Subtract 4% (real inflation) and you get negative GDP for the past several years.
BUMP
And your source for the 4% underestimation of inflation is this guy? Let's look further.
We intuitively know the government "cooks the books" when we see them using a deflation rate of 1.3% to calculate Q3 GDP for 2004 at 4%. 1.3% seems like a significant under-estimate, given that prices in sectors such as housing are up 12%.
Since I suspect the government has designs on making the economy look better than it is by using low inflation numbers, I decided to create my own inflation indicator, an average of three common indexes: CPI U, PPI All Commodities, and the Housing price from OFEHO. This covers the main things we spend money on – housing, commodity-based goods like gasoline, and other consumer goods.
OK, he includes housing prices in his average because it covers the main things we spend money on. Great. I bought my house 12 years ago. How does a 12% increase in the last year hurt me? How does the fact that my house more than doubled in value in the last 12 years hurt me?
I guess he would be correct if everyone bought a new house every year. Since we don't, he's not. Nice try though.
Mr. Conrad holds a Bachelor of Engineering degree from Yale and an MBA from Harvard.
Maybe the real inflation is the grade inflation that allowed this guy to get into and graduate from Harvard.