tag:blogger.com,1999:blog-11719208.post5881262871730568798..comments2023-11-05T04:36:14.223-08:00Comments on The Mess That Greenspan Made: Politics, Wall Street, and the FedTimhttp://www.blogger.com/profile/16530974968126497397noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-11719208.post-52908281953971960582008-03-06T12:08:00.000-08:002008-03-06T12:08:00.000-08:00Nominal GDP is measured by monetary flows (MVt). ...Nominal GDP is measured by monetary flows (MVt). It is mathematically impossible to miss an economic forecasts. (MVt) encompasses everything - including the most comprehensive and accurate measure of inflation. So there was no excuse for the ignorance concerning the impact of administering a low federal funds rate, for an excessive period of time.Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-11719208.post-10922655707735632312008-02-28T14:25:00.000-08:002008-02-28T14:25:00.000-08:00Most of the individual price components are quite ...Most of the individual price components are quite good. Never before has a government collected so much useful data on consumer prices and it is all there for anyone to look through. Unfortunately, the problem is that the end product - "annual inflation" - has been so corrupted with all of these changes over the years to serve the political purpose of extending the fiat money system for as long as possible while having the effect of inflicting much pain on the underclasses. Maybe it's time for another "free cheese" program.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-88380668777674534732008-02-28T14:05:00.000-08:002008-02-28T14:05:00.000-08:00The big thing they changed to be able to manipulat...The big thing they changed to be able to manipulate the CPI is called Hedonic Quality Adjustment; you can find some documentation about it on the CPI info pages (http://www.bls.gov/cpi/) or through google searches. It is based on the theory that items in the CPI should be based on only the feature set when the item was added to the CPI, and future versions of the item are calculated as an arbitrary percentage of the actual future item, based on what percentage would constitute the identical feature set to the item originally added to the CPI. A page on the general idea is:<BR/>http://en.wikipedia.org/wiki/Hedonic_regression<BR/><BR/>By adjusting the price of items to match the arbitrary percentage of the original item which exists in the new item, the CPI can (and is) set arbitrarily lower. For example, a new car might be considered to have 5x the features of a car which was added to the CPI 20 years ago; therefore if the car is $25,000, it's only $5000 for purposes of the CPI (even though it's obviously impossible to buy the $5000 version of the car). Basically, hedonic regression allows the CPI to be essentially constant while actual prices inflate without bound, since manufacturers are always adding new "features" as they produce new versions of products.<BR/><BR/>Seriously, the CPI is 100% bogus as a measure of consumer price change. On the other hand, it's a great way to claim inflation in under control while increasing the monetary supply by 10-15% annually, with essentially flat real GDP.Nickhttps://www.blogger.com/profile/05587036619182019599noreply@blogger.comtag:blogger.com,1999:blog-11719208.post-32264706814754727102008-02-28T13:26:00.000-08:002008-02-28T13:26:00.000-08:00It's my understanding that the BLS staff that coll...It's my understanding that the BLS staff that collects the data and calculates the official inflation rates have fairly strict guidelines as to what they can and can't do and they do their job exceedingly well.<BR/><BR/>It is only when the major changes to the "process" come along (e.g., 1983 OER for housing costs and the Boskin commission in the 1990s) that major changes to the calculation occur. If memory serves, the most recent change has something to do with chain-weighting and is currently being kept in parallel with the existing measure until such time that there is a need to reduce inflation by about one percent per year. <BR/><BR/>Seriously, that's about how it works.Timhttps://www.blogger.com/profile/16530974968126497397noreply@blogger.comtag:blogger.com,1999:blog-11719208.post-2556156705817124622008-02-28T10:51:00.000-08:002008-02-28T10:51:00.000-08:00The current CPI already allows arbitrary adjustmen...The current CPI already allows arbitrary adjustment by the government to suit their needs, that's what they changed circa 1980. The only problem is a perception and confidence issue: it's going to continue to strain credulity to claim inflation at 4% when other stable countries with currencies pegged to the US dollar and less manipulatable inflation statistics are measuring 12% inflation.<BR/><BR/>At some point, most investors will realize that the US dollar is declining in value ~10% annually, and demand greater returns to buy US bonds and other US investments. When the government needs to offer 15% return on bonds to finance the interest in the national debt, and people start to lose confidence in the long-term viability of the US currency, stuff gets dicey. Everybody knows what happens after that, but like the housing bubble burst, nobody is willing to acknowledge it until it actually has happened, because it's too scary of a thought to even think/mention.Nickhttps://www.blogger.com/profile/05587036619182019599noreply@blogger.com