Instrumentation

Joe Doakes from Como Park emails:

Social Security is going up 1.7% next year, a small cost-of-living increase because there’s no inflation. At least, not officially. Not since the government changed the way it calculates inflation.
Here’s a chart showing the inflation rate would be around 6% if we still used the old way of measuring it, from when Reagan and Clinton were in office. That feels more like the decrease in purchasing power I’ve experienced at the supermarket.

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joe doakes

I believe it was during the early Clinton era that “Discouraged workers” and other ultra long-term unemployed were dropped from the “U1” number – the top-line unemployment figure the media runs with.

Which is the only way the unemployment rate is below 6% nationwide, and at 4.5% in Minnesota.

The moral of the story? All statistics are just as good as the formula the statistician used to generate them.

9 thoughts on “Instrumentation

  1. What are the changes made since then? I must confess to being rather perplexed when I heard that gasoline is not part of the CPI, as it’s one of the major drivers of my budget.

  2. So Senate Candidate McFadden is getting beat up by the Alliance for a Bloated Minnesota because he would support privatizing Social Security. My pension would be worth much more if it had been privatized when I was 22 years old. now 35 years later I a facing a system that is running out of money. Meanwhile my own investments look relatively good, they looked a lot better 12 years ago, but still decent despite this pitiful Obama recovery. Please privatize, they love that system in Chile. Go McFadden!

  3. Federal Reserve 40-year mantra: “When profits rise it’s growth, when wages rise it’s inflation.”

  4. I follow a pile of smart financial guys that have gotten everything right since Greenspan started goosing the crap out of the economy in 1996. ALL OF THEM, every single one, says inflation is poorly measured. The simple story is they want to cheat on Social Security etc. and it gives them an excuse to goose our debt based economy with easy money (LOW INFLATION? —>PRINT MORE! IT BEATS PRUDENT RISK TAKING, SAVING MONE, AND HARD WORK) which generates the debt that keeps it afloat to get past the next election. The inflation cheapens the debt as you go, too.

    Pretty soon we’ll be deferring to the central bank of Mars.

  5. “Federal Reserve 40-year mantra: “When profits rise it’s growth, when wages rise it’s inflation.”

    Good god Emery! You are way smarter than me. Why on earth do you come here all of the time and defend statist central planning?

  6. This is must read from King Banaian http://bit.ly/1tyFkyE

    “Let’s face it, if government deficit spending and money printing could produce economic growth, we may as well forget about working harder, getting more skills, or any of the other tedious things that actually generate growth. We could just print and spend. But that’s not the way the world works. So when demand was down in 2008 and 2009 we “borrowed” demand from 2010 and 2011. And when 2010 and 2011 were disappointing we “borrowed” demand from 2012 and 2013. Now we are “borrowing” demand from the second half of this decade. With this as a strategy, you never get to long-term sustainable growth.”

  7. Also, don’t conflate “under measured” inflation with saying it’s trending up a lot. I’m not saying that.

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