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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19989  
Subject: Re: Lies, damn lies and CPI Date: 3/24/2013 1:04 PM
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Those who believe that inflation is only 2%, when it may be 5-8%,

OK. M.I.T. has something called "the billion price index", in which the computer literate dispatch web crawlers to find the prices of identical items, month after month, and from that calculate inflation. These are real prices, not heuristic substitutions, compared day after day, week after week, month after month.

Current annual rate of inflation: 2.01%.

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

I do wish the people who insist inflation is 8% would give some data on where they get such an absurd number, but perhaps that isn't important to places like mauldineconomics.

Some things have gotten cheaper: Bills for car repair and computer repair are a lot less than they used to be because mean time between failures (MTBF) has grown exponentially as quality improves. Some of my computer related equipment (DSL router and Ethernet hub) are 15 or 20 years old and have never failed. While gas prices are up, miles per gallon has improved and we don't feel the full brunt of rising gas prices unless you are moving up from a compact to a SUV or other kind of truck. By changing to a quasi-vegetarian diet my food costs are down (in the old days I used to eat half a chicken in one meal. Now I might eat half a chicken breast).

You are talking "substitutions." I am talking "real prices." The M.I.T. project necessarily doesn't include "services", but in order for overall inflation to be 8%, services would have to be increasing at a rate of about 16% annually. Does this seem reasonable, given the relatively stagnant wages of the past few years?
 
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