Peter Schiff on Inflation: 'The CPI Is A Total Fraud'
CNBC | January 10, 2013
http://youtu.be/HZkBpf1zD9M
Does anyone have any good sources about how the way CPI is calculated has changed over the years and what it would be right now if we used the older formulas?
Good video. I would watch this similar video as well peter explains things:
http://www.youtube.com/watch?v=pwI3Nya5L9g
Yeah, that's the one he talks about in the interview.Originally Posted by gwax23
This might help: http://www.shadowstats.com/alternate...flation-charts
And this: http://www.shadowstats.com/article/n...on-measurement
Last edited by Occam's Banana; 01-10-2013 at 08:23 PM.
The Bastiat Collection ˇ FREE PDF ˇ FREE EPUB ˇ PAPER Frédéric Bastiat (1801-1850)
- "When law and morality are in contradiction to each other, the citizen finds himself in the cruel alternative of either losing his moral sense, or of losing his respect for the law."
-- The Law (p. 54)- "Government is that great fiction, through which everybody endeavors to live at the expense of everybody else."
-- Government (p. 99)- "[W]ar is always begun in the interest of the few, and at the expense of the many."
-- Economic Sophisms - Second Series (p. 312)- "There are two principles that can never be reconciled - Liberty and Constraint."
-- Harmonies of Political Economy - Book One (p. 447)ˇ tu ne cede malis sed contra audentior ito ˇ
Thanks, exactly what I was looking for.
The CPI basket of goods gets updated at least every ten years- based on surveys as a part of the US Census- to reflect the different ways people spend their money over time. We don't buy the same things we did 20 year ago or at the same rations so they get different weighting. For example, people used to spend about one third of their income on food- now it is down to about eleven percent. Back then, changes in food prices then accounted for 30% of changes in the CPI. If we kept the same weighting today then the effect of changes of food prices on the overall inflation rate would be over-stated so now it counts as 11% of the final number. Shadowstats uses the basket of goods which was set in 1980 so they don't capture changes in buying habits since then.
More info on the CPI: http://www.bls.gov/cpi/cpifaq.htm
Last edited by Zippyjuan; 01-11-2013 at 05:58 PM.
I don't claim to know everything about the CPI, but if Peter is right about healthcare costs only being 1% of the CPI, that right there shows how big of a joke it is. Establishing the "buying habits" of America seems pretty subjective and when government is in charge, you know they will tilt it in their favor and as Peter has showed, it appears they have.
More detailed info on how they try to calculate the healthcare portion of the CPI: http://www.bls.gov/cpi/cpifact4.htm
It does not say what weight healthcare actually gets.
I did find a PDF which says in 1993 the medical expenses share of CPI was 5.4%. I think it is 6.3% today but haven't been able to confirm that yet. http://www.nber.org/chapters/c7630.pdf (see table 5.1).
In brief:
General Information on CPI Medical Care
The CPI measures inflation at the retail level, and reflects the average price change over time for a constant quality, constant quantity market basket of goods and services. In most cases it approximates what households spend out-of-pocket on goods and services used for day-to-day living. Therefore, medical care indexes are limited to items with an out-of-pocket expenditure, although in the case of medical care the term out-of-pocket includes any health insurance premium amounts that are deducted from employee paychecks.
The Consumer Expenditure Survey (CE) collects annual consumer spending for each CPI category; this provides the basis for the item category weights. BLS replaces these weights every two years with ones based on more recent Consumer Expenditure Surveys. To obtain the category weights, BLS combines expenditures from the CE's for two years and updates them for price change to the December before their first use in the CPI. For example, the expenditures reported on CE's for 2007 and 2008 updated to December 2009 became the basic weights for use in the CPI from January 2010 through December 2011. Every month, to compute that month's index, BLS updates the base weights for price change from the previous month. Every year, the BLS publishes relative importances for the previous December; these are base weights updated for price change and expressed as a percentage of total weight. Weights for components with greater than average price change will increase more than those with smaller than average price change. As a result, the change in a component's relative importance from one December to the next reflects its price change relative to that of all other categories as well as the biennial weight updates.
Government CPI numbers are not the result of any kind of "objective" attempt at measuring price inflation.
They are the end result of all the attempts by various special interests to "cook the books" in their favor. (And those special interests include the government itself.)
For example, AARP lobbies vigorously & vehemently against any CPI calculation changes that would result in reducing cost of living adjustments for Social Security.
AARP does not do this because they have a deep and abiding passion for accurate inflation metrics. They do it because there is something in it for them.
Likewise for "official" government numbers for unemployment, the deficit, etc., etc. Not to put a fine point on it, but they are all bull$#@!.
They do not reflect reality. They reflect the amalgamated desires of those groups with enough "juice" to rig the game in their favor.
The Bastiat Collection ˇ FREE PDF ˇ FREE EPUB ˇ PAPER
- "When law and morality are in contradiction to each other, the citizen finds himself in the cruel alternative of either losing his moral sense, or of losing his respect for the law."
-- The Law (p. 54)- "Government is that great fiction, through which everybody endeavors to live at the expense of everybody else."
-- Government (p. 99)- "[W]ar is always begun in the interest of the few, and at the expense of the many."
-- Economic Sophisms - Second Series (p. 312)- "There are two principles that can never be reconciled - Liberty and Constraint."
-- Harmonies of Political Economy - Book One (p. 447)ˇ tu ne cede malis sed contra audentior ito ˇ
Is the CPI necessary???
"When goods do not cross borders, soldiers will." Frederic Bastiat
Peace.
1960
Median Family Income $5,600
Purchasing Power of $5,600 income in 2012 dollars = $139,924.73
Median Male Income $4,100
Purchasing Power of $4,100 income in 2012 dollars = $102,444.89
Median Female Income $1,300
Purchasing Power of $1,300 income in 2012 dollars = $32,482.52
Full Time Employed Male $5,400
Purchasing Power of $5,400 income in 2012 dollars = $134,927.42
1960 Minimum Wage was $1.00
1960 Quarters contain 0.1808 oz of Silver
(4) Quarters x 0.1808 oz = 0.7232 oz of Silver
0.7232 oz of Silver x $34.55 (current Silver price) = $24.98
1960 Minimum Wage was equal to $24.98 into today's money.
What this all means is unless you're making $24.98/hour you're living far below the standards of living your parents experienced in 1960. You must gross $134,927.42 in today's money just to be on par with an average wage earner in that era. Of course the average salary for most people in 2012 is around $41,673, so this is an astounding loss of about 70% of purchasing power for the average American worker.
What are you using to try to calculate the "current purchasing power?" The calculators I tried use the CPI http://data.bls.gov/cgi-bin/cpicalc....960&year2=2012
and they say that the "Median Family Income $5600" in 1960 converts to $43,555.32. $4100 median male income converts to $31,888.72 which is significantly below the claimed $140,000.
I suspect he's using gold prices to quantify purchasing power rather than the CPI
I would not consider that a fair vaulation then. In 1960 the value of gold was set by the government (we were still on metal standards back then)- it wasn't really free to float like it does today.
But anyhow- in 1960 gold was about $35 an ounce. Adjusted for inflation that comes to only $272 an ounce today.
why do I always get the feeling Zippy is paid to defend government numbers... almost as if he was one of the people who uses them to justify economic intervention.
inflation? sure, we will just look at prices.. but just the prices of the things that don't really move much. food, energy.. not important. because they will show where most of the funny money is bidding up the price. the growth in money supply being the inflation, the bid up of prices being a symptom.
the fed would have you believe the increase in money supply is not inflation.
isn't that right zippy?
can you please tell us what is the proper way of thinking on this as handed down by the fed?
i'm sure you know it well.
Last edited by torchbearer; 01-14-2013 at 01:43 PM.
rewritten history with armies of their crooks - invented memories, did burn all the books... Mark Knopfler
Adjusted for inflation using...???
Kind of begging/ignoring the original question, don't you think?
Actually silver. We were paid in coins containing a substantial portion of silver and dollar bills were linked by a quasi-gold/silver standard.
You're using the wrong measurement. Use cost of goods per hour worked. It takes far fewer hours today than in previous decades to buy food, a car, a refrigerator, clothing, a clothes dryer, a stove, a tv, and many other things -things which actually affect your standard of living. A coin does not affect your standard of living. It's what you can buy with that coin that's important.
These kinds of trends do not indicate a falling standard of living (despite government's best attempt):
Last edited by enoch150; 01-14-2013 at 10:33 PM.
It should be quite obvious now that the government purposefully understates inflation (through methods like changing how they calculate CPI) in order to reduce the current and future costs of Social Security, which is indexed to inflation. In Spain, they are trying to vote to cap annual increases in their social security system. The people marched in the streets. This way, the government doesn't have to admit that people's pensions aren't keeping up with inflation because the government can't afford it. They simply understate inflation. Certainly there are other perception benefits that come along with it, as well.
There are two main CPI numbers- "core" inflation" does leave out food and energy prices because they can vary so much seasonally. But the main CPI does include both of them- they are not ignored.
There are many uses for the word "inflation". Yes, it can mean to increase (inflate) the supply of money. But if you read an economic report say in a newspaper and it was talking about inflation- what would you assume they were discussing? 99% of the people reading the article would assume they meant prices changing. The supply of money or changes in the level of prices (the most common usage)? Inflation can also refer to things like people's egos or a balloon as well. This is arguing semantics and not the issue. Increasing the supply of money CAN lead to rising prices for goods and services but not necessariliy. If the money supply grows at the same or a slower rate than the increase in the number of goods and services, prices don't necessarily have to rise.the fed would have you believe the increase in money supply is not inflation.
isn't that right zippy?
Example. We have two widgets for sale. There are two dollars in our economy so we can sell the widgets at $1 each. Now let's double our output. Four widgets. Now double the money supply to four. One widget will still be sold for one dollar. In this example, we had monetary inflation (doubling the money supply) but no price inflation.
I have asked for in the past but never received any good suggestions as to how people might suggest improving the CPI or what they would replace it with. It is not perfect I would certainly agree but still in my opinion does a fairly good job of trying to see what is happening to prices over time.
I think this is an excellent measure- time worked to aquire things. Trading your labor for goods and services. What do you REALLY have to do to aquire them? Do you have to work more or less? Money is the unit of exchange- not any measure of real value but of relative values which change over time. It takes into account that not only do prices change over time but so do wages which gets ignored if somebody wants to put the emphasis on price inflation. "Fifty years ago you could have had one of those for a quarter." Fifty years ago it might have taken you a couple of hours to earn a quarter but today it may take 15 minutes (ramdomly chosen numbers for illustration purposes only).
Now we're back to Marx's labor theory of value, and the ever-subjective 'standard of living', as if that's any kind of valid metric for price inflation due to monetary inflation (just one of the adverse effects). If a currency isn't deliberately and continually debased the so-called 'standard of living' should increase--not remain the same, even as ALL prices fall nominally, including labor. What you labor for yesterday should INCREASE in purchasing power. It would only remain relatively constant if the size of the population and its economy was not growing or shrinking, but had reached some naturally optimal size and achieved and maintained equilibrium.
What a great way for the counterfeiters of first resort to take cover (and even vain credit) for things like education and technological efficiency, including transportation, or artificially low distribution costs due to petrodollar aggression, or population inflation/deflation. Let's just ignore the fact that CPI domestic spending and consumption includes, but does not account for, domestic consumption of foreign production, and foreign labor. Perish the thought that we should weight any of the MASSIVE distortions caused by monetary inflation that is exported abroad, and the adverse effects that the petrodollar alone has inflicted on other economies, and how the resulting trade imbalances have distorted our so-called "standard of living" and "purchasing power". Get enough populations roped into our monetary inflation treadmill, and all you're looking at is a Hierarchy of Serfdom.
I'd like a comparison on healthy organic food, not the processes crap that is making many sick and fat.
Pfizer Macht Frei!
Openly Straight Man, Danke, Awarded Top Rated Influencer. Community Standards Enforcer.
Quiz: Test Your "Income" Tax IQ!
Short Income Tax Video
The Income Tax Is An Excise, And Excise Taxes Are Privilege Taxes
The Federalist Papers, No. 15:
Except as to the rule of appointment, the United States have an indefinite discretion to make requisitions for men and money; but they have no authority to raise either by regulations extending to the individual citizens of America.
Time worked to aquire things. Whats being ignored here is that time worked fifty years ago to aquire things now. Someone saved that quarter and attempted to earn interest fifty years ago in hopes that s/he could use that quarter today in retirement, but that quarter, that representation of time worked plus interest is no longer worth enough. Oh well, good thing s/he has Socialist Security to rely on, Oh wait.....s/he is screwed.
Last edited by Henry Rogue; 01-18-2013 at 09:55 PM.
"When goods do not cross borders, soldiers will." Frederic Bastiat
Peace.
Yep.
Pfizer Macht Frei!
Openly Straight Man, Danke, Awarded Top Rated Influencer. Community Standards Enforcer.
Quiz: Test Your "Income" Tax IQ!
Short Income Tax Video
The Income Tax Is An Excise, And Excise Taxes Are Privilege Taxes
The Federalist Papers, No. 15:
Except as to the rule of appointment, the United States have an indefinite discretion to make requisitions for men and money; but they have no authority to raise either by regulations extending to the individual citizens of America.
Nail on the head. For the more socialist/collectivist/relativist/monetarist-minded, who honestly and earnestly think that they are "valuing" labor, it's all ends up a question of "What have you done for us lately?" And the fact that labor is ALWAYS THE LAST to anticipate and adjust for price inflation, and therefore the MOST screwed of all over time -- not even a factor in many blithering minds.
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