inflation 8 percent?

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LH
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inflation 8 percent?

Post by LH » Thu Mar 01, 2012 3:05 pm

http://www.cbsnews.com/8301-505144_162- ... you-think/

I thought this interesting because just yesterday my wife was again talking about how everything she buys seems so much higher in the past couple months. I have noticed it at restaurants too. But that did not jive with the CPI-u, has seemed incongruous, but it does seems more in line with this "EPI" index.

Now maybe my overall spending is more in line with cpi-u inflation. Just interesting that it put a hard number on what I have been seeing consumerwise.

There are lots of short sale houses, but I am not going to buy one, but bread and restaurants, thats another matter : )

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Re: inflation 8 percent?

Post by exeunt » Thu Mar 01, 2012 3:17 pm

inflation 8 percent?
No.

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Sheepdog
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Re: inflation 8 percent?

Post by Sheepdog » Thu Mar 01, 2012 3:25 pm

It does state this Admittedly, the purchases that the EPI tracks make up slightly less than 40 percent of the average household budget. But Steven Cunningham, research and education director at AIER, says these items are what contribute to the "sticker shock at the gasoline pump and the supermarket check-out line."

As it says, these higher prices are what people really notice. They are less than 40% of our average budget. If these continue, the cpi-u will start showing it in future months....probably see some in the March figure coming out in a couple of weeks.
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Re: inflation 8 percent?

Post by tludwig23 » Thu Mar 01, 2012 3:25 pm

I suppose it depends on whether you mainly buy items from the Everyday Price Index (EPI), or whether your spending mirrors the CPI. The vast majority of the increase was due to gas prices. Your bread and restaurants were only up 3.56% year over year. People tend to notice the prices that do change, and ignore all those that don't--so of course it seems as if prices are always going up--something is always going up.
Last edited by tludwig23 on Thu Mar 01, 2012 3:28 pm, edited 1 time in total.
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Re: inflation 8 percent?

Post by Ice-9 » Thu Mar 01, 2012 3:25 pm

AIER focuses on Americans' typical daily purchases, such as food, gasoline, child care, prescription drugs, phone and television service, and other household products.
Well, from the numbers the CPI is based on, for 12 months ending Jan. 2012:

4.4% Food
9.7% Gasoline

I didn't quickly find CPI numbers for child care, prescription drugs, phone and television service and don't know if or how often the BLS releases such numbers, but 8% certainly seems possible if you cherry-picked the items and services you were tracking.

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Re: inflation 8 percent?

Post by PreserveCapital » Thu Mar 01, 2012 3:31 pm

From the linked article:

The not-for-profit research group measures inflation without looking at the big, one-time purchases that can skew the numbers. That means they don't look at the price of houses, furniture, appliances, cars, or computers. Instead, AIER focuses on Americans' typical daily purchases, such as food, gasoline, child care, prescription drugs, phone and television service, and other household products.
The 8% comes from the severely flawed methodology AIER uses, as stated in the above excerpt.

It's not clear what the objective of leaving out all the "big ticket items" is meant to accomplish.

More FUD?

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Re: inflation 8 percent?

Post by kenyan » Thu Mar 01, 2012 3:55 pm

I don't think the methodology is that flawed (unless you use it to actually claim inflation is 8%); they state from the outset what they are trying to accomplish. Personally, I don't think the CPI is infallible - I don't like some of the methodology used in the CPI for big-ticket items - particularly quality adjustments (I don't believe that inflation readings should get credit for technological innovation) and OER. I'm not going to make any blanket statements on whether or not those are right or wrong, and don't want to get in that discussion here; I just don't agree with them.

As a result, it's nice to see some numbers with another perspective; you just can't realistically use those to make the statement used in the thread title without *major* qualifications added.
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Re: inflation 8 percent?

Post by tadamsmar » Thu Mar 01, 2012 4:15 pm

They say the EPI is measuring the inflation rate on items one buys monthly, the implication is monthly at a steady rate.

I could see that the rise in steady monthly expenditures could put some in a squeeze, be a short term contributor to public sentiment, and cause people to put off the purchase of big ticket items if they can (heck, the big ticket items could be deflating while the EPI inflates.)

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Re: inflation 8 percent?

Post by John2525 » Thu Mar 01, 2012 5:31 pm

[political comment removed by admin alex]

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Re: inflation 8 percent?

Post by rustymutt » Thu Mar 01, 2012 5:36 pm

What really peeves me off is the smaller containers of food. Same, or many cases the price is higher, and you get less. Inflation is happening at a faster pace than the government is willing or able to let on. We use to get 6-12 serving of ice cream inside the case. Now we're lucky to get 6. They have learned to incorporate air in the gallon and make 1/2 of ice cream weigh less than it did 10 years ago. We're now buying foamed ice cream.
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Re: inflation 8 percent?

Post by ourbrooks » Thu Mar 01, 2012 6:04 pm

You might want to look here http://www.bls.gov/cpi/cpifaq.htm#9 before you post. The Bureau of Labor statistics takes into account things like changes in container sizes and weights. There are even regional versions of the measurements to track differences between cities.
The CPI is intended to express the average experience, but I doubt whether any particular family is average.

The biggest component in the CPI-U is housing; it's 31% of the index. Home ownership measured as "rental equivalence" is 25%
All food, including meals eaten in restaurants adds up to only 15%. Have house prices stopped falling yet? Not the last I read, so 25% of the CPI-U actually has a negative value. Food going up 4.4% will get lost in the round off error.

Of course, people who haven't bought or sold a house recently won't see the drop in housing costs, but, for the economy as a whole, it's very real and far more important than the price of ice cream.

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Re: inflation 8 percent?

Post by Sheepdog » Thu Mar 01, 2012 6:28 pm

Inflation is still personal.
I totaled our 2 person family basic home expenses in each year from 2008 thru 2011. These expenses included groceries, general household supplies, gasoline, gas, cable, electric, telephone, DSL and medical insurance. We had no changes in living style.

This was our personal inflation.
2008' expenses is the base:
2009 had no inflation compared with 2008
2010 was up 3.2% over 2009.
2011 was up 5.4% over 2010
4 years, 2008 thru 2011, showed that 2011 expenses were 8.6% higher than 2008.
Jim
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Re: inflation 8 percent?

Post by clevername » Thu Mar 01, 2012 6:43 pm

I measure inflation in terms of girl scout cookies - thin mints, to be exact. Every year those manipulative little girl scouts pounce on me outside the grocery store and get me to buy a few boxes, and every year there are fewer cookies!

This year I believe there are 16 cookies per roll, as opposed to 17 last year. So that's what, 5.9% inflation? Sounds about right to me.

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Re: inflation 8 percent?

Post by ourbrooks » Thu Mar 01, 2012 6:50 pm

I measure inflation in the price of Texas ruby red grapefruit. This year, several stores had' 'em at 6/1$. I haven't seen prices that low since 1996.
I conclude that the government has been vastly overestimating inflation and that we're actually in a deflation spiral. Next year I expect to get them 8/$1.

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Re: inflation 8 percent?

Post by FafnerMorell » Thu Mar 01, 2012 6:57 pm

clevername wrote:I measure inflation in terms of girl scout cookies - thin mints, to be exact. Every year those manipulative little girl scouts pounce on me outside the grocery store and get me to buy a few boxes, and every year there are fewer cookies!

This year I believe there are 16 cookies per roll, as opposed to 17 last year. So that's what, 5.9% inflation? Sounds about right to me.
How much are you paying per box each year?

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Re: inflation 8 percent?

Post by Rodc » Thu Mar 01, 2012 6:59 pm

rustymutt wrote:What really peeves me off is the smaller containers of food. Same, or many cases the price is higher, and you get less. Inflation is happening at a faster pace than the government is willing or able to let on. We use to get 6-12 serving of ice cream inside the case. Now we're lucky to get 6. They have learned to incorporate air in the gallon and make 1/2 of ice cream weigh less than it did 10 years ago. We're now buying foamed ice cream.
Buy better ice cream.

Every once in a while I mistakenly get the foamed stuff. Recently grabbed some from a two for one sale. Got home opened it up, half air: Rats! I missed the "lower fat" label.

But the better brands of real ice cream still seem to be like it used to be (if 1.5G instead of 2G per container).
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: inflation 8 percent?

Post by Rodc » Thu Mar 01, 2012 7:05 pm

Has anyone checked the million prices project at MIT lately (I have not)?

They automatically track items that can be purchased over the internet. Last I knew it ran pretty close to CPI, though it must not include housing either unless they have a way to track rent.

Just another data point.

Personally, while I make no attempt to track my personal inflation rate (and since I have not bought a house in about 20 years and keep cars 10-12 years much of my expenses do not change much year to year) I have not noticed a great disconnect with CPI.

Over the last 20 years I have averaged a modest increment over CPI every year in pay raises, and sure enough my standard of living has risen noticeably over the long haul, if not so noticeably year to year.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: inflation 8 percent?

Post by nisiprius » Thu Mar 01, 2012 7:35 pm

I can't speak to the question of whether the "everyday prices" index is an intellectually honest effort to capture something the CPI does not capture, or whether it's intentional scaremongering by someone who wants to grind an axe about inflation. I haven't looked up AIER in Wikipedia yet to see what sort of organization it is.

I have a request to make of LH: since the word "inflation" either has no well-defined meaning, or has a well-defined meaning that's different from the "Everyday price index," I'd like you to change the thread title to something like AIER's "Everyday price index" 8 percent?

I would have to say that since as far as I'm concerned, inflation is measured by much money you spend, not by how much money you think you spend, the CBS article is dishonestly titled, and a better title would be "Inflation: Why it seems higher than it is."

What the analysis leaves out is that if you actually lived through a time when the annual inflation rate really was 7.3%, or 11.3%, or 13.5%*, the same "everyday prices" effect was present, and it felt completely, unmistakably different from the last few years. You were noticing things constantly. It did not feel like any price was stable. It felt very threatening. Not quite enough to make you run out and spent your whole paycheck the instant it came in, but enough to give you the feeling that saving was useless and planning was useless.

When price controls were imposed, it became even more infuriating because of the various evasions. The containers of milk in the company vending machine went from 10 ounces to 8 ounces while the price stayed the same (illegal but common under the price controls). One I particularly remember was that Digital Equipment Corporation renamed its PDP-8 operating system from "PS/8" to "OS/8," even though it was just a routine maintenance update, because that made it a different product and they could charge a different (higher) price.

Now to find out what Wikipedia says the American Institute for Economic Research is. Click, click. American Institute for Economic Research OK, based on Wikipedia's description, it is a straight outfit with no grotesquely evident axe to grind.

*1978, 1979, 1980 respectively
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Re: inflation 8 percent?

Post by PreserveCapital » Thu Mar 01, 2012 7:59 pm

According to the org's website, the EPI measures items constituting 39% of total household expenditures.

They measured inflation at 7.2% but that is only on 39% of total household expenditures. They did not weight the average. .39 x 7.2 = 2.808% inflation rate if the other 61% of household expenditures not included in the EPI average zero inflation. The CPI-U of 3.1% implies: 3.1 - 2.808 = .292% of total CPI-U inflation is contributed by the 61% of expenditures not included in EPI. .292/.61 = .479% which is the implied rate of inflation of the 61% of expenditures left out of EPI, or around one half of one percent, if one assumes that EPI is consistent with CPI-U.

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Re: inflation 8 percent?

Post by tiresias » Thu Mar 01, 2012 8:16 pm

PreserveCapital wrote:From the linked article:

The not-for-profit research group measures inflation without looking at the big, one-time purchases that can skew the numbers. That means they don't look at the price of houses, furniture, appliances, cars, or computers. Instead, AIER focuses on Americans' typical daily purchases, such as food, gasoline, child care, prescription drugs, phone and television service, and other household products.
The 8% comes from the severely flawed methodology AIER uses, as stated in the above excerpt.

It's not clear what the objective of leaving out all the "big ticket items" is meant to accomplish.

More FUD?
because it reflects what it takes to live on a day-too-day basis?
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Re: inflation 8 percent?

Post by sscritic » Thu Mar 01, 2012 8:26 pm

I just went back and ran spending only in Quicken, not including taxes. Here is my inflation report.

2008 was my base year
2009, spending up 47.3%
2010, spending down 14.5%
2011, spending up 13.9%

Now match the years to these facts:
I took my children and grandchildren on a cruise.
I paid a divorce attorney in Southern California.
I got granite countertops. (this one is for nonnie)

Take that Sheepdog! :)

[That's a joke people. I doubt Sheepdog had the ups and downs I had over this same time period.]

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Re: inflation 8 percent?

Post by hazlitt777 » Thu Mar 01, 2012 11:25 pm

LH wrote:http://www.cbsnews.com/8301-505144_162- ... you-think/

I thought this interesting because just yesterday my wife was again talking about how everything she buys seems so much higher in the past couple months. I have noticed it at restaurants too. But that did not jive with the CPI-u, has seemed incongruous, but it does seems more in line with this "EPI" index.

Now maybe my overall spending is more in line with cpi-u inflation. Just interesting that it put a hard number on what I have been seeing consumerwise.

There are lots of short sale houses, but I am not going to buy one, but bread and restaurants, thats another matter : )
Some economists have noted that speaking of inflation as an aggregate is disceptive and has to be used in a qualified sense. What do I mean? Well if you are going to college, your inflation rate is probably much higher than for one who is done with schooling. Also, if you are buying a home, your inflation rate is currently in all likelihood much lower than for one who is renting in some areas. If you have needed health services a lot these past 10 years, your personal inflation rate is probably much higher than others who have not.

So depending what we are buying, our personal inflation may be higher than the official CPI. My take is that food and gas should be included in the core inflation number to give a better sense of what the "aggregate inflation" rate really is. However, then the inflation number would be much more volatile, which is why they opt not to include it.

Hope that is of some help.

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Re: inflation 8 percent?

Post by TheEternalVortex » Fri Mar 02, 2012 1:19 am

hazlitt777 wrote: Some economists have noted that speaking of inflation as an aggregate is disceptive and has to be used in a qualified sense. What do I mean? Well if you are going to college, your inflation rate is probably much higher than for one who is done with schooling. Also, if you are buying a home, your inflation rate is currently in all likelihood much lower than for one who is renting in some areas. If you have needed health services a lot these past 10 years, your personal inflation rate is probably much higher than others who have not.

So depending what we are buying, our personal inflation may be higher than the official CPI. My take is that food and gas should be included in the core inflation number to give a better sense of what the "aggregate inflation" rate really is. However, then the inflation number would be much more volatile, which is why they opt not to include it.

Hope that is of some help.
There's not really a notion of "personal inflation". Inflation means a change in the overall price level. The corresponding concept for individuals is just "expenses".

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Re: inflation 8 percent?

Post by kenyan » Fri Mar 02, 2012 1:27 am

Rodc wrote:Has anyone checked the million prices project at MIT lately (I have not)?
Hey, give them the credit they deserve, it's the BPP, not the MPP =).

Last time I checked, it was continuing to run hotter than the CPI by a slight amount, perhaps half a percent per year, or possibly even less.
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Re: inflation 8 percent?

Post by richard » Fri Mar 02, 2012 6:03 am

tiresias wrote:
PreserveCapital wrote:From the linked article:
The not-for-profit research group measures inflation without looking at the big, one-time purchases that can skew the numbers. That means they don't look at the price of houses, furniture, appliances, cars, or computers. Instead, AIER focuses on Americans' typical daily purchases, such as food, gasoline, child care, prescription drugs, phone and television service, and other household products.
The 8% comes from the severely flawed methodology AIER uses, as stated in the above excerpt.

It's not clear what the objective of leaving out all the "big ticket items" is meant to accomplish.

More FUD?
because it reflects what it takes to live on a day-too-day basis?
If you are just looking at frequently purchased items and ignoring less frequently purchased big ticket items, either (1) you never buy less frequently purchased big ticket items or (2) there's something seriously wrong with your planning. In any event, what you're looking at is not inflation as conventionally defined.

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Re: inflation 8 percent?

Post by nisiprius » Fri Mar 02, 2012 6:19 am

hazlitt777 wrote:Well if you are going to college, your inflation rate is probably much higher than for one who is done with schooling. Also, if you are buying a home, your inflation rate is currently in all likelihood much lower than for one who is renting in some areas. If you have needed health services a lot these past 10 years, your personal inflation rate is probably much higher than others who have not.
The same is true for every average that's ever used in talking or thinking about finance. It's no more and no less misleading than any other index. If you live in Grosse Point, your unemployment rate is probably lower than if you live in Detroit. If you live in Grosse Point but happen to be unemployed, your unemployment rate is higher.
My take is that food and gas should be included in the core inflation number to give a better sense of what the "aggregate inflation" rate really is.
Why, since there is a perfectly good figure, the CPI itself, that does include them. That regular CPI, which does include food and gas, is sometimes called "headline inflation," because it is what the media customarily quote as "inflation" when they do not qualify it.
However, then the inflation number would be much more volatile, which is why they opt not to include it.
That's right, because the "core" inflation number is a specialized number used for setting government policies which shouldn't change in a volatile way. Much as seasonally adjusted employment is used for policy purposes, even though an unemployed construction worker is just as unemployed no matter what season it is. I can't recall anyone attacking the the government for compiling a seasonally adjusted index.

The "core" inflation number is rarely mentioned, and when the media does mention it the media, invariably in my experience, uses the word "core" and adds, explicitly, "which does not include food or gas." There's nothing deceptive or misleading about it. The only thing deceptive or misleading is commentators who imply that "core" inflation is commonly quoted as "the" inflation number in order to pull the wool over the public's eyes.
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Re: inflation 8 percent?

Post by Sheepdog » Fri Mar 02, 2012 6:43 am

sscritic wrote:I just went back and ran spending only in Quicken, not including taxes. Here is my inflation report.

2008 was my base year
2009, spending up 47.3%
2010, spending down 14.5%
2011, spending up 13.9%

Now match the years to these facts:
I took my children and grandchildren on a cruise.
I paid a divorce attorney in Southern California.
I got granite countertops. (this one is for nonnie)

Take that Sheepdog! :)

[That's a joke people. I doubt Sheepdog had the ups and downs I had over this same time period.]
OK, sscritic, you want to go beyond basic expenses, do you? Let's look at my total spending, too......not just the everyday stuff. Let's see who can outspend who. :P
This is from my Microsoft Money....and it doesn't include taxes either, because I don't have to pay any, so there! :beer
2008 base year
2009 spending up 20.8% (wife bought auto)
2010 spending up 24.0% over 2008 (new tile in kitchen, entrance and baths +countertops + big 50th anniversary celebration)
2011 spending up 46.1% over 2008 (new auto for me, old age teeth and hearing repair..sigh)
I outspent you, doggone it, but you know what? Even investing my age in bond and living off of it, our portfolio was still up 11.5% in that period. Glad you did your calculation. I hadn't compared my totals from the end of 2008 to 2011. Here's to these good times.
:sharebeer
Jim
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Re: inflation 8 percent?

Post by nisiprius » Fri Mar 02, 2012 6:45 am

It's all a question of why the index was compiled and how it's used.

If the point is that people judge inflation by the numbers they see most often, and by numbers they see at frequent enough intervals to notice changes in, then it would seem to be a truism.

If the point is that the components of the CPI that have higher inflation rates collectively have higher inflation rates than the CPI, it's a tautology.

If it turns out that the EPI fluctuations somewhat independently of the CPI, and that it affects the public psychologically in ways that affect the economy, it's quite interesting.

If it's going to be used to "prove" that the CPI is not the appropriate number to use for indexing Social Security or inflation-protected securities, or for setting government economic policy, it's nonsense.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: inflation 8 percent?

Post by investorjunkie » Fri Mar 02, 2012 7:09 am

My XM Radio went up approx 10%, my alarm system is up 6% annually.

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Re: inflation 8 percent?

Post by tludwig23 » Fri Mar 02, 2012 8:44 am

FafnerMorell wrote:
clevername wrote:I measure inflation in terms of girl scout cookies - thin mints, to be exact. Every year those manipulative little girl scouts pounce on me outside the grocery store and get me to buy a few boxes, and every year there are fewer cookies!

This year I believe there are 16 cookies per roll, as opposed to 17 last year. So that's what, 5.9% inflation? Sounds about right to me.
How much are you paying per box each year?
It seems that each year either the price goes up, or the box gets smaller (fewer thin mints)--but not both. I'm working on an ETF to track the Morgan Stanley All World Girl Scout Cookie Index. (MSAWGSCI). The lawyers are still debating between the "cooky" and "cookie" spelling variants.
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Re: inflation 8 percent?

Post by tadamsmar » Fri Mar 02, 2012 12:28 pm

nisiprius wrote:I can't speak to the question of whether the "everyday prices" index is an intellectually honest effort to capture something the CPI does not capture, or whether it's intentional scaremongering by someone who wants to grind an axe about inflation. I haven't looked up AIER in Wikipedia yet to see what sort of organization it is.
I did look it up. AIER does not seem like a group that would have a bias. But I just looked at the wikipedia:

http://en.wikipedia.org/wiki/American_I ... c_Research

I understand your skepticism, but this does not seem to be a source for the usual nut-case CPI-bashing.

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Re: inflation 8 percent?

Post by hazlitt777 » Fri Mar 02, 2012 8:13 pm

Using these numbers:
http://www.randomuseless.info/gasprice/gasprice.txt
and using this calculator:
http://www.dinkytown.net/java/AnnualReturn.html

gas prices have been up from 4/26/1979 to 3/2/2012
an average of 4.815%. That is based on $3.75 gas today where i live.

But if you start in 1964 when gas cost approximately .20 dollars a gallon, then inflation to this date has been an average of 6.274% for gas annually.

For whatever that is worth. But try this calculator. It is pretty "fancy."

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Re: inflation 8 percent?

Post by hazlitt777 » Fri Mar 02, 2012 8:15 pm

Anybody know what potatoes cost in 1971 and what they cost today? Or anything else for that matter. I will crunch the numbers for you and give you the average annual inflation rate for that particular good.

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Re: inflation 8 percent?

Post by hazlitt777 » Fri Mar 02, 2012 8:25 pm

Using this calculator for gold, plugging in gold for January 1, 1971 at $35 and then at todays price of $1712, I come up with an inflation rate of 10.728%

For silver January 1, 1971 through today the inflation rate comes out to 7.845%.
That is based on this website that states silvers average price in 1971 was $1.55 and today's spot price of $34.73 found at this site: http://www.usagold.com/cpmforum/

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Re: inflation 8 percent?

Post by Noobvestor » Fri Mar 02, 2012 11:43 pm

hazlitt777 wrote:Anybody know what potatoes cost in 1971 and what they cost today? Or anything else for that matter. I will crunch the numbers for you and give you the average annual inflation rate for that particular good.
Baseball cards. (Sorry, that one was to make a point)

A pair of jeans. (I'm guessing it'll prove a similar point, but am genuinely curious and unsure)

A personal computer (OK, back to point-proving, sorry)
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Re: inflation 8 percent?

Post by fishnskiguy » Fri Mar 02, 2012 11:59 pm

hazlitt777 wrote:Using this calculator for gold, plugging in gold for January 1, 1971 at $35 and then at todays price of $1712, I come up with an inflation rate of 10.728%

For silver January 1, 1971 through today the inflation rate comes out to 7.845%.
That is based on this website that states silvers average price in 1971 was $1.55 and today's spot price of $34.73 found at this site: http://www.usagold.com/cpmforum/
Since you used gold and silver to calculate inflation, why not calculate the price of a Megabyte of computer memory? You'll find severe deflation there and memory has more use than gold.

Just asking.

Chris
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Re: inflation 8 percent?

Post by hazlitt777 » Sat Mar 03, 2012 7:56 am

fishnskiguy wrote:
hazlitt777 wrote:Using this calculator for gold, plugging in gold for January 1, 1971 at $35 and then at todays price of $1712, I come up with an inflation rate of 10.728%

For silver January 1, 1971 through today the inflation rate comes out to 7.845%.
That is based on this website that states silvers average price in 1971 was $1.55 and today's spot price of $34.73 found at this site: http://www.usagold.com/cpmforum/
Since you used gold and silver to calculate inflation, why not calculate the price of a Megabyte of computer memory? You'll find severe deflation there and memory has more use than gold.

Just asking.

Chris
Didn't have the numbers. And how much of that does the average person consume. See if you can find the prices of a value meal at McDonalds. That would be interesting.

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Re: inflation 8 percent?

Post by hazlitt777 » Sat Mar 03, 2012 8:01 am

Noobvestor wrote:
hazlitt777 wrote:Anybody know what potatoes cost in 1971 and what they cost today? Or anything else for that matter. I will crunch the numbers for you and give you the average annual inflation rate for that particular good.
Baseball cards. (Sorry, that one was to make a point)

A pair of jeans. (I'm guessing it'll prove a similar point, but am genuinely curious and unsure)

A personal computer (OK, back to point-proving, sorry)

I wonder where a guy could find those numbers. Candy bars I understand were around .05 dollars back around 1964, so if the average price now is 1.79 then the inflation rate for those would be 7.71%

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Re: inflation 8 percent?

Post by Valuethinker » Sat Mar 03, 2012 8:26 am

[ edited see next ]
Last edited by Valuethinker on Sat Mar 03, 2012 8:35 am, edited 1 time in total.

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Re: inflation 8 percent?

Post by Valuethinker » Sat Mar 03, 2012 8:28 am

Apologies if I have missed something in this thread BUT

MIT now has the 'Billion Prices Index' which uses internet pricing data to calculate inflation. Clearly services are underrepresented in such an index, but it's not a bad guide to what consumers are paying (all that would have to be true is that the premium or discount of items on the web, to in stores, was constant-- we are measuring change here).

It shows that CPI and BPI are more or less tracking each other since July 2008.

http://bpp.mit.edu/usa/


I believe the vast amount of concern about CPI is basically motivated by external interests.

We could point to Argentina. There, government manipulation of CPI is indeed taking place. And economists who then went and published alternative indices were threatened with imprisonment under a public defamation law. The Economist magazine now uses external estimates of Argentine inflation, to prevent prosecution of internal sources within Argentina who offered to supply them with data.

But there is no evidence the US government is so corrupted. Nor that BLS is in cahoots with US Treasury, let alone Federal Reserve Bank, to understate inflation.

Ironically historically the conspiracy theory on this one came from the Boskin Commission in the early 90s was established to show that inflation was overstated because it did not take into account 'hedonic' changes (ie changes in quality) of what is consumed. Boskin was a conservative, Stanford Hoover Institute, economist. Hedonic changes were then incorporated into the CPI leading to concerns CPI was understated for poor people. Yet its methodologies are quite transparent. Most of us would not want to be treated by the medical system of 1972 for cancer, if we could be treated by the 2012 one.

The Boskin Commission One Decade Later
~(Powerpoint Presentation)
Presented at AEA Meetings
Boston, January 7, 2006


available at:

http://faculty-web.at.northwestern.edu/ ... hhome.html

The reality is the CPI is an 'average' created by statistical adjustments. Of course it is wrong but in the long run, it probably averages out about right. However most people here are considerably more affluent than your average American.

Yale Endowment uses a forecast of CPI +1%, reflecting the rise in costs of higher education activities in the long run. That's probably not a bad rule of thumb for an affluent retiree in fact.


Another factor: certain prices are more noticeable than others, because of frequent purchase. Computer prices have fallen dramatically (roughly 30-40% pa for the same spec of computer) but we buy gasoline every week, and computes only every few years (widescreen TVs anyone? 70-80% price drop I would reckon.).

And so when gasoline prices are rising, stories CPI is understated are legion (US household spends c. 4% of income on gasoline-- average household; WalMart ain't just whingeing when it says that higher gasoline prices hit its core customer spending).

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Re: inflation 8 percent?

Post by hazlitt777 » Sat Mar 03, 2012 11:02 pm

Noobvestor wrote:
hazlitt777 wrote:Anybody know what potatoes cost in 1971 and what they cost today? Or anything else for that matter. I will crunch the numbers for you and give you the average annual inflation rate for that particular good.
Baseball cards. (Sorry, that one was to make a point)

A pair of jeans. (I'm guessing it'll prove a similar point, but am genuinely curious and unsure)

A personal computer (OK, back to point-proving, sorry)
It is amazing what you can find on the internet! Here is an article on baseball card inflation! What a riot. It looks like the inflation for baseball cards has not been bad at all. According to the article, a pack of Topps cards cost $.40 in 1988 and cost $0.72 in 2009. Here is the article: http://randombaseballstuff.com/2010/07/ ... inflation/

Crunching the numbers, that is an annual inflation rate of 2.84%. Not bad.

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Re: inflation 8 percent?

Post by joe8d » Sat Mar 03, 2012 11:09 pm

I agree with article ( EPI Index ) cited by the OP. It's the " Beans, Beer and Bathroom Tissue" basic need type cost increases that one has to deal with on a daily basis and they have been rising substantially.
All the Best, | Joe

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Re: inflation 8 percent?

Post by Langkawi » Sat Mar 03, 2012 11:20 pm

clevername wrote:This year I believe there are 16 cookies per roll, as opposed to 17 last year. So that's what, 5.9% inflation?
Nope, it's 6.25%. Don't mix up the numerator and denominator.

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Re: inflation 8 percent?

Post by hazlitt777 » Sun Mar 04, 2012 12:35 am

Langkawi wrote:
clevername wrote:This year I believe there are 16 cookies per roll, as opposed to 17 last year. So that's what, 5.9% inflation?
Nope, it's 6.25%. Don't mix up the numerator and denominator.
Okay, I got 6.25% by dividing 17 by 16.... 1.0625. but how did clevername come up with 5.9% Explain the "mixing up the numerator with the denominator."

From a curious math junky.

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Re: inflation 8 percent?

Post by sscritic » Sun Mar 04, 2012 1:06 am

hazlitt777 wrote:
Langkawi wrote:
clevername wrote:This year I believe there are 16 cookies per roll, as opposed to 17 last year. So that's what, 5.9% inflation?
Nope, it's 6.25%. Don't mix up the numerator and denominator.
Okay, I got 6.25% by dividing 17 by 16.... 1.0625. but how did clevername come up with 5.9% Explain the "mixing up the numerator with the denominator."

From a curious math junky.
As a math junky, you should know that a 25% drop has to be followed by a 33% increase to get back even. In other words, a loss of 25 (out of 100) gets you down 75, but you need a gain of 25 (over 75) to get back to 100.

If 1/16 is 0.625, I wonder what 1/17 is? (A gain of 1 from 16 has to be followed by a loss of 1 from 17 to get back to 16).

In other words, is inflation one cookie out of 16 or 1 cookie out of 17? But wait, are the cookies inflating or is the price inflating? I leave that to the junky. :)

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Re: inflation 8 percent?

Post by Alex Frakt » Sun Mar 04, 2012 1:21 am

Locked following complaint. Thread is off-topic (no investing content).

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