Max Speaks article on inflation...interesting

[stevebreeze]

Do your self a favor and read the whole article to help with understanding of how and why the CPI is understated.




http://maxspeak.org/mt/archives/001895.html#more

Why deny inflation? Those in power have several reasons to understate rises in the cost of living (COL), measured by the CPI.

1. To mask the fall of real wage rates. This is supposed to placate working voters. It is supposed to support orators declaiming that our standard of living is ever rising, and we should all feel good. Actually, real wage rates have fallen steadily since peaking in about 1975. That is using the official Consumer Price Index (CPI) to measure rises in the COL. If the CPI understates rises in the COL, real wage rates have fallen even faster than the data show.

As a by-product, this denial of inflation supports those who like to dismiss George as a false prophet of doom.



3. To slow the rise of income tax brackets, which are indexed to the CPI. That is, when the CPI rises by, say, 5%, the income level at which you pass into a higher tax bracket also rises by 5%. Congress, for once in a reasonable mood, enacted this sensible provision when enough people became aware that they were victims of “bracket creep”. Bracket creep is when inflation boosts your money income into a higher tax bracket, although your real income has not risen.

However, if the true COL rises by 10%, while the CPI rises by only 5%, this provision no longer protects us against bracket creep. It just gives a talking point to those who claim to protect us. Sneaky! That is why you, dear reader, may have had a hard time following the bean under one of the three shells. Politicians, of course, are good at withdrawing promises. The sneakier the method, the easier it is for them to cover their tracks.

[OneBlueSky]

1. just for kicks, anyone care to add to this list? . . .

- 2x4 dimensional lumber is no longer 2x4, but 15-20% smaller in cross-section, and of lower grade stock
• salmon is no longer wild, but farm raised in unsanitary conditions, and died pink (ugh)
• “wooden” furniture is now mostly particle-board
• “wooden” doors are now mostly hollow
• new houses have remote locations, far from desired destinations
• ice cream is now filled out with seaweed products
• the steel in autos is eked out with fiberglass, plastic, and other ersatz that crumbles in minor collisions
• airline travel is no longer a delight but a series of insults and abuses
• gasoline used to come with free services: pumping the gas, checking tire pressure and supplying free air, checking oil and water, cleaning glass, free maps, rest rooms (often clean), mechanic on duty, friendly attitudes and travel directions. They served you before you paid. Stations were easy to find, to enter and exit. Competing firms wanted your business: now most of them have merged.
• cold fresh milk was delivered to your door
• clerks in grocery and other stores brought your orders to the counter; now, many clerks, if you can find one, can hardly direct you to the right aisle
• suits came with two pairs of pants and they fitted the cuffs free. Waists came in half-sizes
• socks came in a full range of sizes
• shoes came in a full range of widths; the clerk patiently fitted the fussiest of customers
• the post office delivered mail and parcels to your door or RFD, often twice a day
• public telephones were everywhere, not just in airport lobbies. Information was free; live operators actually conversed with you, and might give you street addresses
• public transit service was frequent, and served many routes now abandoned
• live people used to answer commercial telephones, and tell you what you actually wanted to know
• autos used to buy “freedom of the road”; now they buy long commutes at low speeds and rage-inducing delays. One must now travel farther and buck more traffic to reach the same number of destinations. Boskin et al. dwell on higher performance of cars, and the bells and whistles, but take no note of the cost-push of urban sprawl.
• classes keep getting larger, with less access to teachers and top professors, and more use of mind-numbing “scantron” testing.
• before world war II, an Ivy-league college student lodged in a roomy dorm with maid service and dined in a student union with table service, and a nutritionist planning healthy meals. All that, plus tuition and incidentals, cost under $1,000 a year. Now, to maintain your children’s place and status in the rat race, you’d put out $40,000 a year for a claustrophobic dorm and junk food. But a B.A. no longer has the former value and cachet. Now you need time in graduate and professional schools to achieve the same status. Many students emerge with huge student loan balances to pay off over life.
• warranties on major appliances cost extra, aren’t promptly honored, and expire too soon. Repair services and fix-it shops used to abound to maintain smaller appliances. Now, most of them are throwaway.
• replacement parts for autos are hard to find, exploitively overpriced, and are often ersatz or recycled aftermarket parts
• musical instruments are mass-produced and tinny instead of hand-crafted and signed
• piano keys were ivory; now plastic
• many new “wonder drugs”, if you can afford them, have bad side-effects, while old aspirin still gets the highest marks

[stevebreeze]

2. Street cars replaced by busses

and just the general decline of mass transit in most cities.

[AX10]

3. very true.

[umass1993]

4. Really makes you wonder.

Great list.

* high fructose corn syrup (I'm already getting indigestion)