The Billion Prices Project (BPP) and inflation

Discussion in 'Politics, Religion, Social Issues' started by jnpy!$4g3cwk, Oct 3, 2014.

  1. jnpy!$4g3cwk macrumors 65816

    jnpy!$4g3cwk

    Joined:
    Feb 11, 2010
    #1
    For a few years now, the Billion Prices Project (BPP) has been collecting prices off the web, as a test of an alternative consumer price index.

    http://bpp.mit.edu/

    Apparently, there is a commercial value to its product, so, there is now a spin-off company that sells its daily index information on many countries. At least the U.S. trend info is still available in public:

    http://bpp.mit.edu/usa/

    Unfortunately, it doesn't appear that the data for the Eurozone is so easy to post. In any case, I am wondering how BPP calculated inflation is doing compared to the official EU calculated inflation. Anybody know?

    BTW, it turns out that the simple CPI in the U.S. is pretty close to the BPP. That surprised me-- I would have thought, based on the simplistic way the CPI is calculated, that the indices would have diverged further.
     
  2. Sydde macrumors 68020

    Sydde

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    Aug 17, 2009
    #2
    The simple CPI is not all that simple: it uses household purchasing surveys in order to weight the relative value of the aggregate prices.

    It should be noted that some of the prices MIT collects are B&M standard retail postings that match shelf prices. In addition, considering the survey component of the CPI along with the fact that people gravitate toward lower prices + convenience (thus opting to buy online when it makes sense), I do not think it is all that surprising that the numbers are fairly close.
     
  3. jnpy!$4g3cwk thread starter macrumors 65816

    jnpy!$4g3cwk

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    #3
    I stand corrected.

    I was also thinking about Europe. While the US economy is recovering, Europe is struggling. According to these:

    http://www.nytimes.com/2014/10/03/upshot/inflation-hawks-views-are-independent-of-actual-monetary-outcomes.html?rref=upshot&module=Ribbon&version=context&region=Header&action=click&contentCollection=The%20Upshot&pgtype=article&abt=0002&abg=1&_r=0

    http://www.washingtonpost.com/blogs/wonkblog/wp/2014/08/14/europes-greater-depression-is-worse-than-the-1930s/

    [​IMG]

    ... Europe is in a worse economic slump than it went through in the 1930's. I'm wondering why Europe is still on the "austerity" bandwagon.
     
  4. Sydde macrumors 68020

    Sydde

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    Aug 17, 2009
    #4
    I have my doubts about "recovery". We only get figures that recurse to the financial sector. The fact that the NYSE/DJI are even higher than they were in '07 is troubling (to me), it suggests that abstract capital is sloshing around in the investment cloud, where it is more likely to lead to problems than to stability. The DJI barely tripled between the '30s and the '70s, which was overall a period of relative stability. Strong growth in the market indices was accompanied by a real decline in the underlying economy and some pretty dramatic dives in the market.

    And I have heard that the lenders are back to their questionable practices. I just do not trust these numbers to harbinge anything good when they go up.
     
  5. zin, Oct 4, 2014
    Last edited: Oct 4, 2014

    zin macrumors 6502

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    United Kingdom
    #5
    Because when the crisis hit, most European governments were formed by centre-left political parties. Thus, instead of realising that the crisis was as a result of primarily the private sector, people blamed the incumbent governments and voted in centre-right parties that advocated austerity.

    The U.S. had the opposite occur. They voted out the Republicans and voted in the Democrats, who advocated stimulus spending.

    In the UK we had 3 years of wasted growth because of austerity imposed by the Conservative coalition on a growing economy. The reason the UK has managed to escape stagnation quicker than Europe under austerity is likely due to the fact that the UK has its own currency and its own central bank, which means it has more control over monetary policy.
     
  6. Bug-Creator macrumors 6502

    Bug-Creator

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    Germany
    #6
    Since you obviously think that is a bad idea, here are your options (simplified):
    - austerity on a shrinking economy (greek style)
    - just print&spend more money (southern Europe pre 2002, US past Nixon)

    Choose your poison wisely :confused:

    IMO "austerity" as in bringing budget in balance is the right approach but one can surely talk about the timing and the details (cutting benefits at the bottom while rescueing the fortunes of the 1% surely ain't the kind of details I would aggree on).
     
  7. zin macrumors 6502

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    #7
    Austerity was imposed on a growing economy in the UK. This kind of thinking makes no sense. It is akin to strangling the economy and you control the hands. By definition austerity is used on depressed economies. Austerity for Greece is not working for the Greek people, nor for most of the European people.

    It works. But it only works if you print and spend to offset depressions. If you print and spend during the good times without any intent to reduce the overall debt burden then it won't work. The net gain is negative.

    Which is exactly why this kind of thinking worked from its major introduction in the 30s right up until the late 70s. It is also why it worked and is working for the U.S. from 2009 onwards. The stimulus ended the depression relatively quickly and the federal budget deficit is decreasing at a very quick rate.
     
  8. Happybunny macrumors 68000

    Joined:
    Sep 9, 2010
    #8
    One of the major reasons on the mainland why recovery has been slow to get of the ground, is that in the EURO zone all the banks had to be restructured so that another banking crisis could be avoided.
    This coupled with saving the PIGS, and making sure that society remain cohesive over the EU in general.

    Because of the spectre of the 1930's and the rise of extremist parties the EU was very aware that they had to ensure that society didn't disintegrate, and start another war.

    Getting any type of legislation through the EU Commision/Parliament is like herding cats.

    I think this is some thing like the ‘Hare and the Tortoise’
     
  9. Sydde macrumors 68020

    Sydde

    Joined:
    Aug 17, 2009
    #9
    However, that is what you will get. The rich guys are far from helpless, a government that they perceive to be urinating upon them rather than someone else will not last long, as plutocracy is the nominal order of the day in most "free" countries.

    Obviously, the vast majority are the meat-and-potatoes of the economy, screwing them over screws everyone over, but achieving a balanced plan can be difficult in an environment controlled by a select few. Unless we can put these high-rolling sociopaths into proper treatment facilities so that they can no longer cause havoc, we will probably just be setting ourselves up for MotS.
     

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