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Old Oct 16, 2013, 01:56 PM   #76
jnpy!$4g3cwk
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Originally Posted by Dmunjal View Post
I completely agree. According to real inflation data, not the CPI or the inflation deflator used to calculate real GDP growth, we have been in a recession (negative real GDP growth) since 2001. Maybe that means the current policy of deficit financing and QE is not working?

Here's some data on what inflation really is:

http://www.shadowstats.com/alternate...flation-charts

In fact, here's an interesting point. If we calculated CPI in the 1970s like we do now, there would have been NO inflation in the 1970s! Of course, we know we had quite a bit of inflation back then.
I agree with you that the CPI understates inflation. But, the shadowstats measure overstates it. In fact, I would say a good estimate would be to average the CPI and the SGS. Either way, not a good idea to store greenbacks in your mattress.
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Old Oct 16, 2013, 02:14 PM   #77
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... In fact, here's an interesting point. If we calculated CPI in the 1970s like we do now, there would have been NO inflation in the 1970s! Of course, we know we had quite a bit of inflation back then.
Yes, inflation was a problem in the '70s, so much so that it triggered one of the biggest government public relations blunders in American history.

If only there'd been sufficient numbers of patriots willing to sign up as "WIN" freedom fighters in the War on Inflation, to defeat "public enemy number one", things might have turned out differently...

Unfortunately, as the Washington Post article, Ford's WIN Buttons Remembered, recalls, Ford's WIN program did little to solve the problem -- "Inflation was not brought under control until Paul Volcker, selected as chairman of the Federal Reserve by Carter and re-nominated by Reagan, pushed interest rates up to the highest levels since the Civil War."

But then, the '70s weren't typical times: "The country was being hit by successive oil price shocks which sent inflation soaring and economic growth tumbling. Economists used the word 'stagflation' to describe the twin evils of stagnant job growth and surging inflation." Basically, the '70s marks the point in time where the wheels fell off the Great American Dream Machine, after it careened off the road and into a ditch... Since then, it hasn't been the same well-oiled machine it once was.

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Old Oct 16, 2013, 02:24 PM   #78
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Originally Posted by jnpy!$4g3cwk View Post
I agree with you that the CPI understates inflation. But, the shadowstats measure overstates it. In fact, I would say a good estimate would be to average the CPI and the SGS. Either way, not a good idea to store greenbacks in your mattress.
No it doesn't. If anything it way overstates it due to problems in how it measures value of goods meaning the value of goods goes way up, as do prices, and that is counted as inflation. New technological innovations, new bang for your bucks, etc. all overstate actual inflation. Also think about it this way, if certain goods become more expensive, aren't people more likely to buy fewer of them, and buy alternate goods that are cheaper. CPI is counted by weighting certain goods and services and it overweighs the more expensive ones.

----------

Quote:
Originally Posted by Dmunjal View Post
I completely agree. According to real inflation data, not the CPI or the inflation deflator used to calculate real GDP growth, we have been in a recession (negative real GDP growth) since 2001. Maybe that means the current policy of deficit financing and QE is not working?

Here's some data on what inflation really is:

http://www.shadowstats.com/alternate...flation-charts

In fact, here's an interesting point. If we calculated CPI in the 1970s like we do now, there would have been NO inflation in the 1970s! Of course, we know we had quite a bit of inflation back then.
Actually CPI is known to be an overestimator of inflation. That being said the '70s were bad but mostly due to OPEC and the oil crisis not inflation itself.
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