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To: J-L-S who wrote (22175)	7/1/2006 5:50:15 PM
From: sea_biscuit	Read Replies (1) \| Respond to of 42834

For instance: if a $2,000 computer of today is compared to a $2,000 computer of five years ago, the cost basis of the new computer will be reduced as part of the inflation calculation in order to account for the higher speed, larger memory, bigger screen, improved (bundled) software, greater energy efficiency, etc A realistic scenario would be where a $2000 computer from 5 years ago, costs say, $1200 now. That is a 40% drop in price. That is fine, as long as the price reduction is considered to be 40% Using hedonics, that $1200 figure can be lowered to something like, say $800 or $900. But that is not the price you paid for it. The point is that using this hedonics nonsense, you can reduce the inflation rate to anything you want. And that is just one of the many magic tricks that the BLS folks have up their sleeve. If we send these BLS bureaucrats to Zimbabwe, they will use their wide array of tricks to "reduce" the inflation rate there to, who knows, well under 10 percent?!

To: J-L-S who wrote (22175)	7/1/2006 11:36:31 PM
From: David Bogdanoff	Read Replies (1) \| Respond to of 42834

When you pay more for the same amount of energy and are left with less to buy your other needs(assumming their price stays the same)you end up buying less with your monthly paycheck(also assummed the same). You have now experienced inflation(admittedly a simple view), not an inflationary pressure. I don not assert that prices of computers have to go down to counterbalance the rising costs in other parts of the economy. I agree that the measurement of inflation is more complex that listed retail prices. That is what makes it possible to arrive at an unrealistic inflation rate; there is just alot of subjectivity in assigning a value to a faster computer chip. My point is that the better computers now available to the consumer (better by many measurements) do not compensate for higher costs in other sectors. The treatment of rents and housing prices in the CPI is very technical and has changed over the years. I think most people would see rising house prices as inflationary, regardless of how it is included in the CPI. I recall listening a discussion on a financial program as to why rising home prices actually decrease the calculated inflation. This is why I don't agree with the official CPI figures. Rising home prices in the San francisco bay area are not just inflationary; they are socially destructive. The younger generation typically cannot afford to buy even a starter home and are obliged to leave the area to start their adult work life. Recent newspaper article point out how the middle class population is shrinking. Of course some people benefit from this inflation. So What? That doesn't mean it isn't inflation. Just for you information, I lived for years in Brazil and experienced annual inflation above 20% during that time. The Brazilians have a far better understanding of inflation and policies to live with it than most Americans. Please don't adopt a patronizing tone with me on the subject. Bogtalk

To: J-L-S who wrote (22175)	7/3/2006 11:28:50 PM
From: Yogizuna	Respond to of 42834

For instance: if a $2,000 computer of today is compared to a $2,000 computer of five years ago, the cost basis of the new computer will be reduced as part of the inflation calculation in order to account for the higher speed, larger memory, bigger screen, improved (bundled) software, greater energy efficiency, etc. Another good example would be to compare today's Volkswagen with the first Beetle of the 60s. It would be unfair to simply compare cost and not take into account that the first Volkswagen was not much more than a pregnant roller skate compared to today's version. That is completely ridiculous. Any product is "state of the art" in a snapshot of a certain time period, and it is completely natural for most products to get better with the passage of time, so this should have nothing to do with calculating inflation... Hey, that 1965 Beetle was many times better than traveling in a horse drawn coach, so I guess inflation from the 1880's to the 1960's will have to be adjusted now... That is how ridiculous this "adjustment in inflation because of improvements" argument can become.