Posted on 05/23/2021 3:01:45 PM PDT by blam
Apples-to-apples, consumer price inflation nowadays is running close to the high inflation readings of the late 1970s. That should be a red flag for policymakers as monetary decisions are focused on actual outcomes, not forecasted. But reported inflation statistics do not show the 1970s inflation-style inflation because they no longer include actual house prices.
The old consumer price index included house prices in measuring the owner’s housing cost, whereas the present-day price index base owners’ housing cost on an arbitrary, non-market rent measure. The only way to make a price series strictly comparable over time is to use the same measurement process.
In April, the median price for existing homes increased 20.3% in the past twelve months, a new record and far above the 1970s high-reading of 17.4%. More importantly, the increase in existing house prices is ten times greater than the 2% increase in non-market rents in the consumer price index.
Owners rent index accounts for nearly one-quarter of the overall consumer price index and a full one-third of the widely followed core index. Inserting actual house prices in place of the non-market rents would add roughly five percentage points to 4.2% headline and 3% core inflation readings. The last time the US consumer price inflation ran that high was during the 1978 to 1982 time frame.
Just because reported inflation statistics no longer include actual house prices does not mean a rise in house price is not a sign of increased inflation and higher inflation expectations. If an increase in house prices is not inflation, then what is it?
One would think the current generation of policymakers would include house prices in their policy framework since it is an inflation-related outcome directly linked to monetary policy.
Inflation cycles don’t end well, and the odds of a bad outcome should be measurably higher when policymakers are unaware that monetary policy is fueling an unsustainable price cycle.
Transitory Or Not: Three Factors Will Determine If Skyrocketing Prices Are Here To Stay
Go to the grocery store to see the current state of inflation. It’s running at about 10% / year.
Good links—to quote from one of the comments on the second link:
“Buckle up”.
This is gonna get crazy.
The rulers will first deny, deny, deny.
Then they will panic and try to clamp on price controls.
If they really panic they will move to rationing.
As long as Harris/Biden are in the WH, I want the economy to crash.
In the Carter years the economy didn’t exactly crash—it just made doing everyday things a real pain in the ^%$.
Young people who did not live through those years have no idea how wacky that can get...
According to the article rent prices aren’t driven by market forces. That’s a pretty stupid claim.
Peanut Boy’s national malaise.
Not yet, but it will. Biden/Yellen’s 21% tax isn’t going to fly, and had it done so, it would have been the thing that kept Biden from turning into Carter 2.0.
No, we are nowhere NEAR to the Carter years... yet.
You will know beyond a shadow of a doubt when we get there.
Cue 70s disco music.
Well hold my Billy Beer!
I am not so much worried about Carter level inflation which is pretty much inevitable at this point. I am worried about Venezuela level inflation which is increasingly likely.
As long as they bring back the Cosworth Vega.
Hi.
I can see “WIN” badges from my front porch.
The rhyming of history is amazing.
5.56mm
Things were in pretty good shape four months ago.
I bought a brand new 1973 Corvette for around $6,100 (with a good discount). A few months later I paid about $6,300 for a 1975 Cosworth Vega. Chevy really dropped the ball on the Cosworth it had untapped potential. Only had 110 hp stock, but was capable of over 200 hp with Weber carbs. Eventually bought a second one, but never had time or resources to do anything with them. At that time our home mortgage interest rate was 9.5% and we felt lucky!
> Go to the grocery store to see the current state of inflation. It’s running at about 10% / year. <
My local grocery sells high-quality packaged cheese. 12 slices for $3. Well, it’s still $3. But now you’re only getting 11 slices.
That’s about a 9% price increase. But, hey. It’s still $3 per package. So no worries, right?
Jimmy Carter Biden.
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