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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: John Vosilla who wrote (34599)6/29/2005 12:05:36 AM
From: mishedloRead Replies (2) of 306849
 
In the end there is no right or wrong answer to the maze just many shades of gray. One thing in my mind is clear. If they still calculated CPI like they did in the 1970's the number today would be far higher. Anyone care to guess how things today would be different if they still calculated it the old way?

I agree it is grey.
Those that see inflation everywhere including beans rising because of drought conditions and oil rising because of peak oil etc etc etc are driving me nuts. I admit that the CPI is understated. That immediately puts me in a hole cause everone else wants to overstate it by enormous proportions. Here is another one: people compare the price of a car today with the price of a model T for back in 1920 and call the price rise in cars inflation. Totally bogus. Hedonics MUST be included into the CPI. One can argue whether or not it is ovestated, but to compare a car of today to a car of even 20 years ago is totally absurd.

There are improvements in safety, speed, brakes, etc. Ther is now AC, power windows and doors, better gas milage, etc etc etc. Where I disagree with the use of Hedonics is in the GDP but that is another story. People bitch about hedonics and they are probably correct. Hedonics probably have the affect of understating inflation. That said, to toss it out completely would overstate inflation in many things by an even bigger amount.

That is all I am trying to propose to Darfott. It ended up being too heated. Somewhere in the middle is the correct answer but IMO the CPI is closer to being correct than the absurd figure I have seem some people try and put on it. We truly would get an absurdly overstated figure if hedonics was thrown out and housing prices used instead of OER.

Mish
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