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I agree--the whole basket of goods is nonsense. We should be measuring inflation based on 1 single consumer good. You get a much better idea of overall inflation that way.
And look up arbitrary starting points while you're thinking of why I'm wrong.
The BLS states the CPI does not account for food and energy prices because they are "volatile". However, Janet Yellen stated that the Fed uses the CPI to manage interest rates so that "inflation" remains at or near 2%.
So I guess we should get used to the mexican peso pricing in 25 years...
Gas was around $1.05 a gallon back in March 1991. Assuming 3% annual inflation, it should be around $2.10 a gallon now, or $2.60 if 4%.
Granted, there is more fuel efficiency available but unless you drive a hybrid, not a great enough efficiency gain to compensate for such a large increase in gasoline prices.
The cost of food is radically higher than 30 years ago. The cost of manufactured goods, however, isn't changed nearly as much and in some instances may be lower. This is due to advances in manufacturing, robotics, shipping technology improvements, an of course, off shoring.
However, if you compare apples to apples, where the energy/quality of a product is compared to today, and only use domestically produced products, what would that index look like?
The BLS states the CPI does not account for food and energy prices because they are "volatile". However, Janet Yellen stated that the Fed uses the CPI to manage interest rates so that "inflation" remains at or near 2%.
This is incorrect. The CPI includes food and energy (and housing) and is what is managed. The "core" CPI does not.
This is incorrect. The CPI includes food and energy (and housing) and is what is managed. The "core" CPI does not.
True, as it seems the Federal Reserve relies on "core" inflation.
http://www.frbsf.org/education/publications/doctor-econ/2004/october/core-inflation-headline
The Big Mac Index vs. the Consumer Price Index
Since 1986, the price of a Big Mac has increased 171% from $1.60 to $4.33 today. During this same time period, the federal government reported consumer price index (CPI) has increased at a much lower rate of 109%…
see: http://www.munknee.com/the-big-mac-index-reveals-the-real-facts-on-u-s-inflation/