Re: "Consumer costs skyrocket while inflation falls flat"


<yared22311@xxxxxxxxx> wrote in message
news:1118078606.316210.64650@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
> Consumer costs skyrocket while inflation falls flat
> Consumer prices are higher this year, but some specialists say even the
> measured rise in inflation does not reflect the rapidly rising costs
> consumers encounter every day.
> at http://www.washtimes.com/business/20050605-105949-8113r.htm
>

Hi,

This article illustrates the problem with considering the Consumer Price
Index to be your "cost of living measure". It all depends on what you
consume. Housing is a good example. Some people (renters, and especially
prospective home buyers and those with adjustable mortgages) can spend a lot
of their income on "housing", and are effected by rising home prices. But
others (those with a fixed rate mortgage or a paid off home) can spend very
little on housing and are not directly effected by increased home prices
except as they effect property taxes.

I think it clear that historically the CPI has understated the "cost of
living" by several percent. But after the Boskin report, adjustments to the
CPI (like the quality factor) may have eliminated that bias or even reversed
it.

Look at

http://www.geocities.com/capitolhill/4834/cpi.htm


See especially the Why You Should Be Alert in Econ Class.


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jim blair (jeblair@xxxxxxxxxxxxxxxxx) Madison Wisconsin
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