Posted on 02/12/2011 7:24:14 AM PST by FromLori
It’s time to look at all prices — including food and energy.
One of the biggest canards ever to be foisted on the American people is the notion that removing food and energy from the price indexes provides a clearer picture of inflation.
In reality, it’s just the opposite.
The so-called “core” rate of inflation (the headline price indexes minus food and energy) is grossly misleading. It was designed in the 1970s to take our eyes off what’s really happening to prices so the Federal Reserve could maintain an ultra-easy monetary policy.
(Excerpt) Read more at marketwatch.com ...
These same people would never be able to grasp the fact that removing the most volatile components of the CPI offers a better understanding of the underlying trends. That's why they do it.
I think it reduces the numbers of players. More predictable.
What, raising the margin requirement?
More predictable.
Or more volatile. Wider spreads.
Which makes people who deliberately ignore the numbers ignorant, or agenda-driven.
(By agenda-driven I don't mean simply profit-driven . . . there are folks who legitimately disagree about how the numbers are calculated, and are using others' ignorance about them to attack the specific one they dislike).
Yes, they include it, but they give them very little weight if in inflation figures.
Nonessential and luxury items should be removed from the CPI, then you would get a better measure of inflation for the majority of consumers.
They are weighted by average consumer expenditures.
Nonessential and luxury items should be removed from the CPI
The CPI should reflect the average consumers expenditures, not be restricted to the bare essentials.
I've yet to find any index that indicates that the value of the US dollar has changed this much in five years. Mostly because of the pressures put on CPI indexes to not demonstrate inflation or reduced purchasing power, as so many other things are tied to CPI indexes, such as benefits increases.
Wouldn't such non-essential products as I've listed here be a more true indication of the relative change in value for the US dollar than the CPIs that you are advocating?
John Williams (Shadowstats) loves these folks.
For a really depressing view of where we stand, take a look at this Freeper’s reply on real inflation in America over the first two years of Obama’s Presidency.
http://209.157.64.200/focus/news/2672501/replies?c=12
Food, energy, housing, transportation, clothing, health care, etc.
Those are the things that drive inflation in my opinion. Your mileage may vary.
I was at a seminar this week with a respected investment manager/statistician. He says the current rate of real inflation is about 2.5%.
Wow that’s an eye opener thanks!
They should be weighted by % of average consumer expenditures. If based on that, food, energy, transportation, housing,clothing, and health care would be the vast majority of the CPI.
The Fed does not count food or energy in inflation so it doesn’t matter if they publish it or not. If they used it Retired Veterans would have gotten a Cola increase, if they used it the inflater ben bernanke would have to rethink his devaluation of the dollar and he doesn’t want to do that he wants to prop up the stock market and the member banks.
That statement is false.
Has the BLS removed food or energy prices in its official measure of inflation?
http://www.bls.gov/cpi/cpiqa.htm#Question_1
No. The BLS publishes thousands of CPI indexes each month, including the headline All Items CPI for All Urban Consumers (CPI-U) and the CPI-U for All Items Less Food and Energy. The latter series, widely referred to as the “core” CPI, is closely watched by many economic analysts and policymakers under the belief that food and energy prices are volatile and are subject to price shocks that cannot be damped through monetary policy. However, all consumer goods and services, including food and energy, are represented in the headline CPI.
Most importantly, none of the prominent legislated uses of the CPI excludes food and energy. Social security and federal retirement benefits are updated each year for inflation by the All Items CPI for Urban Wage Earners and Clerical Workers (CPI-W). Individual income tax parameters and Treasury Inflation-Protected Securities (TIPS) returns are based on the All Items CPI-U.
They are as you described.
This information enabled BLS to construct the CPI market basket of goods and services and to assign each item in the market basket a weight, or importance, based on total family expenditures. The final stage in the sampling process is the selection of the specific detailed item to be priced in each outlet. This is done in the field, using a method called disaggregation. For example, BLS economic assistants may be directed to price "fresh whole milk." Through the disaggregation process, the economic assistant selects the specific kind of fresh whole milk that will be priced in the outlet over time. By this process, each kind of whole milk is assigned a probability of selection, or weight, based on the amount the store sells. If, for example, Vitamin D homogenized milk in half-gallon containers makes up 70 percent of the sales of whole milk, and the same milk in quart containers accounts for 10 percent of all whole-milk sales, then the half-gallon container will be 7 times as likely to be chosen as the quart container. After probabilities are assigned, one type, brand, and container size of milk is chosen by an objective selection process based on the theory of random sampling. The particular kind of milk that is selected by disaggregation will continue to be priced each month in the same outlet.
In sum, price changes are weighted by the importance of the item in the spending patterns of the appropriate population group. The combination of all these factors gives a weighted measurement of price change for all items in all outlets, in all areas priced for the CPI.
“January’s CPI data is due out next week. Owner’s equivalent rent, what a homeowner would expect to earn from renting his or her home, is a quarter of CPI and 40 percent of core CPI, which excludes food and energy prices.”
http://www.cnbc.com/id/41532903
is a quarter of CPI and 40 percent of core CPI, which excludes food and energy prices.”
The phrase "which excludes food and energy prices" is applied to "core CPI", not the whole sentence. Do you need someone to show you how to diagram sentence structure?
Core CPI is reported, but it is not the Primary CPI which is reported as the headline, or used for social security and federal retirement benefits.
Maybe you need someone to explain to you what the whole article is about. Like I said it doesn’t matter if they report them or publish if they don’t use them.
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