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 : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (93675)	2/2/2009 1:54:17 AM
From: Sr K	Read Replies (1) \| Respond to of 116555

My explanation was too simplistic and I didn't want to look up how it's really done. How would you do it, simple explanation, if possible? Do you want to change how CPI-U and CPI-W are calculated? Would you revalue average house prices every month, like Case-Shiller, or smooth it? If it reflected a component for owners and a component for renters (and a component for freeloaders) in proportion to their respective share of the economy, it wouldn't be right for any of them. A component for unrealized/realized gains and losses would underweight that component for actual owners and overweight it for renters and those staying in a home without paying until they get kicked out. Remember that reweighting of the CPI-U components doesn't happen every year, it might happen every 3 or 5 or 12 or more years depending on how out of kilter it gets. In the period since 2000, the CPI-U would have been lower while house prices were rising, and since 2005 or 2006 the CPI-U would have been higher than what was reported. Over time, the CPI formula for Social Security could be changed and where it is used for other fees and income, another index could be substituted. But what would be better? Would the public understand the price index going up when house prices are going down, even if most people aren't selling; and the price index going down when house prices are going up? That would be too difficult to sell, so I think you would have to smooth it.