Last week, I wrote about how there's no significant inflation in the U.S. economy and that critics of the Federal Reserve's policies, chiefly Ron Paul, should admit that they were wrong and find something else to complain about. Such as Fed Chairman Ben Bernanke's inability to address the central bank's other mandate, maximum employment. With an unemployment rate at 8.3 percent, we're far from it.
The response from the commenters was swift, copious — and merciless! I got 120 comments, by far the most ever for a DeBord Report post, and all the one's that I didn't write myself disagreed with everything I had to say. Well, one didn't entirely disagree. This person just said I was as off-the-mark as Kenneth Rogoff and Paul Krugman and shouldn't be blamed.
I'll hasten to say at this point that I'm really fine with with this. I actually like being vigorously attacked, and I think that a good blogger brings the comment stream into the process. And so I'm doing that now (the comments are unedited, by the way).
"James" brought up a point that many others also did: that the government numbers can't be trusted, that the Consumer Price Index, a measure of inflation, is bogus; and that the BLS's unemployment data is just as faulty:
Your assumptions that the figures the establishment supplies are correct. Not in your dreams. Your entire analysis is incorrect. First and foremost unemployment is not 8.3 %., this is recognized by polaticians [sic] and economists alike. Over 1.2 million have dropped out of the work force and do not reflect on the "numbers" you quote. Second...the printing of money out of thin air and increasing the money supply( through credit and debt) and keeping interest at zero creates inflation through devaluation of currency. Wiping out saving of the people who have saved throughout their lives to Collect zero from their hard earned savings.
You must go back to the calculations of the past to evaluate the real inflation that is eroding our buying power every day. Food , fuel, medical, and all the essentials are skyrocketing. Non essentials are down. The government has changed the way they calculate to obscure the truth about why is really taking place in our economy. But people from all walks of life are starting to understand what is going on thanks to Ron Paul who contrery to what you have claimed in this pie[c]e of trash article is right on. Please stop writing what you do not know anything about...get and education and I suggest getting one from Ron Paul.
OK, "James" was a bit rough on me at the end there. But his point needs to be addressed. I'm looking at one set of stats, he (assuming gender here) is looking at another. Which do you accept? I run the risk of being tarred an apologist for the establishment if I stick with the official stats (CPI, BLS), but I'm not inclined to use alternative sources except as a way of refining the official data, by providing an additional point of view. For example, talking about the broader U-6 unemployment rate, rather than always looking at the main U-3 rate.
"chmst1999" also complained about the official data:
Again, your premise is faulty. Please write a story on the historical methods the U.S. has used to calculate inflation since about 1970. Afterward, please use one of the prior methods (e.g., 1980) to calculate our inflation rate today. You will find that inflation, using the government's metric in 1980, is over 8%. However, when you use the hedonistic calculations that the government uses today, our calculated inflation level is just over 2%. What you fail to notice is that today's calculation disregard things such as fuel and food, but the 1980 calculations include these items. Which is correct? I would argue that you should utilize the same metric throughout the whole time period. After all, it is not fair to change the calculator in the middle.
Here's an example. I owned an 11-year-old dog in 1980. We were told that, in "dog years", he was 77 years old (7x11). I owned a dog in 2010 who was also 11 years old. However, we were told that a better calculation, given the fact that food and vet care was better, was (5x11). In 2010, he was 55 years old. In reality, the dogs were the same age, but the calculations caused dramatic differences in projected ages. If we used the same calculation in 2010 as we did in 1980, there would be no difference in "dog years" between either dog.
If you would like to see what our inflation would be using 1990 our 1980 parameters, please go to www.shadowstats.com for a full review.
Shadow Stats, for the record, is a controversial site that calculates data...differently from the federal government. This has given it a tilting-at-windmills punk-romantic aura. It charges $175 a year for a subscription. Reasonable economists with no love for the way things were run until we entered the financial crisis have questioned why anyone pays attention to it.
But, to "chmst1999's" point, sure, you could multiply by 7 or you could multiply by 5, and your choice might affect your perception of your dog's health: 5 gives you a peppy middle-aged pooch, and 7 gives you a haggard elderly hound. But then again, you have to decide whether you believe that the better food/better vet care argument makes sense. You're not debating whether the dog isn't 11. You're into the meta-discussion of how you should perceive the basic data.
The CPI "core" measurement of inflation, which excludes food and fuel — And boy, does that irritate some commenters! — is useful because as we've seen in the past few years, fuel in particular fluctuates far too much, and food prices can actually fall too much, due to the vastly improved nature of production.
Furthermore, and I'll catch it for this, I think the "hedonic" reworking undertaken during the Clinton Administration was a good idea. The method hadn't been revised for more than 30 years up to that point.
So there's my follow-up to a few commenters, whose comments I welcome and value, no matter how much of a misguided fool they might think I am. I'll try to get to a few more in the next day or so.