Economics Questions

Re: Inflation Food and Energy

Sieben — Tue, 13 Jul 2010 21:39:20 GMT

Congrats! Hope the mises.org forums helped..

Re: Inflation Food and Energy

ecublloyd — Tue, 13 Jul 2010 21:27:26 GMT

Check Mate. I believe Mars and I have cornered the guy.

Re: Inflation Food and Energy

Micah71381 — Mon, 12 Jul 2010 05:25:25 GMT

I am of the opinion that anyone who claims their argument is more valid because of their credentials and not because of their argument is not someone worth arguing with. In this case, they seem to think that because of their credentials their argument is more sound than yours. While the process of getting his credentials may have provided him with a certain amount of education on a given topic, the credentials themselves have no bearing on a discussion of this sort. He should be able to leverage that education and use it to provide a stronger / more sound argument than your own and win the argument because he is right (or at least because he debates better than you).

Re: Inflation Food and Energy

chloe732 — Mon, 12 Jul 2010 05:05:45 GMT

Economic Expert ("EE") - "Austrian economics is precisely what got us where we are, with 8,000,000 jobs gone to China, Mexico, et al and the banking industry having free reign to cause the second major financial crisis in 20 years, due directly to the 90's congressmen who put out a contract on America "

Ecublloyd, the above quote presents an extreme level of economic ignorance. Sieben's suggestion to somehow get "EE" to come here is a noble attempt to straighten him out, but I honestly don't think EE is receptive to reasoned arguments.

Re: Inflation Food and Energy

Sieben — Mon, 12 Jul 2010 02:34:33 GMT

K. I don't really like the looks of those fourms... seem clunky and hard to read. If he would be afraid to come here because he'd get swamped, we can set up a (private) vis a vis.

He probably won't, but I'm more than happy to continue giving suggestions and comments.

Re: Inflation Food and Energy

ecublloyd — Mon, 12 Jul 2010 02:26:30 GMT

He will not come here I can assure you. He claims the Austrians are what have caused our economic woes and know nothing about economics.

The Idiot has said in another forum , "Austrian economics is precisely what got us where we are, with 8,000,000 jobs gone to China, Mexico, et al and the banking industry having free reign to cause the second major financial crisis in 20 years, due directly to the 90's congressmen who put out a contract on America "

Here is the link to the discussion.

http://accboards.com/forums/showthread.php?tid=14185&page=2

Re: Inflation Food and Energy

Sieben — Mon, 12 Jul 2010 02:21:05 GMT

Oh, so, obviously don't let him get away with anecdotal evidence. Ask him to show you where rents have stayed steady nationwide. Also there are price controls in many cities! Hah.

Also, what is his theory about where the new money goes? Has he seen the L-shaped charts?

You can bring him here btw...

Re: Inflation Food and Energy

ecublloyd — Mon, 12 Jul 2010 02:18:30 GMT

Oh here is some more of his goodness. BTW the guy is not my friend I can't stand him.

"no problem with rents either. I own several rental propeties and rents haven't increased in ten years. decreased actually. makes sense since mortgage rates are half of what they were. I believe most of your kind thinks that less people should be owning and more renting. so there you go

gas has doubled. so you buy a car that gets twice the fuel mileage

is this making any sense?"

Re: Inflation Food and Energy

Sieben — Mon, 12 Jul 2010 02:17:21 GMT

So there's 2 ways to interpret the CPI. One is to to measure the nominal cost of living a lifestyle, the other is to measure that of a fixed basket of goods.

The former is always going to be slippery. Human beings might be able to subsist on a crude peanut paste and soylent green. The question is why doesn't the CPI simply pick the lowest quality of goods in the first place? Why do they get to compare steak in 2001 to hamburgers in 2002 to discount sour kraut in 2003? If they DO change the basket of goods, they have to do so consistently. E.g. "the best price per gram of protein" or something. They cna't keep jockeying between whatever arbitrary goods they want. In a year where hamburger meat increases in price, eggs may decrease. etc etc.

But if you let them change the CPI to reflect the most minimal standards of living, you're clearly impoverishing people as you knock down their standard of living. So the really rational thing to do is pick the latter option; measure a fixed basket of goods. That way you're comparing apples2apples and not pretending like prices aren't really rising.

Furthermore, the CPI reflects only goods that the average consumer buys; it has little relevance in complex higher order capital structures. To say that the fed is doing a good job because the CPI is low is missing the largest part of the picture. Moreover, it neglects the method by which new money enters the market. If nominal prices doubled overnight but everyone's nominal bank accounts and wallets did too, it wouldn't matter. But if money is injected into the system asymmetrically, through the central bank, it has a different impact on prices. You might not see it at the store for a couple of years.

Re: Inflation Food and Energy

chloe732 — Mon, 12 Jul 2010 02:14:53 GMT

@eculloyd,

Yes, after reading the responses from your interventionist friend, I think you realize that what I said is true. I was an interventionist too, I had to learn for myself. Argumentation is out of the question. The Socratic method may be the only approach, ask questions about what the person believes and why. Don't try to convince him otherwise. It's not worth the aggravation.

By the way, I am a CPA too. I look at the same government data he does, but I make the opposite conclusion about it!

Re: Inflation Food and Energy

ecublloyd — Mon, 12 Jul 2010 01:51:03 GMT

You were correct here is the response I got.

RE: More Free Trade Goodness: Wages Lower Today vs. 2000

personally I don't see any problem with the accounting for substitions. seems proper to me. and you may recall I'm a CPA so I have some insight into proper accounting. not sure what your background is but you seem to be all bent out of shape over what is basic cost accounting. if you are cost accounting for a manufacturingbusiness and you switch a input to lower cost, you use the cost of the new input. what's the problem?

(that ought to get a rational response)

More Free Trade Goodness: Wages Lower Today vs. 2000

I also don't see any problem with the quality accounting. if you buy a computer now that has twice the capability, if you paid the same price that you paid a year ago for one that did half the work, you got the new one for half the cost

I doubt that adds up for you either

Re: Inflation Food and Energy

chloe732 — Sun, 11 Jul 2010 20:23:26 GMT

ecublloyd,

The government website (BLS) clearly states that government reporting is accurate, reliable and meaningful, and that criticism from private sector economists is off base, wrong, and should be disregarded. Moreover, the government cites government experts (including the IMF) and academic economists (who obviously have no bias in favor of intervention) as sources. The BLS makes a very convincing case. Any criticism of their methodology has been successfully refuted by the BLS. The CPI accurately reflects "inflation", and the core CPI is used by policy makers to assess their next policy moves.

If I were you, I would concede the argument to your Keynesian friend. You have been beaten. The BLS has spoken. /sarcasm.

Honestly, I have learned not debate or argue with Keynesians / interventionists. It's a waste of time. Your time is better spent studying sound economics than trying to convince an interventionist that his ideas might be flawed.

Re: Inflation Food and Energy

Chris — Sun, 11 Jul 2010 20:17:43 GMT

The way the US government calculates inflation is such a joke it's utterly hilarious anybody can even take it seriously. Throughout the years as the value of the USD has fallen dramatically and the cost of living has gone up substantially they simply changed the way they calculate the CPI-U. If they calculated the CPI-U the same way that they did in 1990, for example, inflation would be at about 5% and if they used the 1980 method it would be at roughly 9% (courtesy shadowstats.com).

Let me quote David Einhorn from his Ira Sohn presentation on May 26, 2010:

" For example, under the current method, when the price of chocolate bars goes up, the government assumes people substitute peanut bars. So chocolate gets a lower weighting in the index when its price rises...For example, we all know that healthcare, which is certainly a consumer good is about one sixth of our economy and its cost is growing at a rapid pace. So what is the weighting of healthcare in the CPI? About 6%. The government doesn't count the part which the consumer doesn't pay out of pocket. So, if your employer has to pay more for your health insurance, it doesn't count, even though you have to accept lower wages. Similarly, Medicare cost increases don't count even though everyone has to pay higher taxes to fund them. Income and payroll taxes, which are part of the cost of living, are not counted in the CPI either. On the other hand, one fourth of the index is comrpised of something called owners'-equivalent-rent. This isn't something that anyone actually pays for. If you own your house, the govenrment assumes you are foregoing rental income. The amount you could receive from a hypothetical renter - the government implicitly assumes you rent it to yourself - is counted in the basket."

Also let me add that there is also some nonsense in the CPI where if the government arbitrarily determines that the "quality" of something goes up say 5%, and the price goes up 5%, then there is no actual price increase in the index. From March 2009 until May 2010 the cost of food and energy is up 19.7% I believe. If in light of all these facts the Keynesian still believes that there is no inflation he should go check himself in at the nearest mental institution.

Re: Inflation Food and Energy

Smiling Dave — Sun, 11 Jul 2010 20:05:14 GMT

http://www.safehaven.com/article/1458/using-the-consumer-price-index-to-rob-americans-blind

An oldie but goodie. Not sure if point 1 is still relevant, it may or may not be. But 2, 3 and 4 are.

Inflation Food and Energy

ecublloyd — Sun, 11 Jul 2010 19:29:11 GMT

Been debating a keynesian on his claims that The Fed has managed to Hammer out inflation. I know as well as everyone else that food costs have in fact gone up and used that in my arguement. Here is what the gubment says. Seems like a play on words to me.Thoughts?

Has the BLS removed food or energy prices in its official measure of inflation?

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."

http://www.bls.gov/cpi/cpiqa.htm#Question_1