[arete]

I have just about given up on government reports. Everything is now adjusted, readjusted, factored, smoothed and averaged. The CPI and Personal Income reports are so distorted by fudge factors that they are now meaningless. "Even though you are paying more for an item, we have determined that you are paying less because the quality is better and since you are saving money we are going to add that money onto your income." Now that you know that you are employed even though you aren't, and that you are paying less for stuff and making more money, aren't you happy?

Richard W.

[raybbr]

I noticed your tagline. How does one man controlling all of our money translate into capitalism and free-market practice? It just hit me that Greenspan's position is antithetical to our economic system.

[LS]

Richard, you sarcastically note that we are paying more for some items that ARE better, but it's true.

Prices of goods change with technology. In 1925, a "new" Kodak camera cost . . . $5. By the 1950s, such a camera could cost from four to five times more---still much more than the inflation index would allow. Why? Technology had improved, making the camera both easier to use and film easier to process. But consumers paid for this ease.

Now today, we are back to cameras that cost only a few dollars, because further technology has made the cost of making a camera phenomenally cheap, thus making cameras disposable. The same is happening with phones. Phones used to cost a lot of money. Today, they are virtually free. Yet new phones with digital video capability are more expensive than "traditional" phones. Why? Because they have newer, better, technology.

I've used the example of homes many times. My mother's 1950s era house in AZ had only about 60% of the square footage my house does; did not have insulated windows; did not come with central heat/air; did not have a refridg. or a dishwasher or a range; did have a garage---but most did not. They had "car ports" (i.e., a covered driveway). I could go on and on, but the difference in the price of her house and my house is actually less after you adjust for inflation and the cost of all of the things that make up the house that were not there in 1960. Moreover, as part of my house, I had guarantees that it was not termite infested, not sitting on a radon dump, and all sorts of other envrionmental protections. Now, I might agree that the GOVERNMENT should not be in charge of requiring these guarantees, but you cannot deny that these are things that simply did not go along with most home sales in the 1950s.

Furthermore, I am guessing---could be wrong---that mortgage insurance was not commonplace in the 1960s. In my case, that drives up the "cost" of my home by 10%. So, yes, prices can go up, and yet at the same time things get relatively cheaper.