Re: CPI Composition
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if the income is tied to cpi (like bieng long an inflation linked bond), then your purchasing power will not change. you may have to adjust your consumption in reality (i.e. buy chicken instead of beef), but your overall consumption (absent utility) will not change.
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? I don't get it.
but look up hedonics. if food goes up 10% then the food section of cpi doesn't go up 10%, they adjust it to say 3%, because they figure people will buy cheaper food.
But if you are forced to buy cheaper food, aren't you lowering your standard of living? if you have to take the bus because a car is too expensive, aren't you lowering your standard of living? if a new tv is 250% more expensive but they only count it as 75% more expensive because it is better, then you're still not going to have enough money to buy a new tv if your old one breaks, etc.
My main point is that these things are cumulitive given that inflation is never negative, so that after 20 years someone on a fixed income cpi adjusted deal may have .5 to .75 the standard of living of when they started. I mean, you can only downgrade every year so much
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