Inflation is not a partisan issue, it's a class issue.
BLS "Hedonic-quality adjustments" are a comforting lie.
“Is there any good reason to believe that inflation
hits low-income households especially hard?”
- Paul Krugman, December 11, 2021
“The consumer’s not healthy,
especially at the lower income scale.”
Maybe stagnant wages wouldn’t matter as much if our Fed wasn’t so busy always debasing the currency.
CBS Poll analysis: If the economy is recovering, why don't people rate it better?
Maybe the economy is not “recovering” for most. Maybe “the data” is misleading.
Oh, the official explanation for the disconnect between data and sentiment is “the reason lies not so much with the pandemic as it does with partisans.”
Republicans are too hard on Biden, or something, but inflation doesn’t care whether you have a D or an R after your name.
Some angry comments on the CBS piece:
Maybe inflation - as reported by the BLS CPI model - is grossly understated compared to the real-world cost of living? Ever consider that?
Below are actual comments from registered Wall Street Journal readers back in 2015, when official CPI was sub-1%, and even NEGATIVE some months.
As I've shown many times, CPI is an understated nonsense model, but the point here is just look at the anger back then. Today, it's much worse.
Meanwhile, we get this crap:
There's a profound and peculiar national disconnect on the economy alright, but it's on the part of unaccountable, inbred, multimillionaire elitists like Paul Krugman.
My hypothesis is that much of the "the data" that people like Paul Krugman and Justin Wolfers study, and cite as fact - data which is often intentionally manipulated with subjective adjustments - does NOT accurately reflect the way most Americans perceive their economic condition to be.
Hedonic-quality adjustments are a joke.
The way hedonic adjustments work is that the BLS says that something more expensive is actually less expensive, even though it’s more expensive, because it’s “better.”
This is how economists actually think, and why CPI is way below the actual "cost of living." For kicks, print this out and take it with you next time you go men's shirt shopping.
Here's a fun BLS "hedonic quality adjustment" lesson on how $1,250 televisions are cheaper than $250 televisions.
So, a $1,250 (admittedly much nicer) television is 7.1% CHEAPER than the old $250 TV, "after the quality adjustment is applied."
The BLS is saying that something that costs 5-times what an older model cost is actually 7.1% CHEAPER, and that's in the CPI.
For 25 years - according to the math geeks at the BLS - car prices in the CPI did not go up.
That is a huge lie, in plain sight, and no one ever mentions it.
Incomes are never hedonically-adjusted higher.
It doesn’t matter if your new car can do brain surgery if you can’t afford it.
No wonder Joe Six Pack is angry, while Paul Krugman thinks everything is great.
You: How much is this thing I need?
Cashier: It's $20.
You: But last year it was $15?
Cashier: Yes, but now it's cheaper because it's better.
You: But it's not cheaper. It's 33% more. It's $20.
Cashier: No, it's 50% better and $20.
You: What?
Cashier: Do you have an econ PhD sir?
You: Can I just buy the old one for $15?
Cashier: No.
”I think the data that we all think of, that’s…accurate?
I think it’s crafted. I think the government does nothing unintentionally.”
Wolfers: Do you see?
Yes.
Wolfers: The disinflation. Do you see?
Yes.
Wolfers: Average grocery prices are roughly unchanged over the last six months. Do you see?
Oh, my God.
Democratic Party Platforms 1972-1984
“There must be an end to inflation and the ever-increasing cost of living. This is of vital concern to the laborer, the housewife, the farmer and the small businessman, as well as the millions of Americans dependent upon their weekly or monthly income for sustenance. It wrecks the retirement plans and lives of our elderly who must survive on pensions or savings gauged by the standards of another day.” (1972)
“The economic and social costs of inflation have been enormous. Inflation is a tax that erodes the income of our workers, distorts business investment decisions, and redistributes income in favor of the rich, Americans on fixed incomes, such as the elderly, are often pushed into poverty by this cruel tax.” (1976)
“inflation still erodes the standard of living of every American.” (1980)
In the 1984 Democratic Party Platform they mention "inflation" 25 times.
People are trying to make inflation a partisan issue. It's not.
If anything, inflation - i.e., the cost of living spiking ever higher - is a class issue.
Those with lots of assets - especially leveraged assets - should do quite well. Everyone else will not.
Real median household income fell by 2.3 percent last year, according to the Census Department, the third year in a row of declining real incomes.
"All of their [Fed] minutes are fabricated to create a message, so it is all Kabuki theater."
- Mike Taylor
"Over the last 30-something years, the Fed has become like the rest of the economic organizations in Washington DC, where they're given an answer and they justify it."
- Former Fed economist and bond trader Alan Boyce, 2016, on Realvision
Jonathan Smoke, Chief Economist of Cox Automotive
“About half can only afford about a $400 a month [car] payment, and it is really difficult to produce a $400 payment in either the new or the used market today”
Two and a half years ago…
"...we want to see inflation move up to 2%. And we mean that on a sustainable basis. We don't mean just tap the base once. But then we'd also like to see it on track to move moderately above 2% for some time."
- Jay Powell, April 2021
It’s now been 2 1/2 years they’ve been well above their made-up “2% target.”
“The centrals banks desire to control markets is insatiable.”
“We have this really disconnected view of what’s really happening out there. It’s not good. There is too much inventory, but we have structural issues. Everything that’s being built is for people who don’t exist, meaning we don’t have enough Americans who can afford what’s out there on the road, in what I’ve seen...”
Highly recommended. Melody also writes on Substack. Here’s her latest.
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