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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: bart13 who wrote (91297)2/5/2008 5:58:41 PM
From: Archie Meeties  Read Replies (2) of 110194
 
Let's use John Williams argument with the BLS in a real life scenario. He argues that the BLS was in its glory days when basket of goods and services was updated every 10 years, instead of 2.

Lets pretend 3 years ago a consumer could only make long distance calls through a land line. The cost of those long distance calls, if it goes up, gets reflected in the cpi. 2 years later the consumer uses VOIP to contact relatives living in Asia. The cost of his long distance calls have dropped 50%. Ok so per old BLS methodology, you'd calculate the cost of his long distance using land line costs - and you'd do that for the next 7 years!. No substitution allowed! That's masking inflation!

Using a cpi basket that adjust every 2 years you'd capture the change, the choices he has in communications.
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