08-14-2021, 05:13 PM
** 11-Aug-2021 World View: Computing inflation
Let me try this a different way that should (if there's any sense left
in the world) end the argument.
The Consumer Price Index (CPI) is a data series that has been
published for a long time by the Labor Department.
I am applying the Law of Reversion of the Mean to this series,
combined with observations about public debt, the velocity of money,
and generational era. This is pretty much a mathematical,
non-ideological, completely mechanical calculation. I actually have
no dog in this fight other than to use these mathematical tools and
report the result. If the CPI were to jump to hyperinflationary
levels, then my tools would be wrong and I'd have to reexamine the
tools, but so far that hasn't been necessary.
I agree that changes to the CPI are relevant to the methodology I use,
but so far this hasn't been a problem. In particular, if the Labor
Dept "miscomputes" the CPI in the same way every month, then the Law
of Reversion of the Mean should still apply. To put it another way,
if the Labor Dept uses a mathematical, non-ideological, completely
mechanical method for computing the CPI each month, and the CPI is
wrong in the same way each month, then the methology that I use should
still work.
Questions like whether I personally have ever had a decrease in living
expenses are perhaps interesting (though invasive), but irrelevant.
The methodology that I use is not affected by my personal living
expenses.
So my point is that you may have a completely different way of
computing inflation. Your way of computing inflation may include
measuring your own living expenses, or the living expenses of others.
That's fine, but irrelevant to my computation. If, by chance, you've
compiled the values of your version of inflation each month for the
last few decades, then post the results and I'll try applying the Law
of the Reversion of the Mean to your data series, and see what we come
up with.
Cool Breeze" Wrote:> Do you realize that the government has changed and constantly
> changes the CPI? It has also happened more frequently, for
> whatever reason, during the last 40 years.
Let me try this a different way that should (if there's any sense left
in the world) end the argument.
The Consumer Price Index (CPI) is a data series that has been
published for a long time by the Labor Department.
I am applying the Law of Reversion of the Mean to this series,
combined with observations about public debt, the velocity of money,
and generational era. This is pretty much a mathematical,
non-ideological, completely mechanical calculation. I actually have
no dog in this fight other than to use these mathematical tools and
report the result. If the CPI were to jump to hyperinflationary
levels, then my tools would be wrong and I'd have to reexamine the
tools, but so far that hasn't been necessary.
I agree that changes to the CPI are relevant to the methodology I use,
but so far this hasn't been a problem. In particular, if the Labor
Dept "miscomputes" the CPI in the same way every month, then the Law
of Reversion of the Mean should still apply. To put it another way,
if the Labor Dept uses a mathematical, non-ideological, completely
mechanical method for computing the CPI each month, and the CPI is
wrong in the same way each month, then the methology that I use should
still work.
Questions like whether I personally have ever had a decrease in living
expenses are perhaps interesting (though invasive), but irrelevant.
The methodology that I use is not affected by my personal living
expenses.
So my point is that you may have a completely different way of
computing inflation. Your way of computing inflation may include
measuring your own living expenses, or the living expenses of others.
That's fine, but irrelevant to my computation. If, by chance, you've
compiled the values of your version of inflation each month for the
last few decades, then post the results and I'll try applying the Law
of the Reversion of the Mean to your data series, and see what we come
up with.
