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Guest Post: Inflationeering
Submitted by John Aziz of Azizonomics
Inflationeering
As BusinessWeek asked way back in 2005 before the bubble burst:
Wondering why inflation figures are so tame when real estate prices are soaring? There is a simple explanation: the Consumer Price Index factors in rising rents, not rising home prices.
Are we really getting a true reading on inflation when home price appreciation isn’t added into the mix? I think not.
I find the idea that house price appreciation and depreciation is not factored into inflation figures stunning. For most people it’s their single biggest lifetime expenditure, and for many today mortgage payments are their single biggest monthly expenditure. And rental prices (which are substituted for house prices) are a bad proxy. While house prices have fallen far from their mid-00s peak, rents have continued to increase:
Statisticians in Britain are looking to plug the hole. From the BBC:
A new measure of inflation is being proposed by the Office for National Statistics (ONS).
It wants to create a version of the Consumer Prices Index that includes housing costs, to be called CPIH.
The ONS wants to counteract criticisms that the main weakness of the CPI is that it does not reflect many costs of being a house owner, which make up 10% of people’s average spending.
While a welcome development (and probably even more welcome on the other side of the Atlantic) it doesn’t make up for the fact that the explosive price increases during the boom years were never included. And it isn’t just real estate — equities was another market that massively inflated without being counted in official inflation statistics. It would have been simple at the time to calculate the effective inflation rate with these components included. A wiser economist than Greenspan might have at least paid attention to such information and tightened monetary policy to prevent the incipient bubbles from overheating.
Of course, with inflation statistics calculated in the way they are (price changes to an overall basket of retail goods) there will always be a fight over what to include and what not to include.
A better approach is to include everything. Murray Rothbard defined inflation simply as any increase to the money supply; if the money is printed, it is inflation. This is a very interesting idea, because it can reflect things like bubble reinflation that are often obscured in official data. The Fed has tripled the monetary base since 2008, but this increase in the monetary base has been offset against the various effects of the 2008 crash, which triggered huge price falls in housing and equities which were only stanched when the money printing started.
Critics of the Austrian approach might say that it does not take into account how money is used, but simply how much money there is. An alternative approach which takes into account all economic activity is nominal GDP targeting, whereby monetary policy either tightens or loosens to achieve a nominal GDP target. If the nominal target is 1%, and GDP is growing at 7%, monetary policy will tighten toward 1% nominal growth. If GDP is growing at a negative rate (say -2%), then the Fed will print and buy assets ’til nominal GDP is growing at 1%. While most of the proponents of this approach today tend to be disgruntled Keynesians like Charles Evans who advocate a consistent growth rate of around 5% (which right now would of course necessitate the Fed to print big and buy a lot of assets, probably starting with equities and REITs), a lower nominal GDP target — of say, 1% or 2% — would certainly be a better approach to the Fed’s supposed price stability mandate than the frankly absurd and disturbing status quo of using CPI, which will always be bent and distorted by what is included or not included. And for the last 40 years monetary policy would have been much, much tighter even if the Fed had been pursuing the widely-cited 5% nominal GDP target.
I don’t think CPI can be fixed. It is just too easy to mismeasure inflation that way. Do statisticians really have the expertise to determine which inflations to count and which to ignore? No; I don’t think they do. Statisticians will try, and by including things like house prices it is certainly an improvement. But if we want to be realistic, we must use a measure that reflects the entire economy.
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Easy credit = sleezy spending. House prices were driven up around 2004 only because of lax lending standards, bringing future demand to the present. Well now its the future, and housing is done.
Extending more credit to a home buyer for an overpriced home to begin with, is clearly money printing, as the asset value goes up in "price" to keep pace with the flood of dollars.
Libertarians often use "alternative" figures in their arguments about economic issues. What they don't tell you however, is that these statistics such as those produced by people like 'John Williams' of 'Shadow Stats', DEVIATE HUGELY from official government figures. That's why their arguments seem reasonable, but the reality is that they just propaganda.
Nice one.
Keep up the good work MDB at your job in the Ministry of Truth in
the basement of 33 Liberty AKA the gold(empty) 'vaults'..
It's not just Libertarians who use alternative (real) figures, but nice try at setting up the false argument that only Libertarians are interested in having an honest discussion.
Some people get mad at the obvious troll; LTER gets mad at the reverse-implications of the obvious troll.
How about the honest discussion about the fact the Banks being bailed out just so all these suckers could hold onto and keep making payments on negative equity that will never be repaid. There's your black hole. now the slum lords are trying to squeeze it out of the people who got thrown out and anyone not involved through the rents. and you know if we had actual interest rates that would allow the smaller banks to be competitive against bigger ones this wouldn't be a problem..but then what would happen to housing prices of the rent seeking class (and I'm not talking about someone who owns 2-3 houses and rents we know who they are)? When you go negative on RE it's economic suicide to not write off the debt. shit if the banks are that negative let the people buy out their own debt for pennies. Nothing creates liquidity like the bottom of a crash.
The sun won't rise they say,
The rivers won't flow they say,
The first bank of the united states was closed and the second, third times the charm.
during the 1960's most people bought stocks at a pe ratio of 4, 5 was considered risky and 6 was you need your head examined. since then your talking heads have you buying stocks at 20 times/30 times even hundreds of times price earnings. now that is inflation. does anyone talk about the inflation of shear number of shares available to buy, as in, xyz company today anounced they will sell another 100 million shares to raise capital. now, combine those two alone and the inflation is off the charts. yep...prices are cheap at 200 times price earnings and 100's of billions of shares.
That's inflation of stupidity not price inflation. P/E is a ratio and P should inflate equally with E so the ratio stays constant. But nowadays only horrible stocks have PE multiples as low as 4-5 and it just shows that no one wants to own them.
My blood began to boil reading your blunderheaded tripe! Well done!
Well much like how people being unable to afford beef when they can switch to beans is not figured into CPI, the cost of being unable to live in a home when one can move into a cardboard box is left off of the CPI.
Oh and incidentally house price collapse is "deflation" but house price bubble blowing is not "inflation" it's "appreciation" and one can appreciate all the hard work printing the Fed does to provide false "wealth."
There is NO SUCH THING AS INFLATION, and not one single American is affected by it!
Don't believe me? Just ask anyone at CBS/NBC/ABC/CNN/MSNBC/Pacifica/NPR/WashPost/NYTimes.
Also, if you do not agree with this, YOU MUST BE A RASSISS!!
Racist and/or anti-Mormon.
Or howabout a NYC subway ride?
That's about 3%/year and much smaller, I would bet, than most food goods.
One (1) gallon of interior latex house paint...
$165.00
Holy fuck! Are you kidding me? Over $100 for interior latex?
Ask Sherwinn Williams. The cheap stuff is so thin, now, that it takes 3-5 times the amount of paint to cover a wall.
The government has not yet bothered to manipulate/subsidize the price of Titanium Dioxide, like it does crude oil....yet.
Paging Central Planners to the paint aisle...clean-up on the paint aisle.
here in calif they made them change to formula years ago. now the paint doesn't last but a few years...great for the paint suppliers. i just love our red curbs that stay red for 3 months than fade to a putrid pink...and that is if it sticks to the curb
Maybe for specialty Laura Ashley, but a recent purchase of Sherwin Williams latex enamel had it about $60/gallon. It was only 4-5 years ago I thought it was pricey at $30/gallon. Silly me.
Murray Rothbard defined inflation simply as any increase to the money supply; if the money is printed, it is inflation.
Fed Reserve board: We need to shut up this Rothbard cat
Unfortunately Rothbard died in 1995, just before the age of the Internet (he would have flourished in that domain). Here is one of his last predictions
Only half right as it turned out.
So this depression is over? LOL.
Give it time.
Or Option 3) ....
Only cover what is FDIC insured. In no way does this mean that you have to "pay off all the bank liabilities". Bond holders and shareholders are supposed to take the backside loss since they certainly enjoyed the upside gains.
What happened to good old big mac index?
That pink slime that was so prevalent gummed up the calculators?
... let me check the CME to see what pink slime is going for these days ...
Not so well, but Bill Black says green slime is on a tear:
http://truth-out.org/news/item/8530-green-slime-drives-our-financial-crises
That is more for measuring purchasing power parity then inflation, although I suppose you could monitor it over time as an inflation indicator.
We have coupons now for "fast food." how is couponing factored in to "deflation figures" again? Get real folks: prices paid is the only measure of prices. Housing sales must be excluded because the sampling error is off the charts. "Rent" is the only measure for the exact opposite reason. What is always fun of course is "when you can't define ownership." bankruptcy soon awaits when that happens for "what is the collateral the bank is lending against here?"
What a few few more variation of "Smoke and Mirrors" given the current situation?
BTW, I hear the chocolate ration is going up....
Yes from 30 grams to a whole 20 grams...
In a world where almost-bankrupt Italy is going to have to borrow $20 Billion at 7%, to loan to Spain at 3% for it's bailout, can that even be considered a joke, anymore?
That sounds like a sub-prime deal. What could go wrong?
I like my term, prestidigiflation, much better.
The Mandrake Mechanism
The Method by which the Federal Reserve creates money out of nothing; the concept of usury as the payment of interest on pretended loans; the true cause of the hidden tax called inflation; the way in which the Fed creates boom-bust cycles.
http://www.freerepublic.com/focus/f-news/888963/posts
I understand your point, but I still think that this concept is too simplistic. The idea that the only way to introduce new money into the system is by the rate which you can dig up gold out of the ground sounds just as quacky, in my opinion. It is not unreasonable that the monetary base should expand some as new people are introduced into the system (aka expanding population).
The ultimate question, in my mind, is what is the rightest/fairest mechanism for introducing new money into the system. Think of the problem as playing a never ending game of monopoly where new players constantly introduced while a few previous longtime players stop playing. The current fractional reserve model is now too corrupt and dispropotionately favors the current status quo to be of use anymore. Secondly, the fractional reserve model itself is fundamentally flawed in that it exaggerates boom/bust cycles. Personally, I think that eventually the problem will be resolved by creating regionly isolated economies, and by mathmatical models influenced by the regional birthrate/immigration state. To be effective, however, the system must be simple in concept...
I think it's the height of hubris and arrogance to think that a few technocrats can engineer a system that's completely fair and just for everyone in it and this line of thinking has already caused some of the greatest losses of life in history.
No kidding. I wonder which benefactors would get to write the terms of that program. Just us will always be served!
I don’t think CPI can be fixed.
There's no motivation to fix it. Entitlements are tied to it, especially Soc. Security. So the motivation is for the printed CPI to have a negative spread relative to actual inflation. It's slow death by continual dilution of the IV fluids.
TIPS my friend. They can adjust COLA but they don't want to pay people on a perceived "hedge" against their recklessness.
Rothbard is right. Technically Fisher's equation is correct;
MxV = PxT
M: Money Supply
V: Velocity of Money
P: General Price Level
T: Quantity of all Transactions
But it is a tad obvious as much as Double Entry bookkeeping is. There is no way to determine the Velocity of Money or the future transactions. That's why printing money is a dangerous venture and is inflationary at the end of the day.
With a fixed commodity backed medium of indirect exchange such as Gold, transactions can increase in tandem with the velocity and during the late 19th century under the Classical Gold Standard, this translated into deflation with a dramatic rise in living standards for everyone as productivity soared.
You think the gold standard caused late 19th century growth? The gold standard had been around a long time. The Industrial Revolution, huge American immigration, and all that land out west caused our late 19th century growth. The average American farmer was crushed by the gold standard as he saw his debts increase in value while his crops lost value.
Absolute garbage. How many people do you know are able to start a farm in these conditions? Farming has been brutalized by the Keynesian clowns.
Put down the Webster Tarpley crack pipe.
"You shall not crucify mankind upon a cross of gold..." -- W. J. Bryans
"Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation." -- B. Bernanke
At least the Silverites were true to the origin of our specie.
Ben Bernanke wrong again. Money printing does nothing if it doesn't make it out of the bank vault.
And how many times in the sad and sordid history of fiat currency has currency (NOT money) been created in recklessly large amounts only to indefinitely sit idle in bank vaults? This time could be different, but do you really want to bet the farm (and your life savings) on it?
The gold standard was around for the Industrial Revolution, it didn't seem to prevent it.
But the gold standard isn't the only ancient thing around back then, you have to include banksters in the mix.
Bankers shaftimg farmers is an ancient practice, there are records of it when accounts were kept in denarii. Farmers take out debt in the spring and by mid-summer they are broke. They have a big debt, and nothing to sell to cover it. By autumn, they maybe rich. Or maybe not. It's a very risky business, especially back in the day when the bankers could call the loan in July, or the railroads and bankers could collude by dropping the price offered at the railhead to force bankruptcy.
The purpose of the gold standard is to hamstring politicians. It does nothing to stop banksters. I suppose you get confused because they tend to be one and the same today.
So where is the inflation then? Indeed...where is even the RISK of inflation??!!!
Counting any money printed seems like a stupid measure of consumer inflation. Money sitting in a bank vault crushing the V in M x V has little bearing on the consumer. It's a fair argument between housing prices and renters equivalent so it's just important to know what is being calculated. The inflation hysterics always hollered about rising housing prices not being counted. I wonder how low inflation would be if CPI included housing prices these days. As it is, CPI is about 3% with increases to renters equivalent even though housing prices are going down. Where is the outcry about overstated inflation now?
Depends. If you take the numbers the bankers claim, housing prices haven't fallen that much.
On the Government's balance sheet! "don't worry...I'm good for it!"
All government statistics are BULLSHIT and then 25 year old WHIZ kids from IVY league schools that are taught BULLSHIT economics derive computer models based on BULLSHIT.....and we get idiots like Krugman saying we need to take on even more debt to solve a debt problem
Krugman argues for what is effectively a debt transfer. The public sector takes on more debt (at 2% and can repay the debt) and gets the money to people in the private sector who can't repay their debt otherwise.
So what does the...ahem..."economy" get in return?
Restoration of the middle class balance sheet and demand driven growth
Did you mix up your current batch of Harvard-supplied Keynesian Koolaid by the pitcher, or by the drumfull?
Gee, I don't want to pay my mortgage, but I want to keep my house. Maybe I can monetize some lawn clippings and old drywall that I tore out, sell that shit debt to the gov't on a 100 year repayment plan, and use the $$ to pay off my house? The gov't can show some more quality security on their balance sheet, and I'll have a bunch more money left over every month that I can spend on Chinese made shit at Wal-Mart.
Or, I could just get a job and pay my house payment.
Thanks for making it plain for all to see that you don't understand Krugman
Scale it up to the national level, and make the gov't the one looking for shit debt to buy, rather than me actively trying to sell said debt. Krugman in a nutshell.
We have destroyed our manufacturing base, and there can be no recovery without one. It doesn't matter how much debt the Fed monetizes, or how much $$ Bernanke throws at the problem. Period.
If you want to restore the manufacturing base the best thing to do is to devalue the dollar
WOW!
The short-sighted arrogance and literal insanity of such a prescription boggles the mind.
The best way to impoverish a population is ALSO to devalue the currency, as history has proven countless times already. But that apparently means nothing to raging sociopathic statists such as yourself.
(How does one give a given poster 1,000,000 down arrows?)
Devalue the dollar compared to what? The Yuan? Impossible, it's pegged to the dollar.
Compared to the things I need to purchase on a regular basis(fuel, groceries utilities, etc), the dollar already isn't worth shit. I don't see how making the dollar worth any less is going to help.
While a welcome development (and probably even more welcome on the other side of the Atlantic) it doesn’t make up for the fact that the explosive price increases during the boom years were never included. And it isn’t just real estate — equities was another market that massively inflated without being counted in official inflation statistics
***********
Let's add in the CDO's and SIV's etc. that sit on balance sheets "somewhere" because if we did-we would be able to see the hyper-inflation that happened-
Today with everything heading south-we would be able to see the deflation that is occurring-despite all the money printing-which is just too tiny to matter-
Marked to market-we have been in deflation since 08-but of course level 3 is obscured in fog-
I wonder how low inflation would be if CPI included housing prices these days.
It would have been negative for many years.
If house prices are measured in inflation, we'd probably be showing deflation because of the large drops (correct me if I am wrong, as I'm not claiming to be an expert). But when the prices for everything else goes up, is this really accurate? Example: I know I'm paying more for groceries than I was 5 years ago. True, stated inflation from CPI often misses real inflation, and we can certainly use a better formula. But we'd be better off ignoring the housing bubble and then crash when trying to figure out how much our dollar is worth.
Of course you are right and the government bureaucrats who calc CPI have it right (in regards to housing vs renters equivalent) but the inflation hysterics really, really, really, wanted to include housing on the way up. Not so much on the way down.
I appreciate the comment! And quite a bold statement for this forum, I might add.
I don't have too many friends here.
Your kneejerk defense of the sociopathic statist machinations of our financial and political elites may go some way towards explaining why.
Stimulati, the great majority of us want consistent, accurate information, which includes the cost of shelter, to go with the cost of food, clothing, medicine, entertainment, etc. when computing the CPI. Your "inflation hysterics" comment is a strawman. And I am one of your supporters on this site, agreeing with most of what you have to say.
So you're the one
"Of course you are right and the government bureaucrats who calc CPI have it right (in regards to housing vs renters equivalent) but the inflation hysterics really, really, really, wanted to include housing on the way up. Not so much on the way down."
That or we wanted the inflation rate accurately measured so the fed could enact sensible, prudent monetary policies that prevented the massive losses we sustained.
So you want housing included in the CPI calc and you believe the true measure of inflation is actually deflation in recent years. Fair enough. I'm in favor of consistency more than anything in this debate.
"Statisticians will try, and by including things like house prices it is certainly an improvement."
You are assuming that there is no bias in this process and government departments actually seek an accurate measure of consumer price inflation? Naive in the extreme. Officials have every incentive to distort reported inflation lower: to demonstrate monetary policy success and enable continued monetary easing (i.e. more inflation); to overreport real GDP which is deflated by underreported inflation; and, the biggest, to reduce payments that are indexed to inflation.
CPI is a bullshit number that is goalseeked to support the money establishment
How does an "inflation bias" help the establishment? Sure it helps the lazy and indigent...is that your definition of an establishment?
Well the establishment is in large part lazy and indigent, but for how it helps, just read the three ways I describe above.
Inflation rates, unemployment rates, housing numbers are all POLITICAL tools to be used to calm or excite the masses...get on board with this fact and you see the numbers for what they are.
Inflation at 1-5 percent. Ha. Buy gas and milk lately? Pay a health insurance premium lately? How is it that food isn't in the index but the new iGarbage having another G or whatever is supposed to mean inflation is going down?
The peasants cannot buy bread? Let them eat FOXCOMM!
I have and those prices are collapsing. Inventories are soaring as well. Interestly "our savior is paid parking."
The Republicans disqualified Romney, before this started! Tell me, does the RNC KNOW the rules? why invalidate the candidate?
RNC’s Rule 11 States that Mitt Romney Must Be Disqualified
RonPaulForums
http://weeklyintercept.blogspot.com/2012/05/rncs-rule-11-states-that-mitt-romney.html#.T7ABoGBeQaw.twitter
Wishful thinking. The establishment wants Robomney, they'll have Robomney.
Rules, expecially political rules, are not laws. Or, as Capt Jack Sparrow and Capt Barbados both testified - the Pirate Code is more of a guideline...
The disconnect between existing home prices and the "sticks, bricks and permits" cost basis is unreal. Can you consider the run up in home prices during the last decade as "inflation" and the melt down in home prices "deflation" if material (labor not so much) keeps rising? Honest question as I am in the bi-flationist camp. From what I can see what the Home Builders are losing ground on in material they are gaining in reduced labor cost and the lowering of insane impact fees at the local level.
I suggest that this "Inflationeering" article doesn't like the compelling reality of the present system. First chart here
"Real Dow & Real Homes & Personal Saving & Debt Burden"
http://homepage.mac.com/ttsmyf/RD_RJShomes_PSav.html
shows Real Homes and Real Dow price histories, using CPI-U. This 2006 NYT 'Real Homes' chart
http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2....
included the obvious
"Two gains in recent decades were followed by returns to levels consistent since the late 1950s.",
which I figure is very supportive of sound CPI-U structure!
These real price histories show bubbles VERY well, and thus are bubble-deterring. BUT the system makes more money from bubbles, so bubble-deterrence is little seen.
Speaking of debt monetization and The Fed, Jim Demint and Mike Lee have propsed an amendment to a farm bill asking to cap The Fed's balance sheet.
http://confoundedinterest.wordpress.com/2012/06/13/should-congress-place-a-cap-on-the-feds-balance-sheet-the-demintlee-senate-bill-s-3240/
Not quite "End the Fed," but its a start!
I'm writing a book on "how to go from living on a dollar a day to 10 cents." so far my data points are all looking good...
That is because you are using silver dimes.
Get 'em while you can!
OK, but how to include 'everything'? 'Everything' would have to be aggregated somehow...
CPI figures are problematic but so are the alternatives: - the money supply ignores changes in velocity & financial innovation (eg, credit expansion via the shadow banking sector recently) - nominal GDP targeting would just substitute the GDP deflator (+ 'real' GDP growth) for CPI.
Statistics adopted as policy targets are vulnerable to Goodhart's Law: http://en.wikipedia.org/wiki/Goodhart's_law So rule-based policy is unlikely to work forever (whether simple like a nominal GDP target or Taylor rule, or more complex like inflation targetting, which is currently fashionable but I suspect soon-to-be-blamed-for-all-the-world's-ills when the people responsible for the mess run out of other poeple to blame).
& can any non-rule-based institutional setup be immune to corruption if powerful enough interest groups want to suborn it? My suspicion is no. So we're doomed to ricochet on between episodes of appalling mismanagement, prolonged by crack-papering (aka can-kicking) & interrupted by 'regime changes' (aka can-kicking that pisses off more people but still fails to address the truly fundamental problem: human nature).
in san francisco, home prices are still expensive as hell; and rents have also gone up like crazy too; but not enough to justify buying a home.
http://www.americanthinker.com/blog/2012/03/whats_the_real_rate_of_infla...
March 2, 2012
What's The Real Rate of Inflation? :
8% over the last year, or much higher than the "official" reported rate
CBS News
That looks like a valuable tool for measuring inflation, but isn't without its flaws either.
Gasoline is more subject to supply and demand fluctuations than most other goods, and therefore influenced significantly by more variables than just the supply of money. If you take the peak oil theory seriously, that's even more true.
The EPI does seem to put an awful lot of weight into motor fuel costs. That's understandable as it's certainly a significant part of a family's "everyday expenses", but it makes the inflation number a lot more volatile than other measures as well.
That's the main complaint "TheArmoTrader" makes in this article:
The Everyday Price Index (“EPI”) Is Flawed
Inflation is impossible to calculate, because it's based on what the price was last year, rather than what the price should be without intervention (which is impossible to calculate post-intervention).
If, this year, my widget production company gains in efficiency such that I can drop the price of my widgets by half, but the inflation of the money supply doubles the price of my widgets, the official inflation numbers will read 0% while the actual inflation number is 100%.
Inflation steals much more than the "2%" you see in increased prices, it also steals all the gains in efficiency that you never see reflected in the price of goods. As such, any number is complete bullshit and should be disregarded as such.
exactly saro - houses might be 20% cheaper, and 10% cheaper to cool or heat, but up 2%. who knows what inflation is except a monetary phenomenon.? indications are possible from looking at the money supply and gold.
I might be the monority but I agree that only rent, and not housing should be included. Rent is soley driven by incomes whereas house prices are partially, (or mostly during the boom), based on financing tools unique to housing. Rent can only increase as much as people have money (income). Although I could also see the arguement that the leverage tools unique for housing drove house prices higher, and then eventually all prices in the economy as the new money (for cash out refi's to spend, or through inflating the number of homes sales, which has a strong positive impact on the economy as a whole).
Basically, no economic index is pure, just as the market isn't always right. (i don't want to go OT, but the last thing we need is the gov messing with the market, only further clouds the picture) I'm not sure if there is a perfect product to guage inflation. something widely avialable with a constant equalibium between supply an demand. but i guess that's why we like Econ...is all theory!
The Billion Prices Project @ MIT
http://bpp.mit.edu/
They have inflation between 4 and 5% for products. They do no include services. Or at least did not include services last time I looked.
I really like the way they were thinking outside the box when they came up with this.
I have to admit, though, that I'm a little puzzled at how they do it. They say that they use the prices off of web pages and items are always in flux, some items are no longer offered and new ones pop up all the time.
How are they going to compare items when sizes and features change? I suppose their programs might be able to take into account when a package suddenly has fewer ounces (or a bonus size), but how accurate is it to compare one vacuum cleaner to a new model, perhaps by a new manufacturer? It may have a bigger motor, or new and additional features. Consumer Reports articles are often out of date by the time the article is published. The model they tested has been replaced with something new. The new ones may be better in some area and worse in other areas.
Cars can even be trickier to compare.
Better yet, get the government completely out of the "managing the economy" business.
Let the government concentrate on making a fair and level playing field for all. That's more than enough of a challenge for them, and it would keep them from messing up the economy.
Any government interventions necessarily distort the market. It invites political wrangling, cronyism and is a magnet for wanna be oligarchs. It's also a major bureaucratic expense.
Don't worry about targeting money supply, interest rates, GDP, GNP, CPI or PPI or anything else.
We should have real money (ie. gold or silver) whose supply can't be artificially manipulated, and a banking system that doesn't create (or destroy) money out of thin air via fractional reserves.
That would virtually eliminate the boom bust cycles.