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Politics : Stockman Scott's Political Debate Porch
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To: sylvester80 who wrote (4034)8/10/2002 6:07:00 PM
From: Jim Willie CB  Read Replies (2) of 89467
 
signal of imminent rise in price inflation
SylvesterMan, I thought of you when I read this article

321gold.com

we all admit to the severe shortcomings of the CPI as a measure of price inflation
it ignores the following large components:
- property tax
- homeowner, business, auto insurance
- housing property value
- stock portfolio value

so why do we appeal to it to confirm or deny the existence of inflation?
I dont
many do

what Schmidt does here is to report on an alternate price index called the "Median CPI" which is ironically put out and defended by the Cleveland Federal Reserve

he doesnt define its calculation
but he does explore the signals when the Naive CPI diverges from the Median CPI
right now the Median CPI is showing almost 4% price inflation !!!
while the Naive CPI is homing on a puney 1% !!!

he concludes the easy Fed monetary policy now is encouraging more inflation when we are already moving up from 1997-98
his main emphasis is the future of property prices
he expects the Real Estate bubble to be popped
as a faulty price inflation measure invites faulty policy

check it out
Schmidt concludes that we will get more inflation than we expect
the lower dollar will add to the effect with import prices
selling of TBonds will also add to the effect

and in time, the Fed will interrupt the inflation
by that time, the Median CPI will not be as high as the Naive CPI
thus, the Fed will probably overreact, just like in 1997-98

very very interesting
I wonder how I can find this measure on a monthly basis
/ jim
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