The Consumer Price Index is broken and needs to be fixed, says Keith Hall, the former head of the Bureau of Labor Statistics, whom my readers met last week.
Hall created a stir by saying what most of us thought was obvious: The real unemployment rate is a lot higher than what the government officially reports.
Hall doesn’t have an opinion about whether the current CPI is understating, or overstating, inflation. Most people, including me, think the CPI misses a whole lot of cost increases, especially in the areas of housing, health care and tuition.
The CPI is important for lots of reasons. One of the biggest is that the Federal Reserve uses this figure, and others, to adjust monetary policy. But the CPI is also used for cost-of-living adjustments to Social Security recipients and pensioners.
The CPI, which rose 0.5 percent in June on a seasonally adjusted basis, is 1.8 percent higher over the last 12 months.
Over the years, the government has fiddled with the calculations. For instance, Washington has been lowering the CPI because of quality changes in products — i.e., people may be paying more for something like a TV set, but they are getting more for their money.
That’s called hedonics, and it causes inflation to appear lower.
The CPI also adjusts when a product goes up so much in price that people are forced to substitute a cheaper item. Hamburger for steak, for instance, reduces inflation in government statistics.
But while the way of measuring inflation may have changed, the way the BLS and the Census Bureau gather their information hasn’t. And that’s Hall’s beef (or maybe it’s now hamburger) with the numbers.
“I think the CPI should be replaced with several indices,” Hall told me during a phone interview. The people who put together the CPI, he says, are “doing as good as they can with the resources they have.”
In an age when companies like Amazon know exactly what people are buying and at what price — minutes after purchases are made — the CPI is still calculated in a very old-fashioned way.
Each month, says Hall, hundreds of thousands of in-house surveys are conducted to see what Americans are buying. Then the surveyors go into stores to determine costs.
“They’ll walk into a store, pick up a can of tuna fish and look at the price,” says Hall.
“I think it could be done so much better … it is really due for modernization.”
(More of Hall’s interview on Thursday.)
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Wanna see a video of a helpless 8-month-old baby being brutally beaten?
Go to this Facebook page: http://www.facebook.com/photo.php?v=340146252751892 and you’ll see exactly that.
Facebook refuses to erase this incredibly disgusting video, even though the abusive mother has reportedly already been arrested.
The video was posted on March 6. More than 115,000 people “like” the video — Facebook’s way of measuring approval — and 32,124 have shared it with others.
So there’s no telling how many people around the world have actually seen it. Maybe even your kids have!
Facebook is full of this sort of crap. And I will keep bringing up Facebook’s amazing lack of judgment until the company either voluntarily fixes the problem of inappropriate material on this site or advertisers and shareholders revolt.
By the way, a law-enforcement agency in the US is already looking into the matter. and Facebook doesn’t even know it.
And it ain’t the lazy FBI. Facebook hired a former agent, Emily Vacher, as its “trust and safety officer” to handle things like this.
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Today I’m so proud of the rest of the media. It took The New York Times and other media outlets only half a decade to figure out that the commodities markets were being rigged by Wall Street.
It’s the sort of thing you can ignore for only so long.
As I wrote for the umpteenth time a few weeks ago, oil and gasoline prices have been rising sharply, even though demand was down, because Wall Street was playing games.
The Times, in a front-page story this past Sunday, did add a few more commodities to its list of those being manipulated — a practice that costs consumers billions of dollars. So I’ll give it credit for that.
Now let’s see if the Federal Reserve and other government regulators let Wall Street continue to get away with this nonsense to the detriment of US consumers and the country itself.
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Even Blackstone could be intimidated by rising housing prices.
The ultra-rich Wall Street firm already owns 32,000 houses throughout the US, up from 22,000 when I last visited this subject in April.
A spokesman for the company says Blackstone plans to keep buying, but the pace of those purchases could slow as prices rise.
Blackstone is one of several big-name Wall Street firms whose purchases have been propping up the housing market in some areas of the country. But these buyers have also been causing prices to rise rapidly.
With mortgage rates now climbing, the boom in housing could soon bust.