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Source link: http://archive.mises.org/11363/ten-years-of-prices/

Ten years of prices

January 1, 2010 by

Here is a chart on price changes on specific items between 1999 and 2009. What sense does it make to crush all of this data into a single “inflation rate”?

{ 24 comments }

DavidS January 1, 2010 at 12:03 pm

Well, at least they had the courtesy to include the very last figure – the prime rate – which as everyone knows is the root of every other figure in the list that is showing positive. Thanks for the link to the chart. Good information to share.

Sean W. Malone January 1, 2010 at 12:46 pm

Ya know, Jeffrey – you’re right – it makes little sense to lump all these items together into one giant inflation number… That said, just for fun, what happens if we do exactly that?

I only ran it once, so pardon if I made any addition/subtraction errors (though I don’t believe I did), and I discovered that based on just this chart there’s been a general price increase of 44.75% over 10 years…

And I have to point out a few horrific errors in the chart that makes this number far too low.

For instance:

1. Apple stock has split twice since 1999. So while one share may be worth $198.10, if you’d bought 1 share in ’99 at $102.81, you’d have 4 shares today each worth $198.10… So your total didn’t go up 92.69% as the chart claims, but actually by 670.74%

Big difference…

2. Taking a snapshot of housing mortgage prices in 1999 (pre-bubble) and then again in 2009 (post-burst) is silly. It depicts none of the events that have happened in the last 10 years and even gives a misleading picture suggesting that prices have declined.

3. Some of these things aren’t consumer goods at all (i.e. prime rate) and are set by the government by fiat anyway…

So yeah, there are obviously a ton of problems…but what was interesting to me is that if you do look at the consumer goods on here, you’ll notice that the inflation is substantially higher than the “stable” 3% per year rate the government always claims.

Sean W. Malone January 1, 2010 at 12:51 pm

(I accidentally included the prime rate in my average – so the average percent increase in price minus the prime rate is actually 46.92%… Either way, it’s a dumb metric, I’m just pointing out that the overall inflation is way higher than the government wants me to believe… Of course anyone with any sense can see these things in action every day when they go to the store and every year when their “cost of living increases” don’t rise nearly enough to cover the increase in price of goods.)

Sean W. Malone January 1, 2010 at 12:51 pm

(I accidentally included the prime rate in my average – so the average percent increase in price minus the prime rate is actually 46.92%… Either way, it’s a dumb metric, I’m just pointing out that the overall inflation is way higher than the government wants me to believe… Of course anyone with any sense can see these things in action every day when they go to the store and every year when their “cost of living increases” don’t rise nearly enough to cover the increase in price of goods.)

Terri K January 1, 2010 at 12:59 pm

Hahahaha, it also doesn’t include things like this:

http://consumerist.com/2009/10/northern-hopes-you-dont-notice-your-shrinking-toilet-paper.html#comments-content

The price is higher too.

Anyone who shops for household goods knows damn good and well that there’s a great deal of price inflation out there and the government figures are nothing but lies.

Tad Wimmer January 1, 2010 at 2:17 pm

As pointed out by others, the list in the referenced article is not necessarily a basket of consumer goods, nor is it a basket of producer goods, so it isn’t surprising that the numbers don’t match the CPI or PPI. Even so, thanks to Mr. Greenspan’s manipulations, even if it is reasonable to use a figure like the CPI as a metric, the metric used currently is deliberately designed to report low. (see John William’s alternate figures at http://www.shadowstats.com to see what the CPI and other metrics would be without Greenspan’s tinkering.) Had William’s figures been used instead of the government’s, the current “recession” started about about 10 years ago and has only shown “growth” for about 2 quarters.

If the CPI has any utilitiy, it is completely abrogated by the political manipulations.

Shay January 1, 2010 at 2:28 pm

I ought to pull out my grocery store receipts. I’ve got every one saved back to about 1998 (about 12 years’ worth), and all the shopping has been done in the same city over that time period.

Sean W. Malone January 1, 2010 at 5:47 pm

Shay…

Why?

HADzz January 1, 2010 at 8:56 pm

To me it doesn’t make any sense to collect all these irrelevant items into a single chart. putting the empire state visit ticket rate and a gallon of gasoline together does not have any meaning.

newson January 1, 2010 at 10:32 pm

the empire-state figure might be an outlier, due to substitution effects. no more twin towers…

EIS January 2, 2010 at 1:31 am

The New York Times price change is most telling: a 166.66% increase in price with a 80% decline in demand. That’s some serious inflation!

scott t January 2, 2010 at 2:17 am

“Measured in real dollars, gas prices peaked in March 1981 at more than $3 per gallon. We have not even come close to paying the highest real gas price in history — today’s prices are still 30% below the all-time high.”
“Gas prices since the mid-1980s have not only been more affordable as a share of income than at any time, they also have been remarkably stable. The recent small increase in gas prices relative to income is fairly insignificant.”
http://www.usatoday.com/news/opinion/editorials/2005-05-31-gas-prices-edit_x.htm

the above information is probobly pretty easy to verify. i assume its true.
why is it that gasoline when adjusted for inflation still isnt near 1980s highs?
although i remember in my area right around gulf war 1 the gas dropped to around .85 per gallon for a short while.
what have average wages increased by?
they didnt include an average labor price.
many of the staple food and electricity were in the30+ to 40 range..some much less about 3.5 percent per increase per year? is that about in lockstep with wage increases?
after rent/mort i thought that energy and food took the greatest share of income…have those items moved pretty mcuh with wage increases…or fallen?
could gold/silver/100 prcnt reserves do better than that?

scott t January 2, 2010 at 2:22 am

“Apple stock has split twice since 1999. So while one share may be worth $198.10, if you’d bought 1 share in ’99 at $102.81, you’d have 4 shares today each worth $198.10… So your total didn’t go up 92.69% as the chart claims, but actually by 670.74%”

if you bought the stock and sold it the next day…198.10…i dont know what apple stock will do ten years from now.

scott t January 2, 2010 at 2:25 am

if the cpi is abrogated what set of data do those here reccomend? previously-accurate govt reporting?
(

some other source?

scott t January 2, 2010 at 2:32 am

i read where the average hourly wage in 1999 was about 13.50
http://research.stlouisfed.org/fred2/data/AHETPI.txt
and about 18.50 today.
(dont have the link)

$13.50 in 1999 is said to buy $17.53 in 2009 according to http://www.bls.gov/data/inflation_calculator.htm
so depending which basket of vital/popular goods is purchased the wage seems to have exceeded the cpi.

Bruce Koerber January 2, 2010 at 8:06 am

Price Comparisons And Understanding Inflation.

The belief that these static data have any meaning individually or in the aggregate is a perfect example of the flawed mentality of an empiricist.

The belief that laying out the data across the whole spectrum of goods and services creates a comprehensive picture is nothing but an example of the fallacy of Walrasian empiricism.

So combine the meaninglessness of empirically derived data with more meaningless data (but more encompassing) and poof! two wrongs make a right!

Economic history – comparing a price today versus its counterpart from days past – may be interesting but it is not to be confused with economic science.

The truth that shines out from this evaluation is that the data used by these so-called ‘economists’ require ego-driven interpretation to serve their object, which is ego-driven intervention. At whatever stage in this vain and imaginary process – interpretation or intervention – empiricism is wholly unscientific.

Contrast that with the pure science of real human action. No interpretation or intervention necessary!

Counterfeiting the currency causes the purchasing power to decrease – inflation!

Fephisto January 2, 2010 at 8:46 am

scott t:

gold or shadow stats.

scott t January 2, 2010 at 1:06 pm

“Measured in real dollars, gas prices peaked in March 1981 at more than $3 per gallon. We have not even come close to paying the highest real gas price in history — today’s prices are still 30% below the all-time high.”
“Gas prices since the mid-1980s have not only been more affordable as a share of income than at any time, they also have been remarkably stable. The recent small increase in gas prices relative to income is fairly insignificant.”
http://www.usatoday.com/news/opinion/editorials/2005-05-31-gas-prices-edit_x.htm

could gold/silver/100 prcnt reserves do better than that?

does declining gas prices…a really swell product to a lot of people, speak of malinvestment as claimed by the mises lrc economizers?

scott t January 2, 2010 at 1:10 pm

“comparing a price today versus its counterpart from days past – may be interesting but it is not to be confused with economic science.”

confused with or part of?

if credit expansion/malinvestment/federal reserve/frb takes place as described by those at mises/lrc and is observed scientifically and produces declining gas prices and you have no way to compare 100 percent reserve commodity money performance in the same way….how is that scientific?

shane January 2, 2010 at 2:44 pm

When Ron Paul says the the dollars value has been reduced by 95% since the Fed was created, is that number really telling of anything other than the amount of fiat money that has been produced? I guess my question is other than looking like an exceptional number what does that mean to an average person? If the Fed wasnt created, we wouldnt have had any decline in the dollars value over time? Im relatively new to this, what can I read in specific to these questions? Ive defiantly become an Austrian in term of economics, but need to be able to support my arguments better in defense of my philosophy.

t3hsauce January 2, 2010 at 4:07 pm

Shane,

The best introduction to an Austrian perspective on dollar devaluation is going to be Murray Rothbard’s What Has Government Done to Our Money?

Link:
http://mises.org/books/whathasgovernmentdone.pdf

Jule Herbert January 3, 2010 at 10:57 am

Shane:

If you go to the website of the Minneapolis Federal Reserve site: http://www.minneapolisfed.org/
it has an price inflation calculation which uses the CPI index. If you plug in 2009 and the cost of a good or service at $100, and then compute for 1913, the calculation shows that the “same” good or service would have cost $4.64 in 1913. This backs up Congressman Paul’s contention.

scott t January 3, 2010 at 2:47 pm

is pauls contention have much meaning if

” the average hourly wage in 1999 was about 13.50
http://research.stlouisfed.org/fred2/data/AHETPI.txt
and about 18.50 today.
(dont have the link)

$13.50 in 1999 is said to buy $17.53 in 2009 according to http://www.bls.gov/data/inflation_calculator.htm

scott t January 3, 2010 at 2:56 pm

i assume paul is using govt cpi and wage stats?

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