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0 pointslinkregister8y ago0 comments

That is an interesting anecdote, delivered with lots of confidence. However, despite the just-so manner you delivered it, I don't see a compelling argument. For starters, the CPI isn't calculated in an opaque manner; it's explained here: https://www.bls.gov/news.release/pdf/cpi.pdf.

The costs that are increasing for most Americans are housing, healthcare, and education costs. Yet over 40% of American households own their primary residence. Then you can factor in the lack of rent growth away from urban centers, and you see that this metric isn't as pronounced when it comes to the median American. The costs of many goods are falling. Commodity prices are low despite the fact there is a healthy demand for them. It's strange that you're calling out toilet paper. Its price has fallen [1].

The directors of the Federal Reserve, if they had some secret interest in tricking everyone, wouldn't be flatly admitting they consider why inflation isn't hitting targets a "mystery." [2]

The unemployment numbers being released should be viewed with skepticism, and there are plenty of good articles explaining why the main unemployment rate should be viewed in context with the other unemployment metrics, such as U6. (The idea is that there are many people who want to work who aren't counted in the main unemployment statistic.)

Furthermore, certain localities are experiencing extremely high price increases in housing, such as the Bay Area. Anyone in such a locality is going to feel the squeeze. The problem is that these statistics represent the nation, not individual localities.

1. https://www.bls.gov/news.release/pdf/cpi.pdf, page 12; table 2: Household paper products.

2. https://www.bloomberg.com/view/articles/2017-09-26/yellen-kn...

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StanislavPetrov8y ago

Did you even read CPI information from the link you posted? Literally every page is riddled with opaque reference to arbitrarily defined values and modifiers inserted by the FED.

>In calculating the index, price changes for the various items in each location are aggregated using weights, which represent their importance in the spending of the appropriate population group.

What do you think "aggregated using weights" means? How does the FED determine what those weights are? Who decides how how much these "weights" should factor in deciding the proper "spending of the appropriate population group"? Where's a description of their formula? There is none - its made up.

> The CP I-U and CP I-W are considered final when released, but the C-CP I-U is issued in preliminary form and subject to three subsequent quarterly revisions.

In other words, they revise their ridiculous assertions months after the headlines to look less ridiculous in retrospect.

>Seasonally adjusted data are computed using seasonal factors derived by the X-13ARIMA-SEATS seasonal adjustment method. These factors are updated each February, and the new factors are used to revise the previous 5 years of seasonally adjusted data.

More arbitrary "seasonal adjustments". How would the IRS feel if you reported your taxes but you said that you reserved the right to adjust them up to 5 years later?

>Seasonally adjusted data, including the U.S. city average all items index levels, are subject to revision for up to 5 years after their original release.

Which they change up to 5 years later!

That's just from one page of their nonsense! Read the footnotes beneath each chart of "data" to see a slew of arbitrary adjustments that are made for every "calculation".

How many invented variables do you think it takes to invalidate their formulas? 1? 2? or the dozens they have?

YZF8y ago

So what about this data: http://www.thebillionpricesproject.com/datasets/

I think to support the argument that CPI is cooked you need to show that you have some reasonable sampling of prices of some reasonable basket across the entire country. You can search online for rent prices, you can see real estate prices, you can see product/produce prices... You can find out what % of the population rents vs. owns and factor that in. Let's see that data that shows us that CPI is really wrong and not some anecdotes. I think there's enough data in the public domain to be able to form a pretty good estimate. Also we need to see that over a long period since some prices go through big cycles, real-estate can crash 40% and then go up, so we may want to reduce the impact of that...

StanislavPetrov8y ago

A variety of organizations have already done this. One of the better known is Shadowstats.

http://www.shadowstats.com/

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moe38y ago

A mother who has cancer tells the kids what they need to hear. You tell the kids too much, and they grow up thinking there is no point to life. Which is not right or good for them. If you were in her position or the FED's you would do the same.

linkregisterOP8y ago

This is a bizarre conclusion you invented whole-cloth from your tortured parable. It's not even how cancer is disclosed to children! A simple scroll through social media will show images of children "beating cancer" or missing a relative who died of cancer.

The idea that the Federal Reserve lies to the populace to keep them productive is absurd. Every recession has been addressed (eventually) by the Federal Reserve. There have been catastrophic blunders, such as the tightening of credit after the sustained bank failures in 1929-1933, and the vastly too-late raising of interest rates at the height of the housing bubble in 2007.

However, the directors were rightly castigated for their failures; Alan Greenspan is still mocked for failing to address reality. The Fed is blamed as a major cause of the severity of the Great Depression. Yellen et. al. have been criticized for their caution (financial news calls it "dovish" behavior). The Federal Reserve have every motivation to tell it like it is, lest they end up like Alan Greenspan.

candiodari8y ago

> The directors of the Federal Reserve, if they had some secret interest in tricking everyone, wouldn't be flatly admitting they consider why inflation isn't hitting targets a "mystery." [2]

So you're saying these people with all the humility required to announce they have solved economic crises for at least a lifetime [1] wouldn't lie or deceive themselves ?

I wouldn't make that point. Seems unlikely that hubris like that would be limited in any way.

Central banks have a long history of ... well, either outright lying or incredible self-deception, including the federal reserve under this chair. [2] No sane person at this point believes the FED's economic predictions.

To make the difference I would put forth this point: finding analyses that defend the point that the US government (and indeed almost all governments with pension obligations) would be bankrupt in 2 year with a 4% funds rate and 6% inflation is easy. In other words, the FEDs predictions, if implemented, would blow up governments, make them bankrupt. Not just the US government (in fact the US government can probably last longer than the EU or Eastern European governments). I agree with that assessment. Maybe they can make it 3-4 years, but certainly no more.

So in order to believe the FED's predictions and stated reasoning are honest (same with ECB) you have to believe that somehow it escaped the attention of these finance industry 4, 5 and 6 decade veterans that this would cause a financial disaster worldwide. I find it hard to believe that these people are this stupid. I also do not believe the FED would destroy the government it's part of.

So I present to you: they are lying. They are lying about their reasoning, they are lying about their models, they are lying about their predictions. I understand why they're lying, but they're still lying.

They are lying about the CPI too. European inflation measures are similar, as they directly influence pension increases, and "surprisingly" they're very low.

[1] https://www.reuters.com/article/us-usa-fed-yellen/feds-yelle...

[2] https://mises.org/sites/default/files/styles/full_width/publ...

http://www.investmentoffice.com/show_image.php?file_id=2151

http://ei.marketwatch.com//Multimedia/2016/09/28/Photos/NS/M...

linkregisterOP8y ago

Your argument about the so-called certainty of the Fed Chair and the other directors is disingenuous and not supported by the links you provided.

Link #1: She talks back this assertion in the very next sentence! She says she is probably exaggerating, but she has good reason to think there won't be another major crash of that magnitude, provided there are [list of conditions]. Furthermore, she at no point takes credit for this achievement during the interview.

Link #2: Yellen gets asked why she doesn't raise rates all the time. Far from unwarranted certainty, she admits that she expected the economy to to better, doesn't know why it hasn't, and has therefore revised predictions of when the rates will be raised! Any consumer of financial news over the past 4 years should be familiar with this. The fact you omit this is highly disingenuous.

The very last link summarizes my position pretty well. The experts, who admit that things can be a "mystery," change their minds and models based off of reality. Is that not humble enough for you?

I am curious why you continue to vigorously assert a view that you have failed to demonstrate. What is your personal connection to this, and why do you pursue it?

candiodari8y ago

> Link #2: Yellen gets asked why she doesn't raise rates all the time. Far from unwarranted certainty, she admits that she expected the economy to to better, doesn't know why it hasn't, and has therefore revised predictions of when the rates will be raised! Any consumer of financial news over the past 4 years should be familiar with this. The fact you omit this is highly disingenuous.

I agree with you, to some extent. Yellen is actually one of the more humble central bankers. Not much competition there, of course. But I would still classify what she says, and doubly so what she does, as unwarranted certainty.

The net effect of what she does, incidentally, is an unprecedented redistribution of wealth in the US economy (and elsewhere) from the poor to the rich. The fact that she does this things like this while being unsure about the consequences ...

And of course, she is like all other central bankers. As you say, she doubts whether what she's doing is the right thing. So what does this person do when she doubts the effects of her unprecedented policies ? Why, more of them, of course. She errs on the side of making the rich richer yet again and sabotaging the poor even more ...

Let's just be glad this woman is not a pilot.

My personal connection to this is that, like all central bankers, Yellen is effectively spending (sorry "loaning") my own money back to me, enriching a lot of people in the process. Needless to say, I feel less than ecstatic. And please don't make the central banker's argument (that it's to "save me from an economic crisis that didn't happen", ie. a counterfactual argument. It's about as realistic and useful as the quintessential example of such an argument "why didn't they just kill Hitler/Stalin/...")

And, yes, I understand why she can't be really humble.

StanislavPetrov8y ago

>So I present to you: they are lying. They are lying about their reasoning, they are lying about their models, they are lying about their predictions. I understand why they're lying, but they're still lying.

Some are no doubt lying, but never underestimate one's ability to delude themself.

taw558y ago

What if they are lying to spur market optimism? It could become self reinforcing.

j / k navigate · click thread line to collapse

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StanislavPetrov8y ago

Did you even read CPI information from the link you posted? Literally every page is riddled with opaque reference to arbitrarily defined values and modifiers inserted by the FED.

>In calculating the index, price changes for the various items in each location are aggregated using weights, which represent their importance in the spending of the appropriate population group.

> The CP I-U and CP I-W are considered final when released, but the C-CP I-U is issued in preliminary form and subject to three subsequent quarterly revisions.

In other words, they revise their ridiculous assertions months after the headlines to look less ridiculous in retrospect.

More arbitrary "seasonal adjustments". How would the IRS feel if you reported your taxes but you said that you reserved the right to adjust them up to 5 years later?

>Seasonally adjusted data, including the U.S. city average all items index levels, are subject to revision for up to 5 years after their original release.

Which they change up to 5 years later!

That's just from one page of their nonsense! Read the footnotes beneath each chart of "data" to see a slew of arbitrary adjustments that are made for every "calculation".

How many invented variables do you think it takes to invalidate their formulas? 1? 2? or the dozens they have?

YZF8y ago

So what about this data: http://www.thebillionpricesproject.com/datasets/

StanislavPetrov8y ago

A variety of organizations have already done this. One of the better known is Shadowstats.

http://www.shadowstats.com/

1 more reply

moe38y ago

linkregisterOP8y ago

candiodari8y ago

> The directors of the Federal Reserve, if they had some secret interest in tricking everyone, wouldn't be flatly admitting they consider why inflation isn't hitting targets a "mystery." [2]

So you're saying these people with all the humility required to announce they have solved economic crises for at least a lifetime [1] wouldn't lie or deceive themselves ?

I wouldn't make that point. Seems unlikely that hubris like that would be limited in any way.

They are lying about the CPI too. European inflation measures are similar, as they directly influence pension increases, and "surprisingly" they're very low.

[1] https://www.reuters.com/article/us-usa-fed-yellen/feds-yelle...

[2] https://mises.org/sites/default/files/styles/full_width/publ...

http://www.investmentoffice.com/show_image.php?file_id=2151

http://ei.marketwatch.com//Multimedia/2016/09/28/Photos/NS/M...

linkregisterOP8y ago

Your argument about the so-called certainty of the Fed Chair and the other directors is disingenuous and not supported by the links you provided.

The very last link summarizes my position pretty well. The experts, who admit that things can be a "mystery," change their minds and models based off of reality. Is that not humble enough for you?

I am curious why you continue to vigorously assert a view that you have failed to demonstrate. What is your personal connection to this, and why do you pursue it?

candiodari8y ago

Let's just be glad this woman is not a pilot.

And, yes, I understand why she can't be really humble.

StanislavPetrov8y ago

Some are no doubt lying, but never underestimate one's ability to delude themself.

taw558y ago

What if they are lying to spur market optimism? It could become self reinforcing.

j / k navigate · click thread line to collapse