Annual Inflation Hits 4%

There is the CPI... and then there is the MIT's billion price project which, as the name implies, tracks the prices of a billion products in real time. And according to the latter, annual inflation has hit a multi year high of about 4%. Perhaps someone can advise the talented Mr Evans that the 3% inflation he would so love to achieve... has in fact been eclipsed. At least, according to the real world. So take 4% inflation, add $2.5 trillion in "much more" easing, and what you get is only an economic Ph.D.'s guess. Alas, we are unqualified to have an opinion on the matter.

Comments

[Bread Bullets B...]

A gallon of 2% milk and a loaf(the loaves are much smaller now) of cheap ass wheat bread is $11.00. Hell, we haven't even made a sandwich yet. I'm sure they're working around the clock researching how to sell us less than a gallon of milk in a 1 gallon jug.

[snowball777]

After briefly perusing the Safeway website...

Wheat Bread $0.14/oz...Roman Meal 24oz $3.29

Whole Milk $0.03/fl oz Dairy Glen $3.69

Or ~$7 + tax

[faustian bargain]

plus geographic factor

[sbenard]

MIT spits in the face of government inflation fraud!

[Esso]

"Alas, we are unqualified to have an opinion on the matter."

I must be uniquely unqualified, because I'm seeing price inflation in practical application much higher than 4%, more like 20% on necessities.

I have to wonder about MIT's methodology. Who goes to the store and buys a billion things? How is it weighted? I go through a lot more Campbell's Cream of Mushroom Soup than TeeVees.

Oh wait, the DJIA is over 10,000. Nevermind. The economy has never been better. The economy has never been better...

[overmedicatedun...]

Mit computers like the ones that confirmed we would be burning alive in 2011 due to man made global warming ..hmm  climate models with billions of data points - price models with billions of data points.

don't they know it's trillions of data points that matter..ala bens big helo drop..

don't con us all with billions we need multi trillions to truly get close to the the true data.

[HistorySquared]

Letter to the Fed on Faulty Inflation Statistics

I sent in a letter to the Federal Reserve Board staff inquiring about the discrepancy in statistics. Incredibly, they responded within a couple hours.

Q. The CPI lists inflation at 1.8%, but MIT’s billion price project says inflation is 4.5%. What gives?

A.  Thank you for your recent correspondence expressing your concern about price inflation and the methodology used by government agencies to calculate it.

There are many indexes measuring inflation. The most widely used one, and the best known, is the Consumer Price Index (CPI), which is constructed by pricing a representative “market basket” of goods and services each month. The CPI divides the consumer market basket into seven major groups of goods and services.

The government’s methodology of calculating the CPI has been tested over time to provide a realistic picture of price changes. Further, the Bureau of Labor Statistics (BLS) keeps close track of changes in your area. The data are assembled from different surveys and programs conducted by the Bureau, and are refreshed with current information every time any of the source programs releases new statistics, which typically occurs 7-9 times per month. Before you dismiss the data used by federal agencies as incorrect, I suggest that you write to the Department of Labor for more information. The address is:

• Department of Labor
• Bureau of Labor Statistics
• 2 Massachusetts Avenue, N.E.
• Washington, D.C. 20212

Those working at the Federal Reserve are also people and consumers. Thus, equally concerned about price inflation and the sentiments expressed by people like you, who see particular prices increase faster than published aggregate statistics on inflation. Being aware of the dangers of inflation, we do not look simply at any single series of economic statistics but receive and evaluate a mass of data. I want to assure you that the Federal Reserve is determined to maintain its vigilance in combating inflation.

Again, thank you for writing.

Sincerely,

Board Staff

HS :

Wow, what a great response.  Since this is either in whole or part a form letter, evidently others are skeptical about government statistics and are sending letters. Second, they pass the buck to the Department of Labor on computations. The problem with this is that it’s the Federal Reserve that is using these computations in their policy.  They defend their use of heuristics to manipulate what should be a fairly straightforward calculation, such as that used in the MIT billion price project. Lastly, this is a sensitive subject for the Fed and they are aware that people are losing faith in these statistics and the Fed’s credibility is on the line.

[bid the soldier...]

.

[bid the soldier...]

I'm curious. Do I prefer a 1-11/2 % (2 1/2% vs 4%) greater increase in everything that gets an annual COLA adjustment, at the cost of a larger budget deficit, or do I like the smaller COLA increase and a little less red ink next year?

How about you?

[khakuda]

Let's see, who should we trust?  MIT and real world data or Charles Evans who looks like an escapee from a Florida trailer park....

[shacai]

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