[Borodog]

IMO, the best measure of price inflation is not a gigantic "basket of goods" that is heavily subject to manipulation, but rather the prices of homogeneous (or mostly so) goods that have many suppliers and many consumers and are not subject to great innovations in quality, like milk, eggs, white bread, newspapers, etc.

Including things like cell phones and consumer electronics in a price inflation index is ridiculously dumb. Costs fall so fast while quality increases so fast that you are artificially depressing the inflation index by conflating in a productivity component.

The idea that you need to substitute out goods because consumers would make substitutions in the face of rising prices (a Greenspan gimmick) is clearly designed to artificially lower measured inflation. Sure, a housewife might start buying less steak and more hamburger because the price of steak is rising, but the reason she made that choice is BECAUSE THE PRICE OF STEAK IS RISING.

The removal of so-called "volatile" goods from the index, like food and energy, is a similar tactic. Rarely do I see a newsreport anymore that actually reports CPI; they all seem to report "core inflation", i.e. with food and energy removed. By removing goods that are "volitile" in the short run, you also remove their LONG TERM contribution, which is large. Have any of you people gone to the grocery store lately? A gallon of milk is about $6 where I live. Don't [censored] try to tell me inflation is at 2%!

Lastly, I will say that these sorts of aggregate measures of the economy are always problematic, because they presume to do things that simply cannot be done (like add apples to oranges), and they are completely subject to manipulation in their definition and implementation by government bureaucrats. For instance government spending is included in GDP. In fact monetary inflation is pretty much the main driver of GDP growth, at least in the US. The same is true of unemployment numbers. Print a lot of money and hire people to dig ditches, for example, or build pyramids or WPA projects or bombs and tanks and dead little brown foreign people. GDP goes up, unemployment goes down, the economy is booming, right? But the capital stock is being consumed, productive capacity is being diverted from its most highly valued uses to lower valued uses, and people's real standards of living must eventually suffer drastically to pay for it all. But the numbers looked great!

That's the recession. The bill has come to the table and it's time to pay the tab. The moral of the story is that these economy wide econometric numbers really AREN'T that useful. The only number that is useful, imo, really IS the money supply. That's the one that drives the rest. It's the one that allows you to see the man behind the curtain and what he is doing to you and the economy.