Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: KyrosL who wrote (16527)	3/7/2002 7:48:31 PM
From: JBTFD	Read Replies (1) \| Respond to of 74559

The thing that bothers me the most about the hedonic methods is that they dont publish the un-tampered with numbers, and it is very difficult to find out what their methodology is or assumptions are when they tamper with the numbers. And considering that in fiscal 1998 $500 Billion of federal government spending was linked to price changes measured by the CPI, I would say there is a huge incentive to understate CPI. If you wanted to invent a pill that would magically allow us to overstate production and to understate inflation, that pill would be called hedonics. According to the inflation calculator $1000 in 1990 would have the spending power of $1355.01 today. Where I live that doesnt even keep up with the increase in housing costs. I dont get how you can think it is understated.

To: KyrosL who wrote (16527)	3/7/2002 8:07:11 PM
From: Don Lloyd	Read Replies (2) \| Respond to of 74559

Kyros - ...In fact I firmly believe that hedonics is necessary to find what the true inflation rate is and that it should be used much more extensively... The question becomes exactly what purpose knowing the inflation rate serves. The answer has to be that it is a judgement on the degree to which the government is assessing a hidden tax on all forms of income and wealth by deliberately devaluing money. Hedonics is just another means by which government inflates its self-assigned grade on its stewardship of money. All economic values are the result of the aggregation of the subjective marginal utilities of goods and services assigned by individual consumers. In determining the purchasing power of money when used in exchange for goods and services, adjusting for quality is entirely inappropriate. If I have a pencil that is used for recording golf scores, it normally doesn't have an eraser. If I were to buy that pencil, I would be valuing and paying for the service that it provides in depositing graphite traces on a scorecard. Any kind of increase in quality of the pencil, whether it's the addition of an eraser, or the ability to write underwater, has no effect on its ability to provide the precise service that I am paying for. Therefore, to me, the quality increase means exactly nothing and cannot be properly adjusted for. However, this is not to say that an eraser and the ability to write underwater may not be very valuable to someone else. But a pencil with these added qualities is a different and new product, and must be treated as such, just as any new product would be. The next time the government adjusts its method of reporting inflation in such a way as to increase the result, other than by mistake, it will be the first time. Regards, Don

To: KyrosL who wrote (16527)	3/8/2002 1:37:53 AM
From: LLCF	Read Replies (1) \| Respond to of 74559

I couldn't disagree more... if there is an X-basket of goods the government says are a necessity to live [basic amount of safety net say in the case of the poor] then why adjust it EVEN if it does get better over time. It makes no sense and just mucks everything up. In the real world [my example, or cola payments etc] it doesn't matter, it just sounds nice in theory to compare stuff over time. We make no attempt to compare other qualitative changes in standard of living [working mom's vs 20 years ago... kids in child care] etc etc etc. DAK

To: KyrosL who wrote (16527)	3/8/2002 9:52:43 AM
From: Mike M2	Read Replies (1) \| Respond to of 74559

Kyros, corporate America reports their results in nominal dollars. The trouble with applying hedonics to areas of the economy is it creates misleading statistics. When the hedonic deflator is applied to spending on computers it can multiply the real nominal dollars spent by a factor of 5 to 10 fold. The trouble is these hedonicly deflator dollars spent do not represent revenue nor income for ANYONE. It only exists in the minds of gov't bureaucrats. Think about this if the income derived from the hedonic multiplier is real why doesn't the IRS tax it? True spending on computers is a small % of GDP but once the hedonic hoax is applied it creates the illusion rapid economic growth and productivity- the new economy AG likes to refer to as the money supply grows at the fastest rate in the history of the Federal reserve ( with the possible exception of WWII) . I see a pattern of deception in the gov't numbers as well as corporate accounting. GAAP numbers have taken a back seat to operating earnings ( EBITDA) or worse yet pro forma - Accounting speak for anything goes. Its all about deceiving the public into thinking we are in the midst of an economic miracle but its a mirage in order to reap the benefits of a speculative bubble at the expense of the future. Mike