Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: zcream who wrote (44779)	1/19/2006 11:19:09 AM
From: mishedlo	Read Replies (2) of 116555

The CPI has indeed been manipulated. So is the GDP (a really gross distortion of reality there due to hedonics) So is unemployment numbers. In fact I am not sure there is a number one can trust. That said, I do not think it is as distorted as most people think and I do think quality improvements need to be factored into the CPI but NOT the GDP. To say the median price of a house has gone to the moon does not take into the size of the house or the number of rooms or the fact there is a slate floor and a marble bath. Furthermore someone sitting in a house forever (My dad only had one house), did not feel the effects. Only new buyers were impacted. Renters did not seem to be impacted much either these past few years. I continue to think food is a veritable bargain if one knows how to shop. The simple concept of only buying meat and goods when they are on sale can reduce one's food bill 30% or more. Finally the CPI is very underweight energy but then again is oil rising because of inflation or is oil rising from peak oil? It is a critical mistake to pass off oil which is subject to supply constarints (Katrina), geopolitics, a War in Iraq, and peak oil. There are reasons other than inflation that prices of goods rise and fall, and the government should essentially just get the F out of the picture. In that regard, there should be no management of the FF rate to the CPI. Instead rampant growth of money supply needs to be reined in. It will be (perhaps forceably) by a credit market that revolts. It may start in a junk bond revolt or a housing bust, or someplace we just do not see. I have talked about both of these ideas before. 1) Targeting money supply not the CPI 2) Grossly distorted government numbers Grossly Distorted Procedures globaleconomicanalysis.blogspot.com Is the Inflation Monster Tamed? mises.org I believe both articles are on extremely solid ground In regards to inflation, I am looking forward to a deflationary credit bust, not past distortions that have understated government numbers of all kinds. One must look ahead to what is coming..... A huge freaking credit bust and huge numbers of bankruptcies. Mish

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