Re: CPI a fraud?

"Negloid" <negloid@xxxxxxxxxxx> wrote in message
news:1126711389.185094.25640@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
>
> The Trucker wrote:
>> "Negloid" <negloid@xxxxxxxxxxx> wrote in message
>> news:1126638840.450209.133100@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
>> >
>> > The Trucker wrote:
>> >> "Negloid" <negloid@xxxxxxxxxxx> wrote in message
>> >> news:1126541793.238800.152890@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
>> >> >
>> >> > The Trucker wrote:
>> >> >> "Negloid" <negloid@xxxxxxxxxxx> wrote in message
>> >> >> news:1126469485.778357.81110@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
>> >> >> >
>> >> >> > royls@xxxxxxxxx wrote:
>> >> >> >> On 11 Sep 2005 08:59:52 -0700, "Negloid" <negloid@xxxxxxxxxxx>
>> >> >> >> wrote:
>> >> >> >>
>> >> >> >> >royls@xxxxxxxxx wrote:
>> >> >> >> >> On 8 Sep 2005 13:21:18 -0700, "Negloid" <negloid@xxxxxxxxxxx>
>> >> >> >> >> wrote:
>> >> >> >> >>
>> >> >> >> >> >royls@xxxxxxxxx wrote:
>> >> >> >> >> >> On Tue, 06 Sep 2005 06:11:31 GMT, "Bill" <xxx@xxxxx> wrote:
>> >> >> >> >> >>
>> >> >> >> >> >> ><royls@xxxxxxxxx> wrote in message
>> >> >> >> >> >> >news:431d2148.53523502@xxxxxxxxxxxxxxxxxxxxxxxx
>> >> >> >> >> >> >> On Mon, 05 Sep 2005 23:15:11 GMT, "Bill" <xxx@xxxxx> wrote:
>> >> >> >> >> >
>> >> >> >> >> >> A bright high school student could come up with a better way.
>> >> >> >> >> >> And
>> >> >> >> >> >> in
>> >> >> >> >> >> fact, the original process did not have the fraudulent
>> >> >> >> >> >> "hedonic
>> >> >> >> >> >> adjustments."
>> >> >> >> >> >
>> >> >> >> >> >The original process produced a smaller inflation adjustement
>> >> >> >> >> >for
>> >> >> >> >> >rent.
>> >> >> >> >> >In other words, hedonic adjustments since 1987 have adjusted
>> >> >> >> >> >*up*
>> >> >> >> >> >the
>> >> >> >> >> >costs of rent and rent equivalents, not down.
>> >> >> >> >>
>> >> >> >> >> But that means more of the index increase is attributed to the
>> >> >> >> >> aging
>> >> >> >> >> of improvements, and not to the increase in land rents.
>> >> >> >> >
>> >> >> >> >It means that they are sampling the rent that people are paying and
>> >> >> >> >then adjusting it by assuming that it is increasing faster than it
>> >> >> >> >actually is. You tried to claim that hedonics was adjusting the
>> >> >> >> >price
>> >> >> >> >increases down,
>> >> >> >>
>> >> >> >> I said it was adjusting land rent increases down, and I have seen no
>> >> >> >> reason to alter my view.
>> >> >> >
>> >> >> > It isn't adjusting land rent prices either way. It doesn't measure
>> >> >> > land rent increases. The CPI measures rent and rent equivalents and
>> >> >> > adjusts them with hedonics.
>> >> >> >
>> >> >> > Now you're just bitching that the CPI doesn't measure something that
>> >> >> > it
>> >> >> > was never supposed to measure.
>> >> >>
>> >> >> Most of us are under the impression that CPI is supposed to
>> >> >> measure the cost of living. If land rent contributes to the
>> >> >> cost of living (and it is difficult to see how that could not
>> >> >> be true), then why would the CPI be designed to NOT
>> >> >> measure it or to NOT measure its effects?
>> >> >
>> >> > Are you claiming that land rent does not affect the cost of housing
>> >> > rent?
>> >>
>> >> The land is depreciated right along with the house.
>> >
>> > 1) No, it isn't
>> > 2) Even if it were, that would simply cause *more* hedonic *upward*
>> > revisions of rent and equivalents.
>>
>> OK. I screwed this up royally. I was trying to say that
>> the entire property SHOULD be worth LESS becasue
>> the structure actrually IS depreciating. If the structure
>> IS depreciating, yet the market price of the real estate
>> is rising then the reason for that rise IS land rent. But when
>> the estate is sold, the new buyer will then claim the
>> structure is worth much more than it is and the land is
>> not. Reason: The new buyer gets to depreciate the
>> structure again. Therefore, the rise in land prices
>> is hidden quite nicely. The new owner gets to depreciate
>> the structure and gets a big tax break on the rent of the
>> entire estate.
>
> Number one, the basis of the building is established at sale in the
> sales contract by a local appraiser. The buyer doesn't determine the
> value. Number two, fine, let's say they do fudge the numbers. Even if
> you were right, creating a higher depreciation expense can do nothing
> but adjust up the hedonic adjustment for CPI.

No. The land is shown as depreciating in value or
contributing nothing to the new price. We have a
crumby structure worth a lot of dough and land that
is, on paper, quite worthless. The net gain in price
may be small or large. I fail to see how an adjustment
that claims a quality improvement would fit in this
scenario.

> More depreciation = more
> CPI inflation.

So if real estrate changes hands at a new price that
is lower than the old (but not much lower) and the
actual rent of the structure and land combined is
less than it was (but nor much less) because
inflation has offset the deterioration in the
life style now associated with the structure in
question, you tell us that the Pinocchio regime
is going to wave a magic wand and say "headeache"
and add some "value" to this item such that the
item adds to inflation? And the neoconomists that
do the adding are going to do this when they know
that if they do it right they will no longer have a job?
Is that where we are, Mark?

> Number three, why are you complaining about alleged tax
> fraud here when everyone else is discussing CPI inflation?

Because the neoconomists use this fraudulent data
as input.

>> > Coburn, none of this contradicts the fact that hedonic adjustments are
>> > used to upwardly revise the CPI.

Time for a review: You gave an example of a "hedonic"
adjustment as correcting for the better quality of a computer.
You said that the price was $200 more but that the quality
of the computer was so much better that the $200 was
not a sign of inflation because the consumer was probably
getting at least $200 more VALUE for his money. Now
you tell us that the "headache" adjustment is in the opposite
when that is convenient to your position.
>>
>> But you told us that this "headache" adjustment was used to
>> excuse price rises due to the superior quality of the thing
>> being measured. Like that computer that costs more but is
>> actually worth a lot more.
>
> Some hedonic adjustments add a positive bias to the CPI, some a
> negative bias. For high tech items, the hedonic adjustment is
> generally negative, reducing reported CPI inflation. For real estate,
> the hedonic adjustment is positive, increasing the reported CPI
> inflation.

Oh yes.... That good old "Trust me. Saddam is in
league with Osama and has WMD and is currently
developing a nuclear warhead". And "wages are
rising and you are the only person with a problem".
"Those real estate numbers are just a fig newton of
your imagination".

>> > The notion that the CPI understates rent and equivalent rent remains
>> > completely unsubstantiated by you neogeorgists, or whatever the hell
>> > you are supposed to be.
>>
>> You have been presented with the _FACT_ that
>> land price increases are hidden by wiping the slate
>> clean on the resale of real estate.
>
> The _FACT_ as provided by you? We both know that your _FACTS_ come
> directly from your ass, Mike.

Perhaps you'd like to address this more directly:

http://www.michael-hudson.com/articles/realestate/01LieRealEstateStatistics.html

>> We have
>> tax breaks for the new buyer based on this
>> wiping.
>
> Let's just say that the guy supposedly pays off his local tax assessor
> to get a huose appraised as more of the sales price. For every dollar
> he saves in taxes, his building depreciates an extra three dollars on
> the books. The hedonic adjustment accounts for those extra three
> dollars.

"Just trust us. God is on our side and when we lie it is
for the good of the nation".

> It is good to see you acknowledging principles of "trickle down
> economics" though Mike. Give them wealthy "Repugnican" bastards a tax
> break and they will lower costs for the rest of us...

Actually, what happens when you give the wealthy a
tax break is that they become wealthier. End of story.

>> It is the tax breaks that allow the new
>> "owner" to offer the lower rent. He retains ownership
>> of an asset which has rising value yet pays only when
>> the property is sold and then he pays a very low
>> "capital gains" rate. Even then the land price is
>> again hidden by the price of the structure which
>> is again "revalued".
>>
>> When confronted with proper statistics you
>> just deniiiiiiiiiiiiiiiiiiiiiiiiiiiieeeeeeeeeeeeeeeeee.
>
> Mike, you and I both know that you don't produce proper statistics. I
> will ignore the fact that you have not even provided any statistics in
> this thread. The more important point is that your factual claims
> remain completely unsubstantiated.

I have provided simple reports from The US Department of Labor
and OHFEO and now a paper on the subject of land value speculation.
These are not "statistics" that contain a "hedonic" adjustment
to make sure that they show Der Fuehrer in a good light.
They are simply the facts. No number manipulations have
been applied.

--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org


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