The Glade 4.0

No worries.


For the record, though, I'll point you (and everybody else here) to the fact that it's a calculator put up by the Federal Bureau of Labor Statistics, not some fringe Gold-standard group.

_________________
“The duty of a patriot is to protect his country from its government.” - Thomas Paine

And thus equally suspicious?

_________________
"Aaaah! Emotions are weird!" - Amdee
"... Mirrorshades prevent the forces of normalcy from realizing that one is crazed and possibly dangerous. They are the symbol of the sun-staring visionary, the biker, the rocker, the policeman, and similar outlaws." - Bruce Sterling, preface to Mirrorshades

It depends on your perspective I suppose.

I was mostly responding to Micheal being unsure of the validity, and pointing out that it isn't an anti-Fed group. If you trust the government's index, it's valid. If you don't, it's not. I just didn't want the results discounted as being some nutjob's website's product.

_________________
“The duty of a patriot is to protect his country from its government.” - Thomas Paine

I don't trust it, but I know that actual inflation certainly isn't less than any of the values indexed in that database.

_________________
"It's real, grew up in trife life, the times of white lines
The hype vice, murderous nighttimes and knife fights invite crimes" - Nasir Jones

Correct me if I am wrong but doesn't inflation over time accelerate simply due to compounding interest?

Finance isn't my cup of tea, nor is math

_________________

Kinda, which is why I made a note of that earlier in an edit. I forgot that part at first.

_________________
“The duty of a patriot is to protect his country from its government.” - Thomas Paine

It has the appearance of doing so over time because of that very point Hopwin.

Its fairly simple. Lets say you have four years of five percent inflation, we'll set the first year with a widget costing $1,

The first year, inflation is 5%. The widget now costs $1.05.

After the second year, the cost for the same widget is $1.10.25

After the third year, $1.15.7625

After the fourth year, $1.21.550625

The fractions remain important, but adding up, it is no longer a straight 5% inflation rate from the point of view of the base year, widgets now appear to cost 22% more than they did.

After ten years, a widget costs $1.63 compared to the base years cost. It may still be priced $1, but in the first years dollars inflation seems to have climbed 6.3 percent a year. The longer you go the greater disparity between the base year's perception of the inflation rate. The 'real' inflation rate differs greatly from the perceived inflation rate.

After a century of a steady 5% inflation rate, that widget costs $125 dollars. a 12500% increase divided over a century may appear to be a 125% inflation rate.

After a century of a steady 22% inflation rate, the widget costs over $350 million.

Now, accepting that the 1913 dollar had 22.18 times the buying power of the 2009 dollar, the real average inflation rate is around 3.3%.

Of course that is as misleading as any other figure, because the inflation varies greatly from year to year and does not keep a steady average rate.

Thank you Hopwin, for bringing that up.

_________________
The U. S. Constitution doesn't guarantee happiness, only the pursuit of it. You have to catch up with it yourself. B. Franklin

"A mind needs books like a sword needs a whetstone." -- Tyrion Lannister, A Game of Thrones

Ah, you're welcome sensei? LOL

_________________

3% compounded over 100 years yields 1922% total.

5% compounded over 100 years yields 13150% total. Just to demonstrate the effect.

Also, we must define inflation. Is it the growth of consumer prices? Which prices? How do you seperate the growth of prices from simultaneous market forces? Is the CPI a good indicator of it? Is the Core CPI more appropriate? What about hedonic regression and substitutions?

Is the growth of money supply inflation? Do we include commercial money? If so, derived from what sources, long term maturity securities, bonds? Short term discount rate securities, do we count the discount? What about the inflation that occurs during maturation? What type of deposits should be tracked? Cash on demand, savings bearing interest accounts that often form the capital bedrock for other securities (mortgages, auto loans) or non-secured debt, and low-liquidity deposits (savings bonds, if those are still available, CD's etc.)?

The implications is that these dicussions are critical to understand how our metrics that measure inflation do so. Otherwise our discussion of fiat currency systems under central banking models with regulatory controls over every industry would be highly invalid.

_________________
"It's real, grew up in trife life, the times of white lines
The hype vice, murderous nighttimes and knife fights invite crimes" - Nasir Jones

@ Rafael: Based upon the URL, I think the calculator I linked from BLS is tabulating CPI.

_________________
“The duty of a patriot is to protect his country from its government.” - Thomas Paine