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To: Toddsterpatriot
If that's the case, then why does Mr. Conrad state, "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." [emphasis added]

Is he double-counting? I honestly don't know.

554 posted on 02/16/2005 12:24:42 PM PST by 1rudeboy
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To: 1rudeboy
Is he double-counting? I honestly don't know.

If each of his indexes contained the same info, the average would be correct. The problem is using housing prices. I fought over this with that goof Paul Ross. If housing prices increased by 12% but only 1% of the population bought a house then 1% x 12% = 0.12% increase in the basket of consumer goods used to calculate CPI. More people buy gasoline, so an increase hits a larger % of the population, but the total spent per year is much smaller compared to a house purchase.

CPI-U is supposed to be based on what a "typical" urban dweller consumes in a year. That's where Paul Ross was wrong. He had a source that showed people buy a new house every 12 years. I "estimated" that that meant only 8% buy a house in a given year. So, 92% who don't buy are typical, 8% who do are atypical. Conrad treats the housing increase as hitting 100% of the population. Just a small error on his part. LOL!!

555 posted on 02/16/2005 12:35:01 PM PST by Toddsterpatriot (Protectionism is economic ignorance!)
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