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To: GraceZ who wrote (58607)	1/17/2001 12:26:17 PM
From: Les H	Read Replies (2) \| Respond to of 436258

re: I bought a used car for $12,500 this last year. The same price I paid for a new one in 1989. Only the one I bought this year has anti-lock breaks, fuel injection, heavier suspension, side impact panels, keyless entry and a safety record that is 3 times better than that 1989 car I had (still have as a third car). Neither need a tuneup until 100,000 miles (as opposed to those nice big heavy American cars the author remembers as superior) You didn't stipulate how much more mileage was on the used car. You would need to add this depreciation back on to get a fair comparison of prices. In any event, if these newer models are safer, more fuel efficient, or require less maintenance, those cost savings should show up in the weights for fuel consumption, auto repair, auto insurance, and medical costs. Counting those implied savings in the car causes one to double-count savings, real or not. On the other hand, one only need compare auto sales to see how much substitution may be going on, if any. For the most part, the substitution appears to be lease versus purchase, in which case, the owner normally returns the car back to dealer, and for luxury and SUV versus lower tier. At the lowest tier, the substitution appears to be Korean cars IMO. In any event, one should be comparing apples to apples, new cars to new cars, and old cars to old cars.

To: GraceZ who wrote (58607)	1/17/2001 2:23:51 PM
From: pater tenebrarum	Read Replies (6) \| Respond to of 436258

it is true that for high income strata, the net effect of those sectors that are subject to deflation on their spending patterns more than offsets the raging inflation in essential goods. but like the article points out, improvements in the quality of higher order goods are entirely NORMAL in the course of economic development, and the criteria by which BLS employs its hedonic adjustments are NOT objective. whenever something NEW appears on the scene, they 'invent' a standard by which they determine what it WOULD have cost had the good existed before. look at some of the details: according to BLS , you can buy a NEW car for $9,000. CAN YOU??? REALLY? and the catalytic converter, something you are FORCED to buy with your car due to legislative fiat (note: this is not a comment on the desirability of the converter), has INCREASED the cost of your car, while BLS says, no, improved quality, it's really cheaper! for lower income strata, which comprises among others the very people dependent on COLA adjustments, the reality is quite different...every essential,shelter, energy, food, medical stuff (drugs, treatment, insurance) is rising sharply in price. BLS doesn't tell you where NG prices ARE. they tell you where they SHOULD BE. so for these lower income strata, which are incidentally in the majority (you won't find them posting on SI, but they exist, i assure you), the gap between their income (whether it's COLA adjusted or 'normal' income) and their ESSENTIAL expenditures is widening at an alarming rate. take the shelter component of the CPI: it's extremely tame. and yet, we KNOW for a fact, that in some regions real estate prices, rents, and property taxes which are anchored to RE prices, have been EXPLODING. in the regions not subject to the RE bubble, they are still rising at rates far surpassing what BLS states. every single realtor association is publishing data that are totally at odds with what government is publishing. but even worse than the understatement of inflation is the OVERSTATEMENT of productivity and GDP. $8 billion in REAL tech hardware investment growth are made into a 'chain-weighted' $154 billion? a PC with twice the clock speed makes you twice as productive? this is obvious nonsense. but not to worry...the coming kondratiev winter and the associated debt deflation will make short shrift of all of this....