Re: Lets assume the CPI is accurate.
- From: phil scott <phil@xxxxxxxxxxxxx>
- Date: Mon, 3 Dec 2007 10:07:43 -0800 (PST)
On Dec 3, 7:35 am, Lysander <lysan...@xxxxxxxxxxx> wrote:
On Dec 2, 12:26 am, phil scott <p...@xxxxxxxxxxxxx> wrote:
Lets assume the cPI is dead accurate for a moment, it isnt, but
lets assume that it is.
I will over siimplify to make the point,
- we consider the plight of the average recipient,,, living at or
below the poverty line...these buy a few things, food, fuel, and
medical care. Up 15% per year or more,
I doubt this is the real data. Care to give a source?
but the CPI includes,,, leather shoes, jackets, plasma tee vees...
alll lower in price since those are made in chna.... **negative
inflation !.,, so that when these are combined you get 2,3% inflation
as we did in the current adjustment.
You still have no clue to the problems with the CPI. First leather
jackets and plasma TVs are not part of the basket. The basket is daily
household purchases.
http://www.bls.gov/cpi/cpifaq.htm#Question_3shows were they get the
data from and what is in the basket.
"6. How is the CPI market basket determined?
The CPI market basket is developed from detailed expenditure
information provided by families and individuals on what they actually
bought. For the current CPI, this information was collected from the
Consumer Expenditure Survey over the two years 2001 and 2002. In each
of those years, about 10,000 families from around the country provided
information on their spending habits in a series of quarterly
interviews. To collect information on frequently purchased items such
as food and personal care products, another 7,500 families in each of
the 2 years kept diaries listing everything they bought during a 2-
week period.
Altogether, more than 30,000 individuals and families provided
expenditure information for use in determining the importance, or
weight, of the more than 200 categories in the CPI index structure.
7. What goods and services does the CPI cover?
The CPI represents all goods and services purchased for consumption by
the reference population (U or W) BLS has classified all expenditure
items into more than 200 categories, arranged into eight major groups.
Major groups and examples of categories in each are as follows:
* FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken,
wine, service meals and snacks)
* HOUSING (rent of primary residence, owners' equivalent rent,
fuel oil, bedroom furniture)
* APPAREL (men's shirts and sweaters, women's dresses, jewelry)
* TRANSPORTATION (new vehicles, airline fares, gasoline, motor
vehicle insurance)
* MEDICAL CARE (prescription drugs and medical supplies,
physicians' services, eyeglasses and eye care, hospital services)
* RECREATION (televisions, pets and pet products, sports
equipment, admissions);
* EDUCATION AND COMMUNICATION (college tuition, postage, telephone
services, computer software and accessories);
* OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts
and other personal services, funeral expenses).
Also included within these major groups are various government-charged
user fees, such as water and sewerage charges, auto registration fees,
and vehicle tolls. In addition, the CPI includes taxes (such as sales
and excise taxes) that are directly associated with the prices of
specific goods and services. However, the CPI excludes taxes (such as
income and Social Security taxes) not directly associated with the
purchase of consumer goods and services."
Considering that rich and poor are included in the survey food cost
increases may be greatly overstated. Starbucks coffee rises at much
faster rates than a grocery store can of Folgers.
"The CPI does not include investment items, such as stocks, bonds,
real estate, and life insurance. (These items relate to savings and
not to day-to-day consumption expenses.)
For each of the more than 200 item categories, using scientific
statistical procedures, the Bureau has chosen samples of several
hundred specific items within selected business establishments
frequented by consumers to represent the thousands of varieties
available in the marketplace. For example, in a given supermarket, the
Bureau may choose a plastic bag of golden delicious apples, U.S. extra
fancy grade, weighing 4.4 pounds to represent the Apples category."
As is noted when several varieties are available the BLS chooses ONE
variety. Again possible overstating the price changes for the poor and
understating price changes for the rich if an average item is used.
Designer goods increase in prices more quickly than walmart goods.
Secondly, the CPI measures percentage changes in prices of goods that
the BLS defines as the basket of goods a typical family buys. Even if
foreign goods are included then they are not compared to what people
would pay for US goods. In calculating the CPI the data would show
changes in prices of foreign goods not the difference between the
foreign price and what some US company is trying to charge.
The real problems with the CPI.
1. Does not account for substitution. This overstates the CPI. The BLS
may calculate 20 pounds of chicken and 10 pounds of beef, made up
numbers, even if the relative price changes. If the price of beef goes
up people buy more chicken and less beef but the CPI does not account
for this. This overstates the CPI.
2. Quality adjustment. Sometimes prices are higher due to inflationary
trends. Sometimes product prices rise due to quality. The CPI does not
accurately adjust for quality change. You want a measure that does not
call an increase in price due to quality, part of an increase in
general price. If a light bulbs last 3 times as long as the old ones
you get three times the product. Bills and Kleinow has shown this
greatly OVERSTATES the CPI. In fact, they argue the well know fact of
constant rates may be wrong because the CPI has included quality
change as a pure price change. If it were accurately measured we would
likely see accelerating growth rates.
3. The BLS is slow to introduce new goods. It takes time for changes
in technology to show in the CPI. So when cell phones start to become
popular in the 1990's, the CPI is understated because it was not
included in the basket until the BLS could be sure this was an item
the typical family would not only buy but buy consistently, ie. the
cell phone plan.
It is the opinion of the profession that the CPI is exactly vastly
overstated showing too much inflation and not too little inflation.
These are the real problems. The poster has no clue as to what is in
the CPI or why it has problems.
errrr Lysander? you see... there is fraud on the face of the
entire mess... go to the super market or the gas station... its all
up an average of 15 to 25%... depending. staples such as milk and
flour up 30% in many cases... a lb of flour 99c a year ago...1.49
today...etc... all 5 to 10 times higehr than the published CPI
(agregate).... fraud on the face of it.... no matter the
100,000 pages of spin, lies and bogus ass-umptions used by govt to
mask the fraud.
you are proudly showin me their mask.... not impressive, when run away
prices are so patently obvious
reallly Lysander, you can do a whole lot better than that.
Now how about this from the worlds leading derivitives guru.
http://articles.moneycentral.msn.com/Investing/SuperModels/AreWeHeadedForAnEpicBearMarket.aspx
dont forget the 'x' on the end of this URL.
This article explains what the herd of morons running our banks were
up to... liberal arts majors with no clue about the algorthmic nature
of all things, including stooopidity.
Phil scott
fascinatin' ain't it?
.
- References:
- Lets assume the CPI is accurate.
- From: phil scott
- Re: Lets assume the CPI is accurate.
- From: Lysander
- Lets assume the CPI is accurate.
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