Wednesday, June 12, 2024

In the #News #Politics #Economy CPI Not Reality

“If you don't read the newspaper, you're uninformed. If you read the newspaper, you're misinformed.”

“Whenever you find yourself on the side of the majority, it is time to reform (or pause and reflect).”

― Mark Twain

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PT Barnum once said, there's a sucker born every minute. Today's birth rate in the US likely increases it to every hour. Anyone trading the official consumer prices report has already assumed the position. Thank you sir, may I have another! That is, unless you start thinking right now.

How does the CPI contract so rapidly given the currency inflationary backdrop? It doesn't. Inflation reported today, no longer compares to data after the late 1970s, and does not reflect reality like it once did when the series was created in 1921. Methodologies that include geometric weighting, substitution, and hedonics favor price reductions and significantly understate price increases. The original design of the CPI, a time series that helped businesses, individuals and the government consider inflation in their financial planning, died after the Boskin Commission in 1996 made the CPI unrecognizable to the old (please read #CPI #CRISIS Review for further discussion).

The CPI is driven by the most basic assumption, the majority has manure for brains.  This is an important discussion for strategy and separation from the majority.

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