Leading Bush economists said

[10010011]

I swear I heard this the radio this morning.

A Leading Bush economists said "If you ignore all the things whose price has gone up in the past year, then prices over all have stayed the same or gone down."

So if you just ignore the bad news everything looks rosey!

 

[gmichael]

I swear I heard this the radio this morning.

A Leading Bush economists said "If you ignore all the things whose price has gone up in the past year, then prices over all have stayed the same or gone down."

So if you just ignore the bad news everything looks rosey!

Now that is funny. Did the Weather man say, "if this weather keeps up, there will be no change."?

 

[Audiacc]

I swear I heard this the radio this morning.
A Leading Bush economists said "If you ignore all the things whose price has gone up in the past year, then prices over all have stayed the same or gone down."

Huh? Well they said: 0 - x + x = 0
What's wrong with this? It is actually logically true.

 

[furrycute]

Yep, they are also the same bunch back in 2000 who made the prediction that the nation would have huge surpluses for the next 10 years...

 

[MDS]

That statement was most likely made by someone who does NOT agree with the way the CPI (consumer price index) is calculated, rather than as a statement of fact. The headline CPI number is the 'core cpi' which EXCLUDES food and energy - you know all the things that have had a huge run up in price. If you exclude them, it doesn't look too bad.

Another statistical wizardry they use is known as 'hedonic' pricing which is where they make up a 'quality' improvement and adjust the actual price increase downward on the idea that the quality has improved so much that the real price is not higher. That is most often applied to things like computers where the actual price has stayed the same or increased slightly but since processors are so much faster and every other type of hardware has made huge improvements over the years, they actually subtract from the cpi.

Then of course there is 'substitution'. If the cpi basket includes say apples and apples have gone way up in price, then they remove apples from the calculation and substitute oranges if they haven't gone up as much. This is the theory that people will switch to a lower priced alternative so we can just ignore the one that increased in price.

Take all of these things together and the cpi really is useless and way understates inflation. That is why your more sane economists and financial pundits will make flippant comments like 'if you take out everything that went up in price, then inflation is low' - because that is EXACTLY what they do!

No wonder economics is known as the 'dismal science'.

 

[gmichael]

That statement was most likely made by someone who does NOT agree with the way the CPI (consumer price index) is calculated, rather than as a statement of fact. The headline CPI number is the 'core cpi' which EXCLUDES food and energy - you know all the things that have had a huge run up in price. If you exclude them, it doesn't look too bad.

Another statistical wizardry they use is known as 'hedonic' pricing which is where they make up a 'quality' improvement and adjust the actual price increase downward on the idea that the quality has improved so much that the real price is not higher. That is most often applied to things like computers where the actual price has stayed the same or increased slightly but since processors are so much faster and every other type of hardware has made huge improvements over the years, they actually subtract from the cpi.

Then of course there is 'substitution'. If the cpi basket includes say apples and apples have gone way up in price, then they remove apples from the calculation and substitute oranges if they haven't gone up as much. This is the theory that people will switch to a lower priced alternative so we can just ignore the one that increased in price.

Take all of these things together and the cpi really is useless and way understates inflation. That is why your more sane economists and financial pundits will make flippant comments like 'if you take out everything that went up in price, then inflation is low' - because that is EXACTLY what they do!

No wonder economics is known as the 'dismal science'.

This all falls under the heading of Creative Accounting.

 

[Mort Corey]

Then of course there is 'substitution'. If the cpi basket includes say apples and apples have gone way up in price, then they remove apples from the calculation and substitute oranges if they haven't gone up as much. This is the theory that people will switch to a lower priced alternative so we can just ignore the one that increased in price.

They do the same tricks with the Dow Jones Industrial Average.

Mort

 

[mtrycrafts]

This all falls under the heading of Creative Accounting.

Is that anything like Enron Accounting???

 

[gmichael]

Is that anything like Enron Accounting???

I don't have access to the exact figures, but my guess would be yes. I'm sure that they are very similar. Maybe we should not buy any stock from our own country.