The Glade 4.0

I saw this in an article and was wondering if you knew what the differences between calculations are? I can't find them.

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Was this posted here or on another board I read? There was an article a bit (week?) talking about the differences since the CPI calculation change.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

All I can find is that they found "biases" among consumers that weren't reflected in the original CPI. Nothing specific about what they changed.

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Do you want the "correct" answer, the "politically correct" answer, or the actual answer to you question, Hopwin?

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Poot, could I have all three please?

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Poot?

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"...the line dividing good and evil cuts through the heart of every human being. And who is willing to destroy a piece of his own heart?" -Aleksandr Solzhenitsyn

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The "correct" answer is that volatile goods and universal demand items don't actually represent avenues for investment and real growth. Because demand can be calculated solely as a function of population, any economic growth provided by those markets is accounted for in shifts in the population. Likewise, because inflation offsets interest on debt, it creates a net-zero lending paradigm and incentivizes borrowing.

The "politically correct" answer is that it's not possible for government asymmetries to cause shifts or inflation in volatile good pricing, because we subsidize those items for the poorest segments of the economy in an attempt to give them some sort of parity in economic power.

The actual answer is ...

It all counts and real inflation is in the double digits and probably has been the entirety of your adult life. Inflation is also deleterious in that when coupled with front end taxation, it marginalizes your gaining power and general prevents gaining economic mobility.

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So how was the CPI calculated then versus now?

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The CPI is supposed to serve a cost-of-living measurement, not an inflation index. The original "biases" were "removed" because the CPI placed more emphasis on volatile and universal demand items that everyone consumes. Housing, Energy, and Food are the three primary components of the original CPI calculation. Two of those--Energy and Food--are no longer included in the core CPI and core Inflation calculations because they generally contradict the government position on the matter.

But, the general gist of the situation was ...

Take the median total household expenditure per year, excluding taxes, and find that ratio vs. median household income. Do this for each major economic region in the United States and then normalize the results.

One of the major changes happened in the 1980s when housing was chained to rent averages instead of ownership/mortgage averages because rent as a function of income is relatively stable.

Of course, if you dig deep enough, the CPI and CPI-U still has individual data for 36 major cities and markets. And the Core Inflation index, which is used to justify everything from tax to social entitlement policies, excludes most of the difficult stuff.

Honestly, it's just a bunch of hooey now. During World War II we stopped including adjustments and balances caused by the expenditure of government revenues from Income Taxes; Payroll Tax expenditures were never included. And, as government market pressure has increased, more and more asymmetries have been excluded or obfuscated by the calculations at large.

Now, I know people are going to cry conspiracy, but a large part of the CPI and CPI-U is minimizing the impact of government policy on general market behavior and monetary stability. A recent example includes both quantitative easing initiatives by the Fed. Nearly 2.2 trillion new dollars were put into circulation, but the government calculations on currency value, inflation, CPI, etc. all reflect a near 0 value impact or even a positive currency value correction based on increasing the money supply.

Political economy is complex, but one has to look at it with the notion that policy has to benefit the government actors in some way.

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