[Sad90sNerd]

There is no way that matches reality, where does the person publishing such a chart even live? Do they buy eggs or pay rent?

Here is a real alternative - John William's shadow stats. He simply measures inflation as the government used to in the 80s and 70s, and surprise surprise its more like 10% or 14% - no phony "Owner's equivalent rent".

http://www.shadowstats.com/alternate_data/inflation-charts

[jxramos]

I wonder if we all tabulated all our expenses in the most fine grained detail and calculated our own personal rates of inflation how meaningful it would be to have percentiles of our population to say things like 50% of citizens experience a personal inflation rate of x.xx%. That would be very fascinating. I'm almost there myself with some web order scraping I've been playing with. It's a lot of work but once I tackle another big vendor of mine I should be able to look at trends for given products over time that I regularly buy.

[gruez]

Sampling bias is going to be a real issue because there's going to be a strong incentive for people who think inflation is high, or is actively experiencing high inflation to participate. Also, if you're only tracking your expenses and not using a fixed basket, the index will end up including lifestyle inflation as well.

[jxramos]

that's an excellent point. Clarify a bit the notion of the fixed basket, I'm thinking mostly of unit prices. I think that could get a bit fuzzy too because of practices like shrinkflation cluttering up the analysis. I think SKUs should actually be tied to fixed things like weight where applicable. I wonder what the rules are surrounding that, basically make it so that if you change the weight of a product you have to issue a new SKU. Might be a messy figure overall but still capable of shedding some insight people would be interested in I'd think.

[gruez]

By "fixed basket" I'm talking about the issue of people getting higher quality goods as their income increase, or buying more or less of something (eg. takeout) as their lifestyle changes.

[jxramos]

yah those instances I would think would break a given "SKU run" if you will, it would have its run in an individual's life under a given time regime. It would phase in and it would phase out.

[jxramos]

I had to lookup some of these points on SKUs, this is good background https://www.shopify.com/retail/what-is-a-sku-number

[Sad90sNerd]

That's a pretty novel concept - you've inspired me : )

[jxramos]

hey that's awesome, what are you planning to do with it. Sounds like something to look forward to. Keep me posted.

[dez]

https://www.reddit.com/r/badeconomics/comments/3zik5t/shadow...

Shadow stats is comically bad economics.

[Sad90sNerd]

They are making flat assumptions and trying to recreate the charts from the government CPI, its also a reddit post and not a serious bit of research which examined their actual methods. It could all just be correlation - who knows? All I know is that prices are rising very fast, and I tend to not believe the government. Food pyramid, Iraq war, COVID numbers, etc.

I think the FED and our banking regulations are the true "bad economics" and if you trust that, just go ahead and leave your deposits in the bank or invest in 4% yielding bonds : P

[PragmaticPulp]

> John William's shadow stats. He simply measures inflation as the government used to in the 80s and 70s, and surprise surprise its more like 10% or 14%

I don’t understand how anyone who knows about basic compound growth can take this seriously.

10% annual inflation from 1970 would mean prices have increased by 150X since 1970.

That would mean houses would have cost a couple thousand dollars and a dozen eggs would have been about four cents.

And that’s only using the lower 10% estimate, not the higher 14% estimate. It’s obviously not even close to reality.

It’s a quack website that can’t even hold up to the most basic scrutiny.

[jones6ofMont]

Basic stuff like eggs, noodles, rents align quite consistently with shadowstat. Even iPhone top model prices after 2010s seems to follow shadowstat numbers. The problem is China production. We enjoyed years of "deflations" pressure from "Made in China" and USD being hugely popular. Going forward with immense dedollarisation pressure (petrorubbleyuan) and rising cost of Made in China and lower quality from Made in India (India is currenrly in early stage of manufacturing curve so quality is not there yet) would increase our inflation. Even if it is not going Turkeye style, a persistent high inflation of 6-9% EVERY YEAR without strong USD demand will make shadowstat numbers more and more realistic than government's.

[tenebrisalietum]

Things other than inflation can cause prices of specific XYZ to rise. Wasn't there some bird flu thing that constrained the egg supply? Rent and housing costs were going up before the pandemic. Add this to the existing inflation and it's bad, esp. for housing costs.

[Sad90sNerd]

Ok, if you were the government and I asked you to measure rent increases - what would you do? Would you look at the cost of renting on average in a city and compare them to last years? Seems like the most obvious way...

Well, that is not how the government does it now. It currently uses a metric called "owner's equivalent rent". Where instead they call up people who own there houses and ask them how much they would rent it for. It is essentially a survey instead of hard data. This has the effect of hugely underestimating the value of housing - and thats just housing!

Lets talk about measuring food prices, well according to the US government you can have "substitutions". If you think measuring the price of steak is as easy as comparing the number between the years you'd be wrong again, because what they currently do is say "well people are really buying ground beef instead of steak so well use those prices instead". What's next substituting in dog food?

Thats not even to mention "hedonic adjustments"...

When the government relies on a statistic for policy it stops becoming a reliable statistic because the incentive is just too high to not manipulate the numbers

[dragonwriter]

> Ok, if you were the government and I asked you to measure rent increases - what would you do? Would you look at the cost of renting on average in a city and compare them to last years? Seems like the most obvious way... Well, that is not how the government does it now.

Except, in fact, it actually is how they do the rent portion of CPI. (Well, its not city rent averages, they do same-unit rent changes and average those.)

> It currently uses a metric called "owner's equivalent rent".

No, OER is used for...OER. Rent is used for rent. They are two separate subcomponents of the housing component of CPI.

More complete description:

https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

[Sad90sNerd]

Even if that is true (which I am doubtful of), what is the merit of OER at all? Why use it if its A) not really what people are paying B) relying on people not in the market to guess what the going rate is and C) consistently underestimates actual rent.

I see no purpose for it besides the government liking the C) part...

Remember folks, inflation is "temporary" or, i mean, "transitory", or I mean, yes we have inflation, but its the COVID supply chain, OH oh sorry its Putin's fault. Yes lets stick with that...

[dragonwriter]

> Even if that is true (which I am doubtful of), what is the merit of OER at all?

The merit of OER is that is a measure of the cost of using owned housing as housing instead of renting it out.

> Why use it if its A) not really what people are paying

It is a measure of what people are paying, as an opportunity cost.

> B) relying on people not in the market to guess what the going rate is

Potentially a legitimate concern.

> C) consistently underestimates actual rent.

Its not trying to measure actual rent and is not consistently below actual rent (which, again, is tracked separately.)

[Sad90sNerd]

> The merit of OER is that is a measure of the cost of using owned housing as housing instead of renting it out.

I don't follow - can you help me understand? To me there are two metrics that matter: the price of property, and the price to rent property.

Hypothetical: If 50% of the houses in the US were bought by older folks in the 1970 - 1990 (when housing prices were more propositional to income) and they generally don't plan to sell until 2030 - what does it matter what they would rent at today?

I just don't understand the logic here, and to the fact that they are included in the CPI at all means that the CPI is necessarily skewed when it comes to housing imho

[nradov]

The BLS uses both actual rents and owner's equivalent rents as components of the overall Consumer Price Index inflation calculation.

https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

[fooker]

You have cause and effect inverted in your argument.

The specific reasons sum up to cause inflation, not the other way round.

[matt_langston]

My own personal rate of inflation (e.g. gas, eggs, etc.) is about 15% YoY which is inline with the shadowstats figure.

[matt_langston]

I wonder what people think of Mike Maloney's educational video on inflation:

"Inflation: The Biggest Scam In The History Of Mankind" https://youtu.be/iFDe5kUUyT0

Is there anything incorrect in that presentation? John William's shadowstats is mentioned.