it is true that for high income strata, the net effect of those sectors that are subject to deflation on their spending patterns more than offsets the raging inflation in essential goods. but like the article points out, improvements in the quality of higher order goods are entirely NORMAL in the course of economic development, and the criteria by which BLS employs its hedonic adjustments are NOT objective. whenever something NEW appears on the scene, they 'invent' a standard by which they determine what it WOULD have cost had the good existed before.
look at some of the details: according to BLS , you can buy a NEW car for $9,000. CAN YOU??? REALLY?
and the catalytic converter, something you are FORCED to buy with your car due to legislative fiat (note: this is not a comment on the desirability of the converter), has INCREASED the cost of your car, while BLS says, no, improved quality, it's really cheaper!
for lower income strata, which comprises among others the very people dependent on COLA adjustments, the reality is quite different...every essential,shelter, energy, food, medical stuff (drugs, treatment, insurance) is rising sharply in price. BLS doesn't tell you where NG prices ARE. they tell you where they SHOULD BE. so for these lower income strata, which are incidentally in the majority (you won't find them posting on SI, but they exist, i assure you), the gap between their income (whether it's COLA adjusted or 'normal' income) and their ESSENTIAL expenditures is widening at an alarming rate.
take the shelter component of the CPI: it's extremely tame. and yet, we KNOW for a fact, that in some regions real estate prices, rents, and property taxes which are anchored to RE prices, have been EXPLODING. in the regions not subject to the RE bubble, they are still rising at rates far surpassing what BLS states. every single realtor association is publishing data that are totally at odds with what government is publishing.
but even worse than the understatement of inflation is the OVERSTATEMENT of productivity and GDP. $8 billion in REAL tech hardware investment growth are made into a 'chain-weighted' $154 billion?
a PC with twice the clock speed makes you twice as productive? this is obvious nonsense.
but not to worry...the coming kondratiev winter and the associated debt deflation will make short shrift of all of this.... |
