Here's a comparison of CPI based on how it is calculated now with how it was calculated in the 1990s and 1980s. [0] There's a pretty clear trend here. Maybe the current calculation is more accurate. But I doubt it. Looks like suppression to me.
Here's a website that compares CPI today with the way it was calculated in the 1990s and 1980s. Suffice to say, it appears the government is trying to suppress CPI over time. [0]
This is in part because they changed how CPI is calculated in the 80s and 90s, which, as luck would have it, lowered the rates. You can see what CPI looks like with the older formulas here to compare:
From the article, the biggest discrepancy between CPI and true inflation is a result of a change in the formula made in 1987 that removed interst rates aka the cost of money from CPI. The CPI formula replaced the actual cost of financing homes and autos with a new term, owner's equivalent rent. The argument made by the underlying paper [1] is that the older calculation better reflects the cost of living increases experienced by consumers and more closely correlates with the widely used University of Michigan Index of Consumer Sentiment. Also, notable is that consumers care much more about the cumulative multi-year effect of inflation while economists only worry about year/year changes in the rate of inflation as can be seen here [2] (worth a click)
For everyone who thinks CPI is an accurate measure of inflation, consider this chart: [0]
It shows real wages mostly flat or increasing since the 1980's. I've noticed that the same people claiming CPI is accurate also tend to complain about decreasing cost-adjusted standards of living for the median worker. Those opinions can't both be correct (hint: the second one is correct).
I apologize for my tone and edited my post. I'm not going to infringe the copyright of the person at the link by pasting it here. I'm also not going to paraphrase it because I wouldn't be able to add anything by doing so. It's a few paragraphs long, if you want to learn more I invite you to read it.
If your argument is that the calculation of CPI has changed, that is not controversial. If it is the information on Shadowstats about how it has changed is real, you may want to read the link I provided.
That's interesting. I will admit I am a CPI skeptic. I do not understand how it is being calculated. Half the stuff people buy today did not exist 20 years ago. There is such an abundance of the other stuff, it is always heavily discounted. Essential things that have obviously increased in price, like homes and food, are not included in the CPI. Is there a "CPI for Dummies" anywhere out there?
Btw, many economist argue that CPI overstates inflation. Mostly because CPI has a relatively fixed basked, but people adjust what they are buying if relative prices shift. (Eg if bread becomes relatively more expensive than pasta, people buy less bread and more pasta. The CPI basket does not reflect that.)
A modern alternative is to use the GDP deflator. https://en.wikipedia.org/wiki/GDP_deflator Basically, it means to use everything that got produced / consumed as the basket for your inflation measurement.
It's really funny to have you arguing in one subthread that inflation is overestimated by the official numbers, and then have some other guy arguing in another subthread that inflation is underestimated by the official numbers:
My position is basically that the CPI, like all statistics, is fundamentally inaccurate, but it's as likely to be biased high as it is to be biased low. I think you're both proving my point on this. :-)
Anyway, the table I linked to was published last month, so presumably they've already taken the Boskin Commission findings into account and retroactively fixed the earlier numbers.
Depends on how you measure it. The government keeps shifting the goalposts and the current measurement is little related to what a consumer faces. Inflation is measured differently today from the 90s and both different from 80s IIRC.
If you're comparing against 3-4 years ago, CPI says inflation was 18-21%.
So if it's actually 25-30%, that's a significant level of error but not an enormous one.
CPI says that, of those four years, almost all the inflation was in the middle two. So when it says 3.5% since last year, that's not a crazy number, it's more that it's hard to determine/remember which part of the inflation happened in exactly which month. Comparing today to 3-4 years ago is a better option for both accurate numbers and accurate memories.
This article is complete bullshit because it effectively corrects for inflation twice. The CPI is a measure of the nominal change in cost of a basket of goods. This should be compared, like for like, to nominal income, not inflation-adjusted income. The CPI was already used to adjust the income to which it's compared in this article!
[0]: http://www.shadowstats.com/alternate_data/inflation-charts
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