What is the true inflation

[Playa]

Found this data comparing our current inflation calculated using the same methodology used in 1990 and 1980. It indicates is we used the same methodologies as the 1980’s our headlines would show the actual inflation as 15-16%, not 8+.



Basically the gov has fudged the numbers to make it not look so bad. Or that is the claim.

http://www.shadowstats.com/alternate_data/inflation-charts

[OldRiverRat]

Found this data comparing our current inflation calculated using the same methodology used in 1990 and 1980. It indicates is we used the same methodologies as the 1980’s our headlines would show the actual inflation as 15-16%, not 8+.

[ATTACH]1086430[/ATTACH]

Basically the gov has fudged the numbers to make it not look so bad. Or that is the claim.

http://www.shadowstats.com/alternate...flation-charts

I can’t substantiate it but my gut, brain and bank account tell me it’s way more than 8.5%


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[Shane]

Here's what Brian Wesbury wrote about this recently. He's a pretty sharp economist that I follow. Interesting.....

https://www.ftportfolios.com/Commentary/EconomicResearch/2022/3/28/inflation-games

Inflation is a political lightning rod. As a result, there is a good deal of misconception around it. The Consumer Price Index (CPI) is up 7.9% from a year ago and will likely peak in the 8.5 - 9.0% range sometime in the next couple of months, the highest since 1981. Politicians blame war, or COVID, but the simple explanation is just too much money creation.

Others think inflation will be temporary and point to “core” inflation, which looks tamer. Core prices, which exclude the normally volatile food and energy sectors, are up 6.4% versus a year ago and will likely peak near 6.5%.

There is a reason to exclude some prices when there are very special factors at play…but food and energy prices have been going up for over a year. And just because more of the inflationary impact of the surging M2 measure of money (up more than 40% since the start of COVID) shows up in food and energy prices, or even used car prices, isn’t a reason not to count them.

Others argue that the government is grossly underestimating inflation and is hiding the scope of the problem. One on-line analyst says that if we used the pre-1980 methodology to measure inflation it’s already running north of 15%.

But there are serious problems with this analysis, as well.

First, the same method suggests inflation has been running close to 10% per year on average since 2000. This is bonkers. If inflation really had been running close to 10% per year, a true measure of real GDP growth would show the US to have been in recession since 2000. Seriously?!?

Second, why would anyone use the basket of goods and services that Americans were buying in 1980 to measure inflation today? Energy used to be a much bigger share of our spending. Meanwhile, smartphones, by themselves, have replaced spending on a wide variety of products and services. Stereos, records, video recorders, radios, landline phones, clocks, watches, maps, cameras, calculators,…etc. The list goes on and on and keeps getting longer. Today, even poor Americans have access to products and services that the wealthy of prior generations never could have bought at any price.

Third, yes, the government has changed the way it measures home prices, but it’s for the better. When people buy a home they are buying an asset, just like when they buy stocks or land. The CPI is designed to measure the cost of consuming goods and services, not the cost of possessing an asset. When it comes to home inflation, the government changed the measure to look at rents, not the price at which homes are sold, because rents are the cost of consuming the value of homes.

The government figures on inflation are not perfect. The main ones are the CPI, the PPI, and the PCE Deflator (the Fed’s favorite!). All of them measure slightly different things and so the numbers are different, as well. But the inputs and methods to make these calculations are publicly available. There is not a conspiracy to dupe the American people. And every government measure of inflation is up. It’s pretty clear the Fed is going to have trouble wrestling inflation back down.

[PlanoDano]

Here's what Brian Wesbury wrote about this recently. He's a pretty sharp economist that I follow. Interesting.....

https://www.ftportfolios.com/Comment...nflation-games

That seems like a good analysis to me. Thanks for sharing.

[IkemanTX]

Here's what Brian Wesbury wrote about this recently. He's a pretty sharp economist that I follow. Interesting.....

https://www.ftportfolios.com/Comment...nflation-games

My only complaint for that would be the “home buying” versus “renting” metric. The heavy introduction of hedge funds into the single family home market has turned this assumption on its head. The idea of only measuring the rent price as a measure of consumptions ignores the idea of an ENTIRE class of people entering the asset market instead of the consumptive market. The transition from one socioeconomic class to a higher socioeconomic class (or the shutdown of such a transition) MUST be calculated in the statistics. If all you measure is the price of a thing, and not the background consolidation and manipulation of it, you are missing the entire point…


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[Shane]

I get what you're saying, but rent is still a function of home prices too though, isn't it? As asset prices increase, so do rent prices. I'm sure the percentage increases between the two don't track exactly the same every month or year. But they are probably pretty similar over time, I'd imagine. And the percentage increase is what they're looking for when trying to track inflation.

[IkemanTX]

I get what you're saying, but rent is still a function of home prices too though, isn't it? As asset prices increase, so do rent prices. I'm sure the percentage increases between the two don't track exactly the same every month or year. But they are probably pretty similar over time, I'd imagine. And the percentage increase is what they're looking for when trying to track inflation.

Rent is a function of home prices, but not a DIRECT function of it. There is a balance of rent price vs average mortgage price that would be a more accurate representation of the true market.


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[PlanoDano]

I am ending up mostly in cash which is usually not where you want to be in an inflationary environment. I will have over 2/3 of my multifamily assets liquidated by the end of June. The competition is too stiff for new assets and I am not finding deals that make sense.The prices offered for assets made the sell decision pretty easy. It has been a good run. I am not wishing for a recession or a housing bubble to burst but if it happens I will make money. There are no experts who have experience with an economy after the Fed added 6T not to mention 4T in Federal stimulus. Certainly not I. Maybe David Stockman will release a new book giving us some clarity.

[Shane]

Rent is a function of home prices, but not a DIRECT function of it. There is a balance of rent price vs average mortgage price that would be a more accurate representation of the true market.


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Is there a connection between average mortgage price and average sales price?

[Playa]

Here's what Brian Wesbury wrote about this recently. He's a pretty sharp economist that I follow. Interesting.....

https://www.ftportfolios.com/Comment...nflation-games

That was a really brainy way to say “I don’t know what the actual inflation rate is, it’s probably higher than what the gov says, but lower than what the anti gov “experts” say too”

I understand his logic. But like ORR said, it sure feels like I am paying way more than 8% more for most things….

[Ætheling]

That was a really brainy way to say “I don’t know what the actual inflation rate is, it’s probably higher than what the gov says, but lower than what the anti gov “experts” say too”

I understand his logic. But like ORR said, it sure feels like I am paying way more than 8% more for most things….

For sure, all the fancy semantics won't fix the fact that working-class Americans can't afford **** right now. 8-15 percent is a joke when looking at fuel, construction, labor, materials, and groceries. It means for half of America, you cant afford your groceries, you wont be buying a home, you can barely afford to drive to work. No fancy economist is going to wordsmith his way out of that.

My fuel is way above 15 percent more expensive than it was pre pandemic. My groceries are way more than 15 percent more expensive than they were pre pandemic. Materials and construction are way over 15 percent higher than pre pandemic.

[OldRiverRat]

For sure, all the fancy semantics won't fix the fact that working-class Americans can't afford **** right now. 8-15 percent is a joke when looking at fuel, construction, labor, materials, and groceries. It means for half of America, you cant afford your groceries, you wont be buying a home, you can barely afford to drive to work. No fancy economist is going to wordsmith his way out of that.

My fuel is way above 15 percent more expensive than it was pre pandemic. My groceries are way more than 15 percent more expensive than they were pre pandemic. Materials and construction are way over 15 percent higher than pre pandemic.

And just wait until we feel the results of the next harvest in terms of food costs, it’s going to be ugly.


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[Playa]

And just wait until we feel the results of the next harvest in terms of food costs, it’s going to be ugly.


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Yeah they are saying “inflation has peaked…” BS, it’s just begun and current input costs haven’t even touched the fields that produce the raw commodities that make our food and clothes, you know, consumables

[Ætheling]

80 percent of the dollars in circulation were "printed" in the last 2 years. They have broken the system, it will crash.

[OldRiverRat]

Yeah they are saying “inflation has peaked…” BS, it’s just begun and current input costs haven’t even touched the fields that produce the raw commodities that make our food and clothes, you know, consumables

Yep and people don’t see what I see daily in the global shipping market
Our freight rates have doubled in the last 2 months for chemicals
Guess who ends up paying for that?


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