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Handle's avatar

"Taken at face value, a 28.6% rise in the price level at a time of much slower nominal growth implies that the US fell into one of the deepest depressions in US history. Sumner sees this as a reductio ad absurdum argument against using the revised numbers. I would agree."

Yeah, that's totally crazy!

Except ... you know ...

I keep a household finances spreadsheet and record most of my expenditures, especially the big regular bills. I also buy some things routinely on Amazon and other big online retailing websites, so I can compare some price changes over time, with more accurate and precise insight into whether there have been any quality adjustments that should be taken into account. My budget pattern is not volatile and judging by those charts of how people spend their money, I'd say my household in in the normal-ish ranges for our income bracket, though less than average on cars and eating out. Obviously I know income and taxes and maintenance pretty well in my own case.

This lets me track a few plausible indices of "personal real inflation rates" which, sure, aren't "the" price level by any means, but at least tells me how - whatever it is that happened - affected my personal position and was experiences as a boost or a hit requiring belt-tightening and substitution.

Personally, it's been a hit to the tune of an average of over 10% a year in real terms for several years in a row now. 30% in two years seems high, but still, not 'absurdum' high. Then again, if I had to refinance at current rates at what the county assessor says my house is worth ... oof. Friends of mine who hire average people say there has a sudden drop in worker quality (and morals) and they do indeed now have to pay a lot more to get the same kind of "good worker", and they are increasingly looking at ways to shift into more automation.

Of course this is all anecdotal and I'm not claiming this has any bearing on the overall price level whether the official numbers are right or wrong. But if you are personally experiencing 10% a year, then when some metric comes out close to 10% a year, one's first impression is not to balk or scoff as being totally implausible.

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Yancey Ward's avatar

I have written it before- you can generate a positive GDP from a negative one by just underreporting inflation by a % number or two. Like Handle below, I track my expenditures and those of my mother since we are the household- the reported inflation rate by the BLS is significantly lower than the rate in our own personal finances for food, insurance, and utilities which is pretty much all of our purchases since we own the home free and clear and never have spent much outside of Christmas for discretionary items.

And employment is not "soaring"- the participation rate in the civilian labor force never recovered to the rate it was in January 2020 and has flatlined for the last year.

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