What's the real inflation rate in the US?

[snoopy369]

Rent decreases come from new rent costs, not from individual renters getting a rent decrease The question is, if you move out, will the person who moves in after you pay less in rent than you?

It lags by about a year because rent contracts are for a year or more in most cases, so prices are set well in advance.

[Whoha]

Re: What's the real inflation rate in the US?

Originally posted by Oerdin
The argument is that the government deliberately under counts the inflation rate.

http://www.signonsandiego.com/news/b...30inflate.html

Gold is saying I think 8% annually(barring recent speculatory moves). That matches the M3 money supply expansion data from before they took that data private. Still it is somewhat difficult to say what part of a price increase is due to inflation, and what is due to other factors. Also yea we use a different measure of inflation then we used in the 70s, and we should probably go back to that.

Considering the calls to monetize bad munibonds, I'd think it is safe to say, high and going higher.

[OzzyKP]

Originally posted by Oerdin
Also the idea of substitutions, I.E. steaks are to expensive so people might buy pork or chicken instead, sounds nice on paper in academia but in reality this prevents the CPI from actually doing its stated purpose. Which is to compare consumer prices year to year. If you're constantly changing which goods you're counting and which ones you are ignoring then it makes it harder to compare prices year to year.

The substitution method seems reasonable. It is just a question of how much do people actually do it. Do we have data on that? Is the amount that substitution used in calculating the CPI in line with data on actual substitution rates?

[Thoth]

Originally posted by snoopy369
Rent decreases come from new rent costs, not from individual renters getting a rent decrease

Could you clarify that statement for me.

The question is, if you move out, will the person who moves in after you pay less in rent than you?

Not a chance. They'll be paying the same or more.

[Kidlicious]

There's way too much competition for housing in most places. The owners will take a riskier applicant before they lower rents, which can be stupid btw. Smart people keep rent low and rent to highly qualified applicants.

[snoopy369]

You said that you've never seen (your) rent decrease. I said that your rent will not decrease (because they have you in the apt, and can take advantage of the fact that there are physical and conceptual costs to moving, to increase your rent or hold it steady), but that if you moved out it is not unlikely that the rent could actually decrease.

That is because in the open market, if other apartments are going for less, they will have to lower the rent to compensate.

I give you the following example: My apartment is in a 6-apartment building and has several other similar buildings attached to it. My apartment cost $775 when I moved in, and over the course of five years has increased to $850.

The apartment across the hall is identical in every way; same SF, same layout (mirrored), same floor, same neighborhood. You can say for all intents that they are the same apartment.

That apartment currently rents for $775. I could move across the hall and save $75 if I wanted to; but the costs in doing so would exceed that (mostly the difficulty in changing address on everything, redoing my phone/cable/etc.) so I don't move. But, I could... and the fact that the apartment has gone months unrented suggests that $775 is too high for the current market, and it should go down further before it is rented.

[Dauphin]

What about rent control? How does that work over there?

[Thoth]

Thank you for clarifying, I think I understand your point. However, the closest I've seen to the situation you've described is landlords offering "incentives" to get new tenants (ie offering 1 month "free" rent). The actual rent per month doesn't get lowered

This may be due to the fact that the Government of Ontario sets the maximum amount that a landlord can raise the rent in any given year (based on the official inflation rate). There are exceptions where a landlord can raise the rent more than the statutory limit, but AFAIK these only apply when the landlord has actually done significant renovations to the rental unit. If a landlord drops the rent in order to attract a new tenant, that becomes the base rent on which future rent increases are calculated so there is a strong disincentive to reducing the rent on a unit.

[notyoueither]

Originally posted by OzzyKP


The substitution method seems reasonable. It is just a question of how much do people actually do it. Do we have data on that? Is the amount that substitution used in calculating the CPI in line with data on actual substitution rates?

It's smoke and mirrros.

In 50 years we'll end up with 2% inflation based on a grocery basket of soy burgers.

In short, it's bull****.

[GePap]

Originally posted by OzzyKP


The substitution method seems reasonable. It is just a question of how much do people actually do it. Do we have data on that? Is the amount that substitution used in calculating the CPI in line with data on actual substitution rates?

If the point of measuring inflation is seeing how much the price of a steak is going up each year (and the same for every other product), why the hell would we then stop measurng the price of steak and switch to looking at the price of ground beef (a completely different item)?

It should be obvious that if inflation is going up significantly, people will switch, but that switch does not actually change the inflation rate of the product we were measuring.

[Kidlicious]

Inflation gets a really bad name too. Mild inflation isn't a bad thing in itself so long as it's predictable. Just because the inlation rate is 5% instead of 4% doesn't mean the economy is doing worse so long as that inflation rate was predictable and wages also increased.

[OzzyKP]

The trouble though is that they can only examine a certain number of prices for their basket of goods. I think it is appropriate to respond to changes in consumer behavior and priorities in determining which good to include. If they didn't make adjustments we'd be deciding the CPI based on the price of typewriters.

Having an inflexible standard also opens the system up for being affected by outside forces. Like if the price of steak goes up because of mad cow disease, does that count as inflation?

Or if the price of steak goes up and ground beef doesn't, then is it really inflation or something else going on? Maybe steak is on the line between luxury and necessity and that definition determines a lot about its availability, price, and validity to be included in the CPI.

I'm just saying the idea shouldn't be rejected off-hand. It depends a lot on how reasonably it is implemented.

[GePap]

Certainly chosing a basket is difficult, but substitution makes no sense because it is changing the basket midstream, and besides, you have to make assumptions about what the switch to is anyways.

As for chosing the basket, obviously the main goods in it should be those goods that are currently not in it, mainly food and energy, because consumers need to buy those things regardless of anything else. I don;t need to buy consumer electronics regularly, but I sure need to buy groceries every few weeks and people who drive have no choice but to buy gasoline.

If the basket is wide enough fluctuations in one item do to outside events (say the price of orange juice due to bad weather) would be minimized.

[notyoueither]

There's a large difference between switching from the cost of typewriters to computers because nobody buys typewriters anymore, and substituting hamburger for steak because many people can no longer afford steak.

It's a lie that goes straight to the heart of what inflation numbers are supposed to be telling us.

[Dinner]

Originally posted by Dauphin
What about rent control? How does that work over there?

Most cities don't have it. A few (New York, San Francisco) do have it as a hold over from WW2 price controls but most cities don't.