You get real! A new car today is just as spiffy for the person buying it as a new car of yesteryear. You talk about people being brainwashed and yet you buy into this hedonic crap like it was the second Coming! A new car is a new car. Yes the bells and whistles are different today than they were 30 years ago and, yes, they will be different 30 years from now, so what? Its primary purpose hasn't changed and the rest is all fluff. Compare "standardly equipped" to "standardly equipped" in constant dollars. The hedonics are invaluable for confusing the issues and that's part of their purpose.
If a new car is a new car then buy a Hundai for $11,000 and your cost just went way down. All the rest is Fluff? OK for the sake of argument I agree you are 100% correct. So Buy a Hundai or a Toyota, pay less and your price dropped.
I am not denigrating anyone's lifestyle.... Bull! Yes you were. You were denigrating it by assuming they were living beyond their means instead of assuming that affordability wasn't an issue.
Given that the "primary purpose hasn't changed and the rest is all fluff." anyone paying more than the price of a base Hyunda or Toyota has no gripe. In fact, take the Hyunda Elantra brand new for $10,500 and for an extra $500 a 100,000 mile warranty.
Hmmm what did a car cost 5 years ago for that? Seems to me like prices declined according to your measures.
Mish, I know your definition of inflation, you repeat it here and everywhere ad nauseum. Repetition does not make the argument sounder, nor does screaming at those who don't buy into it. Yet you don't or won't explain how a phenomenal increase in Japanese money supply hasn't led to inflation. Your argument has as many chinks in it as anyone else's but you refuse to give them the full merit you give to the chinks you pick in other's positions. That isn't being objective.
I suggest you take it up with Dictionary.com.
That said, let's say I accept your definition "A new car is a new car." Mine cost $10,500. If you paid more, according to your defintion (given that extras are "fluff"), you got taken. Perhaps I did too but if you can find a better car for $10,500 ($11,000 with a 100,000 mile guarantee), tell me about it and I may buy one next time. Anyway, since a car is a car, anyone using the "average price" of a car is a fool bacause as you say, the rest is all fluff.
The Austrian School has a great many things right about how economic issues are related. But those who claim it as a mantle for their opinions often differ widely in those opinions. I'll take Marc Faber's read on the issues over yours any day and I believe he's Austrian School.
I am working on a friendly debate right now with Faber. Debate is not the right word, discussion is the right word. Hopefully I will have an announcement on that soon. BTW, I do not know his definition of inflation. What will you do if his is the same as mine?
This whole thread started because you challenged the board to relate inflation experiences higher than your own. You are getting some anectdotal evidence as requested. You can choose to say its all lifestyle or that it doesn't represent the mainstream but to ignore that it might also be interpreted as a significant slice of the mainstream experience is (IMO) to move closer to LALA land residency than it is to hone your theories on the whetstone of the current reality.
Timba
I ahave already sdaid I believe the CPI is understated. What more do you want me to say? Medical expenses have gone thru the roof as have energy costs. Both of those are seriously unerstated in the CPI. But... By your own measures, a lot of what people are griping about is "fluff". Your word not mine.
I believe I have proven that a lot of people do not know how to shop for food on sale. Logic also dictates that anyone that bought a house 5 years ago and refinanced at a lower rate had their actual housing costs GO DOWN.
Some people have had rental prices go down others up. But I dismiss someone telling me that on "average" the CPI has gone up 10% a year for 5 years. No freaking way in hell unless someone has really unusual experiences. I doubt that "on average" it has even gone up 6% a year. Heck, 4% might be stretching it but I think 4% is probably about right ON AVERAGE. Given that we have not defined the average basket of goods and services or the average person individual results may vary. No doubt for some people it will be 8% and other 2%. For a small subset it will probably be negative. Add it all up and what do you have? A CPI that understates somewhat price increases. Of course this is all subjective since no one can tell me what the basket of goods and services and stocks and commodities etc we are measuring.
I suspect that our personal expenses have roughly stayed flat but that inclued a property tax challenge resolved in our favor as well as reduced homeowner and auto insurance costs by switching companies. Those are NOT typical and I freely admit that. We have also not been sick and now have a bigger medical deductable (not really our choice-it was a company plan switch to reduce expenses). Can that matter big time down the road? Yes it can. How does one factor that in? I do not know but that went up for sure as did our heating bills. Add it all up however and I say we are roughly flat. Call it 2% a year if you want, but it might really be negative.
Take all the people living in small town USA that have owned their house for 5 years. That is a lot of people! Most of those have not had huge increases if they refinanced their mortgage. Let's say 4% a year. What about renters in Chicago or LA? 6%? 2%? 10%? who the H really knows because we do not know the basket but what have rental prices in Chicago done for 5 years? LA? San Diego? Small Town USA? Whatever it is, I bet it is nothing like Hawaii.
Finally you simply can not ignore quality improvements. They are not free. If they were free, then everyone would have double pane argon gas filled energy efficient windows. To the extent that upper end houses have those and lower end houses do not, one can not just look and say "a house is a house is a house" look at those average or median prices just as (I hope) I proved that "a car is not a car is not a car". The pain fact of the matter is houses have gotten bigger, the number of features has increased, people are opting for granite and marble upgrades and the average house is simply far bigger and with more upgrades than the average house 15 years ago.
The ONLY way it makes sense to compare prices is on exact equivalents.
A tomato is still a tomato.
A potato is still a potato.
$100,000 of life insurance is still $100,000 of life insurance.
A gallon of gas is still a gallon of gas.
A 16 oz T-Bone steak is still a 16 oz T-Bone steak.
A ton of copper is still a ton of copper.
Home insurance per $100,000 valuation home is still home insurance per $100,000 valuation.
Comaparing the average home or average car to those of 15 years is fraught with TONs of problems. It does indeed make sense to hedonically adjust for quality and number of bathrooms, and marble vs vinal and total square feet. The problem of course comes in the subjective measure of those quality improvements. Do I think the government overstates those improvements? Yes I do. Do I think medical and energy expenses are underweight in the CPI, yes I do.
Mish
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