- "We have always maintained that rising oil prices act as a tax on consumers, and are therefore counter-inflationary as they have a negative impact on consumer discretionary spending power." (No mention of core inflation)
If you want a good discussion of "the other side of the issue" then I recommend reading
- The real numbers, to most economically minded Americans, would be a face full of cold water. Based on the criteria in place a quarter century ago, today's U.S. unemployment rate is somewhere between 9 percent and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession.
- Readers should ask themselves how much angrier the electorate might be if the media, over the past five years, had been citing 8 percent unemployment (instead of 5 percent), 5 percent inflation (instead of 2 percent), and average annual growth in the 1 percent range (instead of the 3–4 percent range). We might ponder as well who profits from a low-growth U.S. economy hidden under statistical camouflage. Might it be Washington politicos and affluent elites, anxious to mislead voters, coddle the financial markets, and tamp down expensive cost-of-living increases for wages and pensions?
- Since the Consumer Price Index was calculated by tracking a bundle of prices, so-called "core" inflation would simply exclude, because of "volatility," categories that happened to be particularly troublesome: at that time, food and energy. Core inflation could then be spotlighted when the "headline" number was embarrassing, as it was in 1973 and 1974. (The economic commentator Barry Ritholtz has joked that core inflation is better called "inflation ex-inflation"— i.e., inflation after the inflation has been excluded.)
- Nothing, however, can match the tortured evolution of the third key number, the somewhat misnamed Consumer Price Index. Government economists themselves admit that the revisions during the Clinton years worked to reduce the current inflation figures by more than a percentage point, but the overall distortion has been considerably more severe. Just the 1983 manipulation, which substituted "owner equivalent rent" for home-ownership costs, served to understate or reduce inflation during the recent housing boom by 3 to 4 percentage points.
Kirk Comment: An item I see missing from CPI calculations is the decrease in quality of customer service. You may get an item 50% cheaper these days but how much do you save if you value your time and spend hours on the phone with people in other countries to get information you should not have had to ask for? It is probably not a big deal until you add up all the time you could spend on the phone disputing bills to getting help for products that don't work rather than just live with it because it is not worth the hassle.
Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
by Kevin Phillips (Author)
J. Lewis wrote: "I have just ordered this book, but based on the excerpt published in this month's Harper's, it is a must-read for anyone concerned about our nation's economy and our position in the world. It appears to be lucid and well written, and it is not a political screen. (The bad guys are every administration in recent memory, not just the Bushes.)
Simply put, over the past 30-40 years, various administrations have changed the statistical bases of economic analysis. If consistent standards were used, inflation and unemployment would be shown to be much higher and the GNP much lower than we believe. We are losing the economic battle, but do not understand the extent to which we are because we have succeeded in lying to ourselves."