CPI

For a while I have been rambling about how inflation calculations are bullshit and some of those implications that follow.

Something I have very little understanding about but feel is totally insane is the Consumer Price Index. I kinda have equal parts ignorance and feeling its extremely contrived at 5% while I have to spend well over twice as much on gas, food, and building materials from this time last year.

Just wondering if anyone here has any real understanding on whats going on there or if I should deep dive into my loony toons conspiracy hunting nonsense at some point.

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Originally Posted by Helz

For a while I have been rambling about how inflation calculations are bullshit and some of those implications that follow.

Something I have very little understanding about but feel is totally insane is the Consumer Price Index. I kinda have equal parts ignorance and feeling its extremely contrived at 5% while I have to spend well over twice as much on gas, food, and building materials from this time last year.

Just wondering if anyone here has any real understanding on whats going on there or if I should deep dive into my loony toons conspiracy hunting nonsense at some point.

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There is a lot to unpack here.

For reference let's look at what goes into the CPI:

https://i.imgur.com/UF0znOq.png

https://i.imgur.com/iM7zAei.png

Spending twice as much on gas and food is likely either confirmation bias or hyperbole as the prices on gas and food have not doubled.

Gas
Retail Gasoline prices have increased from an average of $2.170/gal in Jun 2020 to $3.157/gal in Jun 2021 - a 45% increase - but this doesn't tell the whole story, since the price of gas during the pandemic was depressed due to low demand. Going back to January of 2020 and the price was $2.636/gal - so only a 20% increase since then. Not nearly as much as a 45% increase.

https://i.imgur.com/bWMCJs4.png

Although despite that fact - the CPI does work on a 12 month rolling window - and the CPI has the increase in fuel price at 50.8% - way higher than the 5% CPI. This discrepancy is explained when you look at the relative importance of Fuel Prices in the CPI with Energy Commodities only contributing 3.809% to a households expenditures.

Food
The aggregate price of food at home has not changed much.

https://i.imgur.com/ZMeE1wL.png

The area that has seen a substantially larger increase in food prices is the Food away from Home category - which has seen an increase of 4.0% and when you narrow it down to limited service meals, that increase is 6.1%. Someone that eats out a lot at take-out places will notice significant inflation compared to someone that cooks all their food at home. Speculating here because I haven't dug up any concrete data on it, but I suspect this is driven by the shortage of minimum wage workers who work all throughout the limited service meals industry.

Building Materials
Building materials are not included in the CPI - the way they might affect it is through housing prices - but building material cost is several degrees separated from housing prices. Furthermore the significant spike in building materials costs (e.g Lumber) has been driven moreso by a shortage than by inflation.

Then where did all that money go?
A valid question would then be, if prices haven't increased that much outside of the 50+% increase in fuel prices, where did all the money go, why haven't they increased more?

The answer to this has to do with a concept known as the velocity of money. The velocity of money basically measures the rate at which money cycles through the economy. A high velocity of money means consumer spending is high, money is flowing quickly through the economy and not spending much time in savings accounts before being spent. Whereas a low velocity of money is the opposite.

The supply-side shortage caused by the pandemic has created an economy with a very low velocity of money - so a lot of money just sitting in savings accounts, and money sitting in savings accounts isn't being spent on goods and therefore doesn't affect the prices of those goods.

Except not really.

Because that money hasn't just been sitting in savings accounts - it's been put into stock and bond markets. Which is why the S&P 500 has continued to reach record high after record high. Inflation has occurred - just not primarily in basic consumer goods (which is what the CPI measures) - rather inflation has manifested itself in the stock market.

So then to answer your main question:

Should this be something you are concerned about?
Concerned? I don't know, if you want to be concerned, sure, go for it. But as long as you have your savings parked somewhere that's historically been a good hedge against inflation (eg real estate or stocks... or gold if you're one of those people) then you'll probably be fine. (Oh and just hope there's not a stock market bubble and then crash, or another real estate crash - but IMO a real estate crash seems very unlikely, at least when compared to the possibility of a stock market bubble)

The Federal Reserve has stated that it is possible that there could be a period of uncomfortably high inflation coming, and they have adjusted accordingly by moving up their timeline on interest rate hikes. Which in turn has had rippling effects throughout the global economy with many emerging markets mirroring the change with interest rate hikes of their own.

But nothing at the doomsday conspiracy theory level.

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Some additional considerations:

Geographic Region
I noticed your location is set to Texas. The CPI measures prices in 23 metro areas in the US, two of the metros are in Texas (Houston and Dallas) The prices are aggregated bi-monthly for the two cities alternating months between the two. The city that was aggregated in May was Dallas and their CPI was at 6.3% compared to the national average of 5.0% Of the metros that were measured in May, Dallas had the highest inflation rate of them all.

Lag
CPI lags by a month. The current CPI is for May. June CPI is scheduled to be released on July 13th

I get what your saying and I do see the same numbers. I just only see them when I pull statistics online and not in my life.

The cost of basic foods I stock my fridge with has gone from costing me about 50$ a week to about 200$. The same foods I picked up when I traveled to California for work went from roughly 110$ to 240$. My neighbors rent just went from 750$ to 1250$. The cost of a 2x4 in January of last year was roughly 2.50$ and it jumped to around 10$ but now dropped to 7.90$. A year ago I could get an entree with a beer and tip for about 20$ while now I walk out for around 30$.

These are the things I see in my life and the lives of people around me. But the CPI shows some 5% which does not translate to my life experience. On the most basic level I feel like when you snap trillions of dollars into existence in a fiat currency inflation happens which is reflected in consumer prices but the numbers are showing something very different. I see the same disconnect in online listings and real pricing.

There is this part of me that has been focused on understanding how much of what I perceive is wrong in this world is just in my head but then I see stuff saying Inflation and CPI has only gone up by 5% and my mind just outright rejects it because of what I see around me. I can accept that CPI does not account for the scalping and such going on where a 3080's MSRP is 700$ but to buy one you gotta cough up 2k but those numbers look totally fucked to me when I walk out of a grocery store.

I didn't see this until just now but it made me laugh https://www.youtube.com/watch?v=svYH8JDEUU8

Also reminded me how the house I bought last August for 88k I rejected an offer for 190k a month back. Buy sliced cheese : )

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Originally Posted by Helz

I get what your saying and I do see the same numbers. I just only see them when I pull statistics online and not in my life.

The cost of basic foods I stock my fridge with has gone from costing me about 50$ a week to about 200$. The same foods I picked up when I traveled to California for work went from roughly 110$ to 240$. My neighbors rent just went from 750$ to 1250$. The cost of a 2x4 in January of last year was roughly 2.50$ and it jumped to around 10$ but now dropped to 7.90$. A year ago I could get an entree with a beer and tip for about 20$ while now I walk out for around 30$.

These are the things I see in my life and the lives of people around me. But the CPI shows some 5% which does not translate to my life experience. On the most basic level I feel like when you snap trillions of dollars into existence in a fiat currency inflation happens which is reflected in consumer prices but the numbers are showing something very different. I see the same disconnect in online listings and real pricing.

There is this part of me that has been focused on understanding how much of what I perceive is wrong in this world is just in my head but then I see stuff saying Inflation and CPI has only gone up by 5% and my mind just outright rejects it because of what I see around me. I can accept that CPI does not account for the scalping and such going on where a 3080's MSRP is 700$ but to buy one you gotta cough up 2k but those numbers look totally fucked to me when I walk out of a grocery store.

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"Statistics are invisible; anecdotes are salient."

Many of your anecdotes are most likely comparing apples to oranges... figuratively and literally.

And for the ones that aren't comparing apples to oranges - there are countless other explanations for an increase in price that are unrelated to economy-wide 100+% inflation rates.

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On the most basic level I feel like when you snap trillions of dollars into existence in a fiat currency inflation happens which is reflected in consumer prices but the numbers are showing something very different.

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You're not wrong, printing money in a fiat currency causes inflation. There has been inflation in the consumer good price index, in fact inflation is at the highest rate since Jun-Aug 2008, and since 1991 before that.

Particularly salient anecdotes have just suggested a magnitude to the inflation which is much higher than the true value.

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There is this part of me that has been focused on understanding how much of what I perceive is wrong in this world is just in my head but then I see stuff saying Inflation and CPI has only gone up by 5% and my mind just outright rejects it because of what I see around me

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This is admittedly something that many people do struggle with - a conflict between their conclusions based on anecdotal observations and statistical facts.

In fact, most of the things you've raised concerns over aren't even being primarily caused by inflation - they're being caused by gentrification / rapidly rising land values:

• Your neighbor's rent went up significantly
• Your home has more than doubled in value
• Groceries are getting much more expensive
• Local dining is getting more expensive
• In Texas - a state with a booming real estate market

Ultimately though you posted this thread on the premise of if you should do a deep dive into conspiracy hunting. Because you observed:

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Originally Posted by LagAttack

A conflict between your conclusions based on anecdotal observations and statistical facts.

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And are operating under the assumption that either:

1. Your observations are wrong in some way
2. The US Bureau of Labor Statistics is wrong

But this is not the case - there is a third option:

• 3. There is some other explanation for your observations that is separate from inflation

And the existence of this third option makes the answer your question of if you should go conspiracy hunting: a clear and resounding "no."

It is incredibly unlikely that the US Bureau of Labor Statistics is wrong or covering something up, and instead it is almost certainly the case that there are other economics forces at play - and investigating the forces at play in your observations (rather than jumping to the conclusion that it's inflation and the CPI is wrong) would uncover some very interesting economic trends.

And doing a dive into uncovering these reasons could definitely be worth the effort - for example the 2x4 price increase. Doing a dive into why 2x4's have become so expensive reveals that it is driven by a lumber shortage - which is caused not by a shortage of trees, nor a shortage of production capacity, but rather the combination of lumber tariffs, pandemic driven demand for lumber in remodeling, housing shortages, and the lumber industry's misreading of the implications of the pandemic.

I do understand your point. I just see a very substantial disconnect between what I observe and what I see reported. In conversations I have had with friends in Missouri, New York and California they have said they have the same issues. Im curious though, does anyone living in the US have a different experience with pricing?

Some things are resulting from a shortage of supply or labor but many things are not such as E Textbooks for college. On 2x4's specifically I believe its just price gouging with lumber yards being well stocked and lumber mills having never slowed down the only change in demand or supply to that system was the big freeze Texas had earlier this year (which largely required sheetrock and plumbing supplies, not lumber.) Sectors like Oil or gas totally make sense but that only explains a portion of the observable shifts.

I have to accept I could be totally wrong and connecting dots that don't exist but the difference between what we are being told and what I can see and hear from other people is just too extreme for me to ignore without poking the subject.

LMAO @ this thread.

If you want to accurately measure inflation of certain products, then use the inflation rate for those product sectors. The CPI is only good for one thing and one thing only - to determine the inflation of the aggregate macroeconomy. If gas prices go up, but medical care commodities go down then that CPI will reflect that. Similarly, use inflation rates specific for your state only as a general CPI for the entire country may not be as accurate. So if you're interested in Texan foods and Texan house prices, just stick to those indices instead. Or even better, stick to the city or general region of those prices (e.g., real estate reports).

Also as in all science, personal anecdotes are bullshit unless many people are reporting same phenomenon under randomized controlled trials. You're only seeing like 6 data points whereas these government statisticians are seeing sample sizes of > thousands. You don't even need more than one degree to understand this.

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Originally Posted by Helz

Im curious though, does anyone living in the US have a different experience with pricing?

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Sure, my grocery bill has been largely unaffected.

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On 2x4's specifically I believe its just price gouging with lumber yards being well stocked and lumber mills having never slowed down

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Claiming lumber mills never slowed down is a bold claim considering all the reporting and market data to the contrary.

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I just see a very substantial disconnect between what I observe and what I see reported. ... I have to accept I could be totally wrong and connecting dots that don't exist but the difference between what we are being told and what I can see and hear from other people is just too extreme for me to ignore without poking the subject.

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Where you seem misguided is in assuming that the observations you have made are necessarily attributed to inflation rather than other factors.

I promise you, the US Bureau of Labor Statistics isn't in cahoots with the Federal Reserve to cover up some astronomical inflation rate.

Also any discussion on inflation would be incomplete without a mention of the Personal Consumption Expenditures Price Index (PCE) which is under the purview of the US Department of Commerce, Bureau of Economic Analysis.

The PCE is arguably a better indicator for macro-economic inflation (for various reasons, which I won't get into - it's a rabbit hole in it of itself), as it's also the metric that the Federal Reserve uses as its inflation barometer.

Not to say that the CPI is unimportant, social security benefits are adjected using the CPI which has rippling effects throughout the economy - but for talks about macroeconomic inflation the PCE is generally a better metric. (But even then, the two are highly correlated anyway)

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Originally Posted by LagAttack

Claiming lumber mills never slowed down is a bold claim considering all the reporting and market data to the contrary.

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Earlier today I was at Berdoll Sawmill and was talking with them about it. I also talk pretty regularly with lumbar yards and keep up with pricing. If there ever was a shortage past when trucking stopped for a week or so when Texas froze I have not herd of it from anyone. Something we have been laughing at is how hardwoods prices have not shifted at all. You can get sheets of maple cheaper than you can get some types of OSB and Plywood these days which is just insane (although its worth noting there has been supply issues in sheetrock and plywood with the logistics chain being backed up at the ports so those prices are somewhat justified from my understanding)

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Originally Posted by LagAttack

Where you seem misguided is in assuming that the observations you have made are necessarily attributed to inflation rather than other factors.

I promise you, the US Bureau of Labor Statistics isn't in cahoots with the Federal Reserve to cover up some astronomical inflation rate.

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Thats fair.

I do not think there is some cover up. Just that the metrics used to evaluate CPI and Inflation are not effective even if they exclude secondary markets. This push that argues all the issues are transitory is pretty ridiculous in my opinion although time will tell whenever pricing stabilizes. I personally doubt a 2x4 will ever go back to being $2.38

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Originally Posted by Helz

I do not think there is some cover up. Just that the metrics used to evaluate CPI and Inflation are not effective even if they exclude secondary markets. This push that argues all the issues are transitory is pretty ridiculous in my opinion although time will tell whenever pricing stabilizes. I personally doubt a 2x4 will ever go back to being $2.38

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Like I said, if you're interested in lumber prices, then refer to a lumber cost index: https://fred.stlouisfed.org/series/WPU0811

As you can see, the indices have increased by 254% when you compare May 2020 and 2021 indices. This is most likely as a result of last year's contracts expiring and new commodity contracts being renegotiated at the current market price, which in turn is also driving other industries relying on lumber materials downstream.

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Originally Posted by LagAttack

"Statistics are invisible; anecdotes are salient."

Many of your anecdotes are most likely comparing apples to oranges... figuratively and literally.

And for the ones that aren't comparing apples to oranges - there are countless other explanations for an increase in price that are unrelated to economy-wide 100+% inflation rates.



You're not wrong, printing money in a fiat currency causes inflation. There has been inflation in the consumer good price index, in fact inflation is at the highest rate since Jun-Aug 2008, and since 1991 before that.

Particularly salient anecdotes have just suggested a magnitude to the inflation which is much higher than the true value.



This is admittedly something that many people do struggle with - a conflict between their conclusions based on anecdotal observations and statistical facts.

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https://www.youtube.com/watch?v=DISHFF3BQmw

I am starting to feel slightly less ignorant on this subject although its dragging me down a rabbit hole

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Originally Posted by Helz

I am starting to feel slightly less ignorant on this subject although its dragging me down a rabbit hole

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Lol you live in rabbit holes.

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Originally Posted by SuperJack

Lol you live in rabbit holes.

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This is very true. For every one of them I climb out of I find 5 more I want to dive down >.<

I have no idea what you guys are talking about.

I do know my gas, grocery, lumber, copper costs, property costs, rent have all increased significantly.

Why? IDK but I don't think it should be like that if most peoples pay remains the same.

This is why I sell cocaine in bulk.

I bought my house a few years back for 300K, my real estate agent said we could sell for $450K, I've done minimal work to the inside. How does my property increase in value $150K in about 4 years when everyones pay is essentially the same.

I live in ASSachusetts where everything is way overpriced.

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Originally Posted by blinkskater

I bought my house a few years back for 300K, my real estate agent said we could sell for $450K, I've done minimal work to the inside. How does my property increase in value $150K in about 4 years when everyones pay is essentially the same.

I live in ASSachusetts where everything is way overpriced.

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Bought our first house in 2013 for $135k, sold it in 2018 for $270k. Bought our current home for $340k, probably could sell it today for upwards of $500k or $600k. Market is fucking insane. Utah here.

And yeah pay stays stagnant.

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Originally Posted by blinkskater

I bought my house a few years back for 300K, my real estate agent said we could sell for $450K, I've done minimal work to the inside. How does my property increase in value $150K in about 4 years when everyones pay is essentially the same.

I live in ASSachusetts where everything is way overpriced.

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Originally Posted by BananaCucho

Bought our first house in 2013 for $135k, sold it in 2018 for $270k. Bought our current home for $340k, probably could sell it today for upwards of $500k or $600k. Market is fucking insane. Utah here.

And yeah pay stays stagnant.

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lol this discussion.
Meanwhile, in other parts of the world: https://noahpinion.substack.com/p/wh...conomic-crisis

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Originally Posted by OzyWho

lol this discussion.
Meanwhile, in other parts of the world: https://noahpinion.substack.com/p/wh...conomic-crisis

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LOLOL. They really are serious about punishing a country from something that happened like over 6 decades ago.. Or is it to protect the go-to retiree state? Mmmm. Mmm. They really should learn how to forgive lol.

Colossians 3:13 states that bear with each other and forgive one another if any of you has a grievance against someone. Forgive as the Lord forgave you.

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Originally Posted by OzyWho

lol this discussion.
Meanwhile, in other parts of the world: https://noahpinion.substack.com/p/wh...conomic-crisis

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It may not be as serious of a problem as Cubans are facing. But it's still a problem. It's pretty much impossible for new homebuyers to buy a home these days where I live. Gotta settle for condos or townhomes that are smaller than what we bought in 2013, or rent which isn't an investment at all and a shitty thing to have to do. And rent has gone up significantly anyway as well; people are renting single rooms for more money these days than my entire mortgage payment was in 2018 for a 1500 sq ft home. I honestly have no idea how anyone can afford to buy a new home these days on a single income anymore, even with a nice middle class job. And it's just getting worse. Those of us who got in the game at the right time were extremely fortunate.

In 2015 we were living off of one $40k salary, and things were tight. No fucking way we could do that today and have the home we had (which, by the way, was a shitty 3 bed 2 bath split level starter home). And that was only six years ago. I was with the same company then as I am now. New hires coming into that position I had still only make $40k.

Meanwhile my company's stock is through the roof...

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Originally Posted by BananaCucho

It may not be as serious of a problem as Cubans are facing. But it's still a problem. It's pretty much impossible for new homebuyers to buy a home these days where I live. Gotta settle for condos or townhomes that are smaller than what we bought in 2013, or rent which isn't an investment at all and a shitty thing to have to do. And rent has gone up significantly anyway as well; people are renting single rooms for more money these days than my entire mortgage payment was in 2018 for a 1500 sq ft home. I honestly have no idea how anyone can afford to buy a new home these days on a single income anymore, even with a nice middle class job. And it's just getting worse. Those of us who got in the game at the right time were extremely fortunate.

In 2015 we were living off of one $40k salary, and things were tight. No fucking way we could do that today and have the home we had (which, by the way, was a shitty 3 bed 2 bath split level starter home). And that was only six years ago. I was with the same company then as I am now. New hires coming into that position I had still only make $40k.

Meanwhile my company's stock is through the roof...

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Mmm mmm. Do you blame BlackRock for it?

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Originally Posted by Yuesford

Mmm mmm. Do you blame BlackRock for it?

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I don't know enough about BlackRock to blame them for anything

Also for a minute there I thought you were treecko lmfao

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Originally Posted by Helz

I do understand your point. I just see a very substantial disconnect between what I observe and what I see reported. In conversations I have had with friends in Missouri, New York and California they have said they have the same issues. Im curious though, does anyone living in the US have a different experience with pricing?

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I have noticed my grocery bills are higher than before - but I think that is mostly a result of buying more - 2 growing boys are eating more, and with financial stability we have been more lax with this in our budget. So I have no idea if prices have actually gone up, but we are definitely spending more

Gas? Um, I remember gas prices being over $4 a gallon for a hot minute in 2008. It was expensive as hell to fill up my gas guzzling DirecTV van. So when I see people complaining about high gas prices, I wonder if they notice how every year it goes up in the summer and back down in the winter? But I've never seen it over $4 again since then. Every summer though (last year was an exception) it seems to always go over $3 for a time before eventually dropping back down, this year being no exception

What else. Service stuff? Like I don't feel like getting a haircut has gotten more expensive, that's still pretty cheap. Eating out does feel more expensive, but then again I see the same correlation with groceries - we simply eat at nicer places now than we used to and buy more food (instead of splitting a meal) lmao. No idea there tbh

We don't pay for TV. It did seem like internet prices were getting outta hand until we got fiber available in our area - it is way cheaper than shitty comcast and has only gone up like $2 in five years which is fine imo

Other utilities/bills - tbh wife handles the water and gas bills so I have no idea lmao. Electricity bill is like $9 a month since we got solar so idk

Tutition cost did seem to increase every year while I was doing the college thing. And I did the college thing from 2012-2019. There's no question about that - it rose every year and it hurt every time. So glad that's over with.

But yeah man. Home prices. Rent. That's where the problem is, at least around here.

I am curious if people still see things the same. Stuff has gotten worse and worse to the point contractors are now refusing to give quotes that last more than a week or so. The price of many foods has tripled while companies are reporting record profits although this suggests the raised prices are not due to raised costs or a currency change.

Rich people get richer way faster than poor people get "richer". If i would have ~8.7mil usd i know like 3 spots atleast in the market i could get into.
but i dont have that money - and my chances are vanishing.

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Originally Posted by Helz

I am curious if people still see things the same. Stuff has gotten worse and worse to the point contractors are now refusing to give quotes that last more than a week or so. The price of many foods has tripled while companies are reporting record profits although this suggests the raised prices are not due to raised costs or a currency change.

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The original question was:

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Originally Posted by Helz

For a while I have been rambling about how inflation calculations are bullshit and some of those implications that follow.

Something I have very little understanding about but feel is totally insane is the Consumer Price Index. I kinda have equal parts ignorance and feeling its extremely contrived at 5% while I have to spend well over twice as much on gas, food, and building materials from this time last year.

Just wondering if anyone here has any real understanding on whats going on there or if I should deep dive into my loony toons conspiracy hunting nonsense at some point.

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My view on the accuracy of the CPI has not changed - I don't think it's "totally insane" nor do I think their calculations are "bullshit"

Inflation has certainly continued to go up though, and that is also reflected in the CPI which sits at 7.9% for all urban consumers and 8.6% for urban workers - those are the highest inflation rates since the stagflation of the late 70's/early 80's. So I think the index is doing a pretty good job of capturing the severity of the current inflation. And those are just the February numbers, March numbers are scheduled to release tomorrow.


As far as the topic of "has my view on inflation changed?"

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Originally Posted by Lag

The Federal Reserve has stated that it is possible that there could be a period of uncomfortably high inflation coming, and they have adjusted accordingly by moving up their timeline on interest rate hikes. Which in turn has had rippling effects throughout the global economy with many emerging markets mirroring the change with interest rate hikes of their own.

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Yes and no. Yes since inflation is empirically higher now, so of course my view on the current rate has changed.

But no because it's not a particularly surprising outcome given that the Fed had explicitly warned about that possibility as I mentioned in my previous post.



And going back to the original question - No, the Federal Reserve and US Bureau of Labor Statistics are still not "totally insane" nor are they "bullshit"

https://i.imgur.com/0PAHbiV.png

On the topic of inflation itself rather than the accuracy of inflation metrics -

Some interesting data points here.

Meat prices up 13.0%
Fuel up 43.6% (although this is arguably more due to geopolitics than it is inflation)
Used Cars and Trucks up 41.2%
Airline fare up 12.7%

Even something like rent being up 4.2% can have a major impact on people that live paycheck to paycheck.

An illustrated example:
A worker makes $2500/month and takes home $2000/mo after taxes in disposable income.
The worker's living expenses are $1800/mo. Giving them $200/mo in discretionary income. (Note the difference between disposable and discretionary - disposable is after taxes but before bills are paid, discretionary is after taxes AND bills are paid)

If prices go up even just 5% without the worker's wages increasing, then their living expenses increase to $1890/mo, and their discretionary income drops from $200/mo to $110/mo - that's a 55% drop in discretionary income.
With the current 8.6% inflation rate, said worker's discretionary income drops by 77.4%

the wording of that original question is from a year ago.

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Originally Posted by Lag

The original question was:



My view on the accuracy of the CPI has not changed - I don't think it's "totally insane" nor do I think their calculations are "bullshit"

Inflation has certainly continued to go up though, and that is also reflected in the CPI which sits at 7.9% for all urban consumers and 8.6% for urban workers - those are the highest inflation rates since the stagflation of the late 70's/early 80's. So I think the index is doing a pretty good job of capturing the severity of the current inflation. And those are just the February numbers, March numbers are scheduled to release tomorrow.


As far as the topic of "has my view on inflation changed?"



Yes and no. Yes since inflation is empirically higher now, so of course my view on the current rate has changed.

But no because it's not a particularly surprising outcome given that the Fed had explicitly warned about that possibility as I mentioned in my previous post.



And going back to the original question - No, the Federal Reserve and US Bureau of Labor Statistics are still not "totally insane" nor are they "bullshit"

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i got a 2017 toyota corolla like a week before lockdowns started in the US. For about 12k and it's now worth about 18k. Obviously anecdotal experience but it's still kind of shocking. If that 7% feels high to anybody i mean... the us government will happily give you 7% interest on a 10k bond for at least the next 6 months https://www.treasurydirect.gov/indiv...res_ibonds.htm - although i wager if you wait til may to buy it, it'll be closer to 8%

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Originally Posted by aamirus

i got a 2017 toyota corolla like a week before lockdowns started in the US. For about 12k and it's now worth about 18k. Obviously anecdotal experience but it's still kind of shocking. If that 7% feels high to anybody i mean... the us government will happily give you 7% interest on a 10k bond for at least the next 6 months https://www.treasurydirect.gov/indiv...res_ibonds.htm - although i wager if you wait til may to buy it, it'll be closer to 8%

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Originally Posted by Lag

Meat prices up 13.0%
Fuel up 43.6% (although this is arguably more due to geopolitics than it is inflation)
Used Cars and Trucks up 41.2%
Airline fare up 12.7%

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Yes, vehicles are one of the areas that has definitely increased far more than 7-8% used vehicles are up 41.2% in the last year alone. (And this fact is indeed taken into account in the CPI)

My vehicle is a 2020 (purchased in 2019) and I could sell it for orig MSRP today. Crazy!

Our home value has gone up 40% since last year! I am thankful to own both a decent vehicle and a decent home and not be in the market to buy right now.

I am concerned about inflation continuing to rise rapidly. Food and fuel cost is getting scary.

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Originally Posted by Tossangel

My vehicle is a 2020 (purchased in 2019) and I could sell it for orig MSRP today. Crazy!

Our home value has gone up 40% since last year! I am thankful to own both a decent vehicle and a decent home and not be in the market to buy right now.

I am concerned about inflation continuing to rise rapidly. Food and fuel cost is getting scary.

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The people who suffer most are those who dont already own a house/car to trade in.

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Originally Posted by Lag

https://i.imgur.com/0PAHbiV.png

On the topic of inflation itself rather than the accuracy of inflation metrics -

Some interesting data points here.

Meat prices up 13.0%
Fuel up 43.6% (although this is arguably more due to geopolitics than it is inflation)
Used Cars and Trucks up 41.2%
Airline fare up 12.7%

Even something like rent being up 4.2% can have a major impact on people that live paycheck to paycheck.

An illustrated example:
A worker makes $2500/month and takes home $2000/mo after taxes in disposable income.
The worker's living expenses are $1800/mo. Giving them $200/mo in discretionary income. (Note the difference between disposable and discretionary - disposable is after taxes but before bills are paid, discretionary is after taxes AND bills are paid)

If prices go up even just 5% without the worker's wages increasing, then their living expenses increase to $1890/mo, and their discretionary income drops from $200/mo to $110/mo - that's a 55% drop in discretionary income.
With the current 8.6% inflation rate, said worker's discretionary income drops by 77.4%

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i think its interesting how energy commodities went up 37.9% while all subpoints (gas/fuel) are higher than that. what data are they hiding that didnt go up?

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Originally Posted by SuperJack

The people who suffer most are those who dont already own a house/car to trade in.

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i wouldnt trade in anything tbh, prices still gonna go up.

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im currently in germany. im comparing to early 2020 prices (in Euro) (Pre-Pandemic)
Pringles 2.39 -> 2.59
Ramen Pop-Up noodles 0.49-> 0.65
Can o'Coke -> 0.33->0.49
Cheapest Bun at baker 0.20->0.45
Chewing Gum 0.69->0.99
Muesli/Cereals 2.99 ->3.99
Cheese (400g) 1.69 -> 2.19
Milk (l) 0.40 -> 0.69
(im trying to find price increases that you cant dismiss as war/covid etc...^.^)
and so on goes the list, not to talk about houses, energy, public/municipal utilities
even in russia, pre-spez operational prices didnt go up that strong ...

Quote:

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Originally Posted by Lag

https://i.imgur.com/0PAHbiV.png

On the topic of inflation itself rather than the accuracy of inflation metrics -

Some interesting data points here.

Meat prices up 13.0%
Fuel up 43.6% (although this is arguably more due to geopolitics than it is inflation)
Used Cars and Trucks up 41.2%
Airline fare up 12.7%

Even something like rent being up 4.2% can have a major impact on people that live paycheck to paycheck.

An illustrated example:
A worker makes $2500/month and takes home $2000/mo after taxes in disposable income.
The worker's living expenses are $1800/mo. Giving them $200/mo in discretionary income. (Note the difference between disposable and discretionary - disposable is after taxes but before bills are paid, discretionary is after taxes AND bills are paid)

If prices go up even just 5% without the worker's wages increasing, then their living expenses increase to $1890/mo, and their discretionary income drops from $200/mo to $110/mo - that's a 55% drop in discretionary income.
With the current 8.6% inflation rate, said worker's discretionary income drops by 77.4%

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I question the source of this and I would ask a simple question.

Last year food went up 2.2, now it went up 7.9. Is anyone only paying 10.1% more on their grocery bill? How much have your average groceries gone up?

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Originally Posted by Helz

I question the source of this and I would ask a simple question.

Last year food went up 2.2, now it went up 7.9. Is anyone only paying 10.1% more on their grocery bill? How much have your average groceries gone up?

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Not to say I do not think you have one. Just saying I do not believe the data and would ask this forum to provide something of a dataset through feedback. I live in Texas and recently had a conversation with a Mexican restaurant owner over how they plan on shifting around dish portions and changing pricing because of the rapidly changing pricing of raw foods.

i actually havent noticed my food goin up
but i dont pay attention lol

I looked at my order history and here is the year over year price comparison for a few items:

April 2021 April 2022

Milk 1.08 3.22
Bottled water 4.38 4.98
Protein shakes 4.98 5.98
Bread 2.68 2.98

These are the same brand items from the same store. I am afraid we haven't seen nothing yet. Between fuel prices, grain shortages, fertilizer shortages, money printing, war etc, things are only going to get more expensive. I would start cutting luxury items and stocking up on the basics.

At the time this thread was posted there had been an average 5.4% inflation rate over the previous year and an average 2.7% rate over the previous three years

Now its up to 8.6% over the previous year and over 14% cumulative over the previous two years

Ouch

Quote:

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Originally Posted by Lag

At the time this thread was posted there had been an average 5.4% inflation rate over the previous year and an average 2.7% rate over the previous three years

Now its up to 8.6% over the previous year and over 14% cumulative over the previous two years

Ouch

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I think there will be a 'housing crisis' coming up. The fed is hiking interest rates by tiny increments (because if they hike over half a point or something they have to make some big announcement.) This is to offset how over the last 12 years or so they artificially froze interest rates to make the economy seem better than it is.
If you think about it my home loan is at like 2.4 or so so with 14% over 2 years my lender has lost over 9%. The last housing market crisis happened because the market was contrived and I don't see this as different in principle. This time the real estate market will turn down while everyone with variable rate mortgage will see their rates raise past their means with interest rates catching up to where they should already be.

To CPI I forgot to follow up on it but one thing I found is that the index shifts what it measures. For example 'entertainment' is a field. Although concert and sports tickets have gone up by like 300+% they can keep that metric down by instead saying 'a Netflix subscription only costs X.' Its apparently been done quite a bit over the years so this current bit is not a unique issue.
On the other side (specific to food and some other products) manufacturers have been shifting their products. 1 bag of chips may still be the same bag but now its half empty or sometimes they even shrink the bag because it just looks silly. Some items (such as a gallon of milk) dont have this problem but CPI does not take these shifts into account. This really sucks for those living off social security who's income is based on CPI in a world of increasing inflation and cost of living.

Anyways, Expect to see issues over the next couple of years. I think the places like New York and California that have been loosing lots of their population will be hit the hardest but this will probably hurt the population more than the last housing crisis did.