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Pastimes : All Clowns Must Be Destroyed -- Ignore unavailable to you. Want to Upgrade?

To: Oblomov who wrote (15657)	3/8/2000 9:25:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 42523

Andrew, obviously the perfect substitution assumed by the BLS is utter nonsense. i actually think that while the original goal of the 'new and improved' PPI and CPI calculation has been achieved (namely to cheat all recipients of state run entitlements of truly inflation adjusted raises), it has unwittingly helped foster a much too loose monetary policy by the Fed...as a result the economy and the stock market are in an artificial boom that has now progressed to a point of no return, i.e. no 'soft landing' can be engineered anymore. in the meantime Greenspan has acknowledged that CPI may not be such a great measure of inflation after all...but it is too late. it is one thing to adjust a cost of living measure every few years to reflect statistically viable changes in spending patterns, but the current system never allows us to compare apples to apples. what's more, certain categories of spending are NOT subject to substitution at all, but BLS assumes they are, month after month. an example is energy...a recent report shows that in spite of the increase in oil and distillate prices over the past year, demand for gasoline has grown in terms of units. and yet this inflation doesn't show up. if consumers were indeed substituting perfectly, they would never spend more than their income...and yet household debt grows much faster than disposable income. the growth in mortgage debt and refinancings also vastly outpaces the actual increase in new housing units, which proves that real estate inflation has become the basis for taking on debt for consumption...and stock market speculation of course. overconsumption on credit and hyperinflation in financial assets - a deadly combination.