sppartenburg ron paul forum underway

[Luxoris]

"The depecriating currency is surely a sign of inflation because the demand for the currency is not at par with what the fed dictates themselves as creditworth for."

No, it is only a sign of the demand for the currency relative to other currencies for trade. That may be indirectly inflationary to the extent that it makes foreign goods more expensive, but it also improves the trade balance because it makes our goods cheaper for other countries to buy.

Any links to support that the "old" method actually produces 10%?

[Zygote]

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No, it is only a sign of the demand for the currency relative to other currencies for trade. That may be indirectly inflationary to the extent that it makes foreign goods more expensive, but it also improves the trade balance because it makes our goods cheaper for other countries to buy.


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the depreciating currency is not directly inflationary and is actually an effect of inflation. i never said otherwise.

the idea of helping the trade balance is also decieving. Americans can at any time reduce their prices in half and sell lets say twice as much, but why dont they? because they need to work twice as hard

in the long run a depreciating currency has the similar and more unfair effects. Only a minority benefit who spend the money they earn quickly and/or are lucky to have contracts with fixed expenses. Almost all others lose out.

[Borodog]

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Why do you think it is that they recently, after 5 decades, decided to change the way they calculate inflation? And is it supposed to be merely coincidence that the new way produces a number 80% lower than the old method, yet is magically numerically close to the old numbers produced by the old method, giving the appearance to the casual observer of continuity in the statistic?

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I don't know, you tell me. You are asserting that the change was made to mask "real" inflation. Your only back up for this is an a priori assumption that governments always act in an underhanded way. Of course, when you start with this assumption then interpret a government action from that point of view, then (surprise!) you conclude that they're acting in an underhanded way. I am asking if you've actually critically analyzed the old CPI methodology, the new CPI methodology, and the government's explanations for the change. If you have, I'd love to hear your explanation on how the change in methodology is a sham and that you have a better way to measure "real" inflation. Do you have facts and analysis or just assertions?

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http://www.mises.org/story/2302

[Luxoris]

Several problems with the link:

The quoted inflation rate for the first 7 months is either incorrect or carefully chosen from the various inflation statistics to present a worst case scenario. The index used for most purposes is the All Urban index, which showed a 2.6% increase, not 3.4%.

He then equates "volatile" with "rising faster". What distinguishes more from less volatile prices is that they fluctuate up and down rather than show pretty much monotonic increases.

He then inserts the typical Austrian claptrap of government conspiracies to "prove" an intent to deceive. Guess what, if you assume something, it cant be used to prove anything.

As mosdef surmised before the link was posted, its a lot of assertions and suppositions.

[mosdef]

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Why do you think it is that they recently, after 5 decades, decided to change the way they calculate inflation? And is it supposed to be merely coincidence that the new way produces a number 80% lower than the old method, yet is magically numerically close to the old numbers produced by the old method, giving the appearance to the casual observer of continuity in the statistic?

[/ QUOTE ]

I don't know, you tell me. You are asserting that the change was made to mask "real" inflation. Your only back up for this is an a priori assumption that governments always act in an underhanded way. Of course, when you start with this assumption then interpret a government action from that point of view, then (surprise!) you conclude that they're acting in an underhanded way. I am asking if you've actually critically analyzed the old CPI methodology, the new CPI methodology, and the government's explanations for the change. If you have, I'd love to hear your explanation on how the change in methodology is a sham and that you have a better way to measure "real" inflation. Do you have facts and analysis or just assertions?

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http://www.mises.org/story/2302

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Thanks for the link Borodog.

Although I find mises.org to be a great resource, this article still suffers from the basic problem of assuming in advance that governments are bad and then concluding that governments are bad. Consider the tone of the article:

"My point is that given the incentives facing government officials, we should be reluctant to put any credence in government statistics."

"The choice of basket items is arbitrary. There is no way to determine which basket accurately measures inflation. Since government officials get to pick the basket, it's safe to assume that they would choose a basket that furthers their interests."

While the article does a good job of pointing out the risk associated with believing government statistics, it does not make a case that any other measure of inflation is better, or that the lower "core" inflation is worse than the prior estimate. It just assumes that it is worse because, as we all know, governments are bad and so whatever they report is wrong. Hardly convincing.

[Zygote]

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Why do you think it is that they recently, after 5 decades, decided to change the way they calculate inflation? And is it supposed to be merely coincidence that the new way produces a number 80% lower than the old method, yet is magically numerically close to the old numbers produced by the old method, giving the appearance to the casual observer of continuity in the statistic?

[/ QUOTE ]

I don't know, you tell me. You are asserting that the change was made to mask "real" inflation. Your only back up for this is an a priori assumption that governments always act in an underhanded way. Of course, when you start with this assumption then interpret a government action from that point of view, then (surprise!) you conclude that they're acting in an underhanded way. I am asking if you've actually critically analyzed the old CPI methodology, the new CPI methodology, and the government's explanations for the change. If you have, I'd love to hear your explanation on how the change in methodology is a sham and that you have a better way to measure "real" inflation. Do you have facts and analysis or just assertions?

[/ QUOTE ]

http://www.mises.org/story/2302

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Thanks for the link Borodog.

Although I find mises.org to be a great resource, this article still suffers from the basic problem of assuming in advance that governments are bad and then concluding that governments are bad. Consider the tone of the article:

"My point is that given the incentives facing government officials, we should be reluctant to put any credence in government statistics."

"The choice of basket items is arbitrary. There is no way to determine which basket accurately measures inflation. Since government officials get to pick the basket, it's safe to assume that they would choose a basket that furthers their interests."

While the article does a good job of pointing out the risk associated with believing government statistics, it does not make a case that any other measure of inflation is better, or that the lower "core" inflation is worse than the prior estimate. It just assumes that it is worse because, as we all know, governments are bad and so whatever they report is wrong. Hardly convincing.

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let me ask you this... what benefit do you obtain, if any, from taking away your volatile hands when measuring your poker stats?

want to know a better way to deal with inflation than the current strategy?

anything that allows the full control of the money supply to be in the hands of the public demand. Under those circumstances, there can never be a larger supply than money demanded and, therefore, no inflation.

[Borodog]

Last time I checked, everyone I know uses food and energy. And for the majority of people, and most especially the poor, food and energy are a significant fraction of their daily budget. It is arguably the most important portion of the budget, since without food and energy, you pretty much die of starvation or exposure in short order.

Meanwhile the inflation rate on food and energy is much higher than the inflation rate amongst other consumer goods (especially for food now that this ethanol madness is ramping up; they are forcing us to BURN OUT FOOD IN OUT CARS). It is patently ridiculous to exclude food and energy from the calculation; the ONLY conceivable reason you would do so is to hide the true cost of inflation.

[mosdef]

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Last time I checked, everyone I know uses food and energy. And for the majority of people, and most especially the poor, food and energy are a significant fraction of their daily budget. It is arguably the most important portion of the budget, since without food and energy, you pretty much die of starvation or exposure in short order.

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This is a good point, and supports your argument.

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Meanwhile the inflation rate on food and energy is much higher than the inflation rate amongst other consumer goods (especially for food now that this ethanol madness is ramping up; they are forcing us to BURN OUT FOOD IN OUT CARS). It is patently ridiculous to exclude food and energy from the calculation; the ONLY conceivable reason you would do so is to hide the true cost of inflation.

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Not quite. If swings in the prices of a few components of an index are large enough to dwarf the changes in the rest of the index, then including them can make it look (for exampe) like prices are going up when everything except energy is actually going down. Note that there have been times when core inflation exceeded CPI, so you can't say that the purpose is to reduce inflation estimates just because that's what the methodology does in the current circumstances.

Anyway, I agree with you that leaving things out is pretty artifical and ultimately does more harm than good. My bigger problem was that you threw out criticism of the method on the basis that it was a government method and must therefore be bad. This is an ever-growing trend on the forum due to the thunderous AC applause for all anti-government posts with no demand for supporting arguments.

[Luxoris]

CPI, not core inflation, is used as the cost of living indicator for Government programs, taxation, etc. Core inflation is used for analysis and policy because it dampens volatility without obscuring trends in non-volatile goods as using a long term average would. Nothing is being "ignored", they have different purposes.