GDP numbers are true.

[ltokuda]

Besides what BobS said, another possible reason is that the economy wasn’t really doing as well as we had thought. Here’s a chart from http://www.shadowstats.com which shows the U.S. GDP, using the historical calculation of CPI (as opposed to the tweeked versions used since the 1980’s).

[img_assist|nid=7776|title=
ShadowStats GDP|desc=|link=node|align=left|width=466|height=324]

By tweeking the definition of CPI, you can effectively manipulate the reported GDP. The chart illustrates the effects of all those tweeks.

So its possible that the economy was doing much worse than what was officially reported. Notice that GDP could have gone negative around 1995/1996.

What’s also interesting to me is that the ShadowStats GDP says that the 2001 recession actually lasts until 2003. I think its interesting because that’s exactly what it felt like to me. This experience gives me reason to believe that the ShadowStats GDP numbers are true.

[ltokuda]

Besides what BobS said, another possible reason is that the economy wasn’t really doing as well as we had thought. Here’s a chart from http://www.shadowstats.com which shows the U.S. GDP, using the historical calculation of CPI (as opposed to the tweeked versions used since the 1980’s).

[img_assist|nid=7776|title=
ShadowStats GDP|desc=|link=node|align=left|width=466|height=324]

By tweeking the definition of CPI, you can effectively manipulate the reported GDP. The chart illustrates the effects of all those tweeks.

So its possible that the economy was doing much worse than what was officially reported. Notice that GDP could have gone negative around 1995/1996.

What’s also interesting to me is that the ShadowStats GDP says that the 2001 recession actually lasts until 2003. I think its interesting because that’s exactly what it felt like to me. This experience gives me reason to believe that the ShadowStats GDP numbers are true.

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