Seems like you learned nothing from even just looking at the charts from the article… You started buying into housing when it was a significantly smaller portion of people yearly budgets and well before it started it’s 30 year climb into a bubble where its basically stayed since then. A median purchase in the 60’s and 70’s was an actual house; small but still 2-3 beds. Last year in Los Angeles, it would get you a 600sqft condo; and not a very nice one. Renting hasn’t gotten any easier either as rent prices generally tend to track housing prices, locally.

Rob,
Governments certainly have an incentive to understate the rate of inflation since the COLA is baked into a lot of different things like Social Security, etc. However, I’m not sure it is vastly understated. A lot depends on your personal circumstances and where you live. The cost of living is vastly different between NY city and rural Arkansas not to mention Alaska or Hawaii.
In addition, your spending depends on your stage of life, for instance the elderly spend much more on Healthcare and less on housing than younger people do. On the other hand, things like Computers and other Electronic items have been falling in price for decades but the elderly don’t buy them as much as young people do.
So it is virtually impossible to get an index that covers everyone accurately. The BLS has developed a CPI-E that is supposed to be more accurate for the elderly but haven’t implemented it for Social Security adjustments… perhaps because it would mean larger increases in SS payments since Healthcare is more heavily weighted in the CPI-e.

Great site. I believe that inflation, if measuring the costvof living, is vastly understated. For one, the formula is flawed. More
importantly, the worst thing that can happen to massively indebted western govts is to show any inflation exists. For then, interest rates rise and game over for stocks and government borrowings to keep their societies stable with social ans corp welfare.

What say you?

Thx

Rob Branson

Valijon,
Excellent question! I’m assuming that you are asking why the stock market (which represents the total accumulated value of all companies over a hundred years) is only worth about 1.5 times more than the country makes in a year. I had never thought of that before so I had to think a minute. First let’s look at the formula for GDP.
GDP = private consumption + gross investment + government investment + government spending + (exports – imports). i.e. it measures total output.
So, first of all, some of the GDP is actually consumed such as the value of all the food you eat, the gas you burn, the electricity you consume, etc. Secondly, there is a lot of government consumption that produces no value, or even if it does produce value such as constructing government buildings or roads and bridges, that value isn’t counted in the value of the stock market. Currently total government spending is 37% of GDP. And that is just the federal government. You also have all the individual state governments. And then there are services both public and private such as the Post Office and FedEx once the service is performed it is just like a consumable. Over the last 30 years the U.S. has become more and more service-oriented and less product-oriented so long term it doesn’t create any tangible value to add to the stock market value. So once you subtract all of these “non-productive” factors only a very small percentage of the GDP is available to boost the stock market value.
Hope this helps!

Thanks for the article.

However,
How can the total value of the U.S. stock market is $37.7 Trillion while the GDP of the US is $21 trillion?

Thanks

Michael,
Good question! Velocity of money is primarily a result of market perception. Which is why the FED can sometimes “Jawbone” the inflation rate up or down by simply convincing the market that it has things under control (whether it actually does or not). But if it can get the media to cooperate it can herd the sheeple in the direction it wants. But other than that the only control it has on the velocity of money is interest rates which can help prod the sheep in the “right” direction.

Wall Street now anticipates the balance sheet could hit $10 trillion this year as the Fed affirms its whatever–it-takes commitment to softening the coronavirus blow. Fed Chairman Jerome Powell told NBC’s “TODAY” show Thursday that the central bank will “aggressively and forthrightly” continue its efforts and will not “run out of ammunition.”