Dollar vs Euro

[gator10010]

Originally Posted by philnotfil

If you spend half of your income on food, the EPI does do a better job of reflecting inflation. EPI makes some odd assumptions about how people spend their money. It doesn't include housing, which is the single largest expense for most households, and it overemphasizes energy and food which are much more volatile.

Here is a good graph showing the differences:


If you truly believe that inflation was up 15% in 2008, and down 12% in 2009, and back up 5% in 2010, then EPI is the metric for you. I don't think that overstating the volatility in prices is effective for anything other than fearmongering.

EPI doesn't count food for half of your budget. I'm talking about individual purchasing power which affects daily commerce in our discretionary spending economy. Our economy, like it or not, is a consumption based economy that depends on discretionary spending.

EPI includes only the prices of goods and services that the average consumer purchases at least once a month. The index includes food and beverages, household energy products and services, other utilities, motor fuel, prescription drugs, child care fees, phone services, personal care products, and other goods and services purchased on a regular basis. These frequently purchased products in the Everyday Price Index make up only about 39 percent of total household spending. But changes in the prices of these products are what people experience day to day.

It doesn't include housing but most people do not renegotiate rent or mortgage payments on a regular basis. Most people's housing is a fixed expense.

As for 2008 and 2009, have you already forgotten the gas prices at the pump in those two different years? 2009 prices also explain the Fed's panic mode about printing money.

So let me ask you, in June of 2008 were you more concerned with your mortgage payment shooting through the roof or were you concerned about how $4/gallon gasoline was affecting your monthly budget?

Most Americans were concerned with $4/gallon gasoline.

[Burke]

Gold has been used for thousands of years as a medium of exchange, which makes it money.

Arguing that using as money again, whether the exchange is direct or through a depository, is barter is silly.

[philnotfil]

Originally Posted by gator10010

EPI doesn't count food for half of your budget. I'm talking about individual purchasing power which affects daily commerce in our discretionary spending economy. Our economy, like it or not, is a consumption based economy that depends on discretionary spending.

EPI includes only the prices of goods and services that the average consumer purchases at least once a month. The index includes food and beverages, household energy products and services, other utilities, motor fuel, prescription drugs, child care fees, phone services, personal care products, and other goods and services purchased on a regular basis. These frequently purchased products in the Everyday Price Index make up only about 39 percent of total household spending. But changes in the prices of these products are what people experience day to day.

It doesn't include housing but most people do not renegotiate rent or mortgage payments on a regular basis. Most people's housing is a fixed expense.

As for 2008 and 2009, have you already forgotten the gas prices at the pump in those two different years? 2009 prices also explain the Fed's panic mode about printing money.

So let me ask you, in June of 2008 were you more concerned with your mortgage payment shooting through the roof or were you concerned about how $4/gallon gasoline was affecting your monthly budget?

Most Americans were concerned with $4/gallon gasoline.

Yes, if you ignore the fixed costs, the costs that remain fluctuate much more. And if you only look at our OOC schedule, the Gators play a pretty weak schedule every year.

EPI is much more volatile, which makes it more useful for scare tactics, but not much else.

[gator10010]

Originally Posted by philnotfil

Yes, if you ignore the fixed costs, the costs that remain fluctuate much more. And if you only look at our OOC schedule, the Gators play a pretty weak schedule every year.

EPI is much more volatile, which makes it more useful for scare tactics, but not much else.

Was $4/gallon gasoline a scare tactic in 2008? No it wasn't. It was affecting real people in their every day life and monthly purchases.

I'm guessing since you ignored my question about 2008/2009 you all of the sudden remembered the difference in the prices at the pump for those two years. I'm also assuming that you connected the dots and realized how much that was affecting Americans in their daily lives thus recognizing the impact food and energy have in our in our monthly budgets.

We have an economy that depends on discretionary spending. We have built ourselves a service oriented consumption economy. So what is more important in an economy based on discretionary spending?

[mdgator05]

Originally Posted by gator10010

Yes I realize the CPI has several measures of inflation, when the media and government talk about CPI the majority of the time they are talking about the "core" CPI. Which in you link states the core CPI does not reflect food and energy prices.

If you google US CPI in news search, at 5PM on 1/11, the first relevant articles returned are:

http://www.reuters.com/article/2012/...8NE98S20121214

The Labor Department said on Friday its Consumer Price Index dropped 0.3 percent last month as a sharp decline in gasoline prices offset increases in other areas. It was also the largest drop since May and followed a 0.1 percent gain in October.

http://articles.marketwatch.com/2012...-stock-markets

European stock markets declined in afternoon action on Friday, after U.S. data showed consumer prices fell 0.3% in November, which was a bigger drop than expected.

http://www.bloomberg.com/news/2012-1...his-month.html

Treasuries Rally for First Time in Four Days as U.S. CPI Falls

The headline CPI number, which includes energy and food, declined 0.3% while the core increased 0.1%.

So you are simply wrong on this account.

[mdgator05]

Originally Posted by gator10010

EPI doesn't count food for half of your budget. I'm talking about individual purchasing power which affects daily commerce in our discretionary spending economy. Our economy, like it or not, is a consumption based economy that depends on discretionary spending.

EPI includes only the prices of goods and services that the average consumer purchases at least once a month. The index includes food and beverages, household energy products and services, other utilities, motor fuel, prescription drugs, child care fees, phone services, personal care products, and other goods and services purchased on a regular basis. These frequently purchased products in the Everyday Price Index make up only about 39 percent of total household spending. But changes in the prices of these products are what people experience day to day.

It doesn't include housing but most people do not renegotiate rent or mortgage payments on a regular basis. Most people's housing is a fixed expense.

As for 2008 and 2009, have you already forgotten the gas prices at the pump in those two different years? 2009 prices also explain the Fed's panic mode about printing money.

So let me ask you, in June of 2008 were you more concerned with your mortgage payment shooting through the roof or were you concerned about how $4/gallon gasoline was affecting your monthly budget?

Most Americans were concerned with $4/gallon gasoline.

Housing is not regularly renegotiated, so for people who are not changing housing, you are right that price changes don't affect them much. However, this is an issue of depth versus breadth. While housing might not affect most people in a given month, the people a change in housing prices do affect are likely to be more heavily affected than any person is by a similar percentage change in gas prices.

So while if you have a representative economy of 100 people, all 100 people might be affected by a 1% reduction in their purchasing power based on a 20% increase in fuel prices. Meanwhile, 96 of those people might not be affected at all by a change in housing. However, the 4 that are, who in this example also experience a 20% increase in housing, might endure an 8% decrease in purchasing power.

The arbitrary removal of any products makes the index somewhat more subjective, which somewhat explains the wider variance in their measure.

[gator10010]

Originally Posted by mdgator05

If you google US CPI in news search, at 5PM on 1/11, the first relevant articles returned are:

http://www.reuters.com/article/2012/...8NE98S20121214



http://articles.marketwatch.com/2012...-stock-markets



http://www.bloomberg.com/news/2012-1...his-month.html


The headline CPI number, which includes energy and food, declined 0.3% while the core increased 0.1%.

So you are simply wrong on this account.

Economist focus on the core CPI.

Ok, the Headline CPI, (which is different the core CPI) uses food and energy, but it also uses large infrequent purchases in their equation such as, housing, car purchases, large appliance purchases, etc. Not only are these items not purchased on a regular monthly basis, traditionally these items have a much smaller rate of inflation which offsets the items that are more volatile, like food and energy, and misleads the average American public into thinking inflation is not near as bad as it is.

[philnotfil]

Originally Posted by gator10010

Was $4/gallon gasoline a scare tactic in 2008? No it wasn't. It was affecting real people in their every day life and monthly purchases.

I'm guessing since you ignored my question about 2008/2009 you all of the sudden remembered the difference in the prices at the pump for those two years. I'm also assuming that you connected the dots and realized how much that was affecting Americans in their daily lives thus recognizing the impact food and energy have in our in our monthly budgets.

We have an economy that depends on discretionary spending. We have built ourselves a service oriented consumption economy. So what is more important in an economy based on discretionary spending?

Or that your opening statement was so absurd that I didn't give any credence to your supporting statements.

[gator10010]

Originally Posted by mdgator05

Housing is not regularly renegotiated, so for people who are not changing housing, you are right that price changes don't affect them much. However, this is an issue of depth versus breadth. While housing might not affect most people in a given month, the people a change in housing prices do affect are likely to be more heavily affected than any person is by a similar percentage change in gas prices.

So while if you have a representative economy of 100 people, all 100 people might be affected by a 1% reduction in their purchasing power based on a 20% increase in fuel prices. Meanwhile, 96 of those people might not be affected at all by a change in housing. However, the 4 that are, who in this example also experience a 20% increase in housing, might endure an 8% decrease in purchasing power.

The arbitrary removal of any products makes the index somewhat more subjective, which somewhat explains the wider variance in their measure.

I think we may be looking at this from two different angles. I'm talking about the individual purchasing power of consumers on a monthly basis. Our economy needs consumption to thrive.

The average American lives in a residence for an average of about 7 years. So once every 7 years individual purchasing power will be affected in a housing change.

Once every 7 years is a lot different than once every 7 days.

By the way housing prices are down which is also offsetting the current inflation rate. For example an individual with a $1,000.00 mortgage payment may have lost equity in his house but he will not feel the effect of that lose for roughly 7 years.

That same individual is feeling the effect of food an energy inflation every day at the pump and at the grocery store.

[gator10010]

Originally Posted by philnotfil

Or that your opening statement was so absurd that I didn't give any credence to your supporting statements.

So $4/gallon is absurd and doesn't play a role in our economy?

or are you blatantly ignoring the obvious because you are wrong?

You ridiculed the EPI numbers from 2008 to 2009, when I pointed out the obvious differences and how it affected Americans you no longer want to discuss the differences in the two charts from 2008 to 2009.

[mdgator05]

Originally Posted by gator10010

Economist focus on the core CPI.

Ok, the Headline CPI, (which is different the core CPI) uses food and energy, but it also uses large infrequent purchases in their equation such as, housing, car purchases, large appliance purchases, etc. Not only are these items not purchased on a regular monthly basis, traditionally these items have a much smaller rate of inflation which offsets the items that are more volatile, like food and energy, and misleads the average American public into thinking inflation is not near as bad as it is.

Wait, first it was the media and the government. Then when it isn't the media that uses core cpi (and btw, the first paragraph of the government release contains the headline number but not the core number, which doesn't show up until the third paragraph), now it is economists. It sounds like you are desperately searching for somebody that primarily uses core CPI. Economists prefer the appropriate measure for what they are attempting to discover. If they are trying to smooth month-by-month volatility in pursuit of a long-term finding, then yes they prefer core. If they are attempting to deal with shorter term economic issues, in which the volatility of energy and food is important, then they prefer the headline number.

Basically, the best measure long term is the core CPI, since price changes in volatile markets will eventually be reflected in less volatile markets. The best measure medium term is the headline CPI, since changes in those volatile markets won't completely pass through to consumers in the medium-term. In the short term, the EPI might be a useful metric, as long-term purchases in a short term period are rare. But over the medium and long-terms, the EPI becomes less and less useful due to the increasing incidence of purchase (I might not purchase a house this month, but I probably will over the next 15-20 years) for the goods it leaves out, as well as the downside of dramatically high variance (huge amounts of statistical noise).

[gator10010]

Originally Posted by mdgator05

Wait, first it was the media and the government. Then when it isn't the media that uses core cpi (and btw, the first paragraph of the government release contains the headline number but not the core number, which doesn't show up until the third paragraph), now it is economists. It sounds like you are desperately searching for somebody that primarily uses core CPI. Economists prefer the appropriate measure for what they are attempting to discover. If they are trying to smooth month-by-month volatility in pursuit of a long-term finding, then yes they prefer core. If they are attempting to deal with shorter term economic issues, in which the volatility of energy and food is important, then they prefer the headline number.

Basically, the best measure long term is the core CPI, since price changes in volatile markets will eventually be reflected in less volatile markets. The best measure medium term is the headline CPI, since changes in those volatile markets won't completely pass through to consumers in the medium-term. In the short term, the EPI might be a useful metric, as long-term purchases in a short term period are rare. But over the medium and long-terms, the EPI becomes less and less useful due to the increasing incidence of purchase (I might not purchase a house this month, but I probably will over the next 15-20 years) for the goods it leaves out, as well as the downside of dramatically high variance (huge amounts of statistical noise).

From your link:

http://www.bls.gov/cpi/cpiqa.htm

"Has the BLS removed food or energy prices in its official measure of inflation?

No. The BLS publishes thousands of CPI indexes each month, including the headline All Items CPI for All Urban Consumers (CPI-U) and the CPI-U for All Items Less Food and Energy. The latter series, widely referred to as the "core" CPI, is closely watched by many economic analysts and policymakers under the belief that food and energy prices are volatile and are subject to price shocks that cannot be damped through monetary policy. However, all consumer goods and services, including food and energy, are represented in the headline CPI."

So, when you are having your morning coffee watching the Today show and Paul Krugman comes on talking about CPI, more than likely he is referring to the core CPI. Likewise, when CNBC has a "policymaker" on and this policymaker is referring to CPI more than likely he is referring to the core CPI.

That is coming from your link so I'm sure the source is impeccable.

[philnotfil]

Originally Posted by gator10010

So $4/gallon is absurd and doesn't play a role in our economy?

or are you blatantly ignoring the obvious because you are wrong?

You ridiculed the EPI numbers from 2008 to 2009, when I pointed out the obvious differences and how it affected Americans you no longer want to discuss the differences in the two charts from 2008 to 2009.

No, I ridiculed the idea that only discretionary spending was important in our economy. I agree that gas prices going up and down makes a difference in the lives of Americans. I disagree that gas prices provide a better measure of inflation than overall prices for everything that Americans spend money on.

[mdgator05]

Originally Posted by gator10010

From your link:

http://www.bls.gov/cpi/cpiqa.htm

"Has the BLS removed food or energy prices in its official measure of inflation?

No. The BLS publishes thousands of CPI indexes each month, including the headline All Items CPI for All Urban Consumers (CPI-U) and the CPI-U for All Items Less Food and Energy. The latter series, widely referred to as the "core" CPI, is closely watched by many economic analysts and policymakers under the belief that food and energy prices are volatile and are subject to price shocks that cannot be damped through monetary policy. However, all consumer goods and services, including food and energy, are represented in the headline CPI."

So, when you are having your morning coffee watching the Today show and Paul Krugman comes on talking about CPI, more than likely he is referring to the core CPI. Likewise, when CNBC has a "policymaker" on and this policymaker is referring to CPI more than likely he is referring to the core CPI.

That is coming from your link so I'm sure the source is impeccable.

Wrong again.

Since you picked Krugman in particular:

http://krugman.blogs.nytimes.com/201...yperinflation/

That is the all item one (headline), not the core.

[gator10010]

Originally Posted by mdgator05

Wrong again.

Since you picked Krugman in particular:

http://krugman.blogs.nytimes.com/201...yperinflation/

That is the all item one (headline), not the core.

This is the best you got? Laughable.

I was only using Paul Krugman's name because he is a popular economist but if this is what you want to hang your hat on so be it.

[gator10010]

Originally Posted by philnotfil

No, I ridiculed the idea that only discretionary spending was important in our economy. I agree that gas prices going up and down makes a difference in the lives of Americans. I disagree that gas prices provide a better measure of inflation than overall prices for everything that Americans spend money on.

I am not saying that discretionary spending is the only important factor in our economy but when you have a service based economy like the United States has you cannot ignore discretionary spending.

[mdgator05]

Originally Posted by gator10010

This is the best you got? Laughable.

I was only using Paul Krugman's name because he is a popular economist but if this is what you want to hang your hat on so be it.

So what would you consider the fact that the best example you could come up with isn't even true? I consider THAT laughable.

As for the rest of it, Core CPI is often used by economists and policy makers in the measure of long-term inflation, as it eliminates a considerable amount of variance that could result in the researcher committing a Type II error. In addition, energy and food price will naturally at least partially pass through into this data. Many economists use headline CPI when dealing with more short term issues, since the additional variance is less of a problem for these sorts of analyses. Again, the problem dictates the measure, not vice versa.