Great discussion, thank you! Can't wait to read your next post. On CPI, I couldn't agree more. It's not just a discussion on the items within the basket and how they are measured, a much more important discussion might be how it relates to people. Since it's an aggregate measure it affects different parts of society differently. If your paycheck is above $1M per year, do you really care how much you pay for a burger, how much you pay for insurance, college tuition, food, rent? Not really, and housing price inflation works in your favor because you own assets and real estate.
When someone is barely making $15/hour, inflation is real, possibly closer to 10% given the discrepancy between wage increases and the real cost of living. The trend of rich vs poor has been going on even before the last financial crisis but it has accelerated this past year. A good illustration is the disconnect between the stock market and the so-called eye test - the real economy. This sort of disconnect can only last so long. Something has got to give at some point.
Good points Clemens. The CPI does not do a good job reflecting cost of living for real people, in part because a third of it is a bogus made-up number designed to measure the cost of living in the house that you already own. (More on this later) A separate issue is how to choose which set of prices should be included in the basket used to measure the real interest rate. That basket should have nothing to do with consumer prices.
Great discussion, thank you! Can't wait to read your next post. On CPI, I couldn't agree more. It's not just a discussion on the items within the basket and how they are measured, a much more important discussion might be how it relates to people. Since it's an aggregate measure it affects different parts of society differently. If your paycheck is above $1M per year, do you really care how much you pay for a burger, how much you pay for insurance, college tuition, food, rent? Not really, and housing price inflation works in your favor because you own assets and real estate.
When someone is barely making $15/hour, inflation is real, possibly closer to 10% given the discrepancy between wage increases and the real cost of living. The trend of rich vs poor has been going on even before the last financial crisis but it has accelerated this past year. A good illustration is the disconnect between the stock market and the so-called eye test - the real economy. This sort of disconnect can only last so long. Something has got to give at some point.
Good points Clemens. The CPI does not do a good job reflecting cost of living for real people, in part because a third of it is a bogus made-up number designed to measure the cost of living in the house that you already own. (More on this later) A separate issue is how to choose which set of prices should be included in the basket used to measure the real interest rate. That basket should have nothing to do with consumer prices.