Contrary to Popular Wisdom?

One way of measuring inflation is to gauge how prices for an assortment of goods and services have varied over time. Another approach involves looking at changes in how much things cost relative to what the average worker earns (the flaw with this latter method, of course, is that those who don't have jobs may find that many, if not most, of the things they might want or need to buy are unaffordable).

Be that as it may, if one assumes that data from the Bureau of Labor Statistics is even remotely close to the mark, it would appear that the purchasing power of the average worker has improved over the past 10 years, which is contrary to popular wisdom (see dotted line in the chart below).

There could be any number of reasons why perceptions differ from the reported data. Among other things, the composition of the basket of goods that the BLS uses to construct its index might not be realistic, especially in today's fast-changing economy. Or maybe the pricing information they rely on doesn't jibe with consumers' experience on the ground. Then again, a cynic might note that authorities have an incentive to underestimate inflation and overestimate wage growth for pollitical gain.

Regardless, I thought it interesting to highlight those categories that have become the least and most affordable for the average worker over the past decade. Not surprisingly, gasoline and other energy-related products are a lot more expensive in relative (and absolute) terms than they used to be, which goes some way towards explaining  the heightened demand for fuel efficient cars and why people are driving fewer miles than they used to. In contrast, it's easy to see why sales of flat screen TVs and other modern gadgets have jumped -- the products are much more affordable than they used to be.

Comments

[Tom]

The government routinely lies to us regarding unemployment, the CPI and about other topics about which it fudges the data or cooks the books (housing is another one). With so much propaganda floating around with govenment stamps of approval on them, is it any wonder people don't believe in "our" government any longer? Nothing is changing here on the ground despite the media b.s. Oh sure, you can apply for a part time job making close to minimum wage anywhere in the country with six or seven hundred other people, but most people searching for jobs (that had earned decent money over the past bunch of years) are finding either only a few openings (with far too many applicants to compete against) or none at all in their chosen field, and more often than not either take part-time work at someplace they deem "transitory" in their career or (for us older outsourced workers) simply give up and either retire (whatever that means now) or do something else (like volunteer).

When a large business downsizes they lay off over 1000 people at a time. This is still going on every month here and the so-called job creators aren't replacing these jobs with similarly paid positions anywhere, but rather "let the market" handle the situation - making matters so much harder on us all than a pro-active government (one that actually cared about its citizens) would.

[Dominant issue]

Monetary policy takes care of powerful interests...

Ron Paul: “We Have Had a Victory For Liberty Tonight!”

“I sorta have to chuckle when they describe you and me as being dangerous. They are telling the truth, because we are dangerous… to the status quo. And we will remain a danger to the Federal Reserve system as well.”

http://sgtreport.com/2012/01/ron-paul-we-have-had-a-victory-for-the-cause-of-liberty-tonight/

[The Corrupt State]

@There could be any number of reasons why perceptions differ from the reported data.

Try...

The Corrupt State

The State has a massive propaganda campaign and always had. The ruling elite and their cronies benefit greatly from the current dominance of government. These include elected politicians, lobbyists, the bureaucracy, big business, big labor, welfare recipients and the press among others. All have incentives to support bigger government at the expense of free markets. All have monetary benefits and protective barriers that would not exist in free markets.

Crony capitalism loves big government. Quid pro quos between Congress and business produce near monopoly returns for both sides. Furthermore, restrictive laws are useful to prevent competition. Bailouts enable companies and banks to take risks they otherwise would not engage in.

The State is now rotten to the core. It is the reason why the standard of living has been declining for decades. It is a parasite that has crippled the golden goose and will completely destroy it if not stopped.

http://www.economicnoise.com/2012/01/05/the-corrupt-state/

[I guess everyone wants censorship...keep sleeping]

Why Banks Back SOPA, the “Bring the Chinese Internet to America” Bill

SOPA and PIPA (Protect IP Act) use nuclear-weapon-to-kill-a-mouse scale solutions to Internet piracy. David Carr in the New York Times, in an rather anodyne article given what is at stake, gave an overview of what is wrong with the bills, namely, a lot. Even if you accept the proponents’ dubious claims about the losses from “rouge” foreign websites ($58 billion!), the bills probably won’t fix that problem and will create a host of new ones. Despite assertions that it would create jobs, it would actually deter technology startups, undermine scientific journals, and could fragment the Internet domain name system. It’s tantamount to making the public wear ankle bracelets to combat shoplifting.

So why is the American Bankers Association one of the sponsors of a bill that seems awfully remote from its terrain? The bill allows anyone to send a complain about a purported SOPA violation and get the site disappeared. This faster and more brutal than the execution of Wikileaks via cutting off its access to payment networks. From TechDirt in December (emphasis theirs):

Oh no, this isn’t crazy at all, it’s authoritarian. Imagine how long Goldman666 or Matt Taibbi or Karl Denninger or yours truly would be around with this rule. Wikileaks demonstrates that even Swedish domiciled sites are not safe.

http://www.nakedcapitalism.com/2012/01/why-banks-back-sopa-the-bring-the-chinese-internet-to-america-bill.html

[Revolt with your vote]

How To Get Ron Paul Elected! Step by Step! Democrats Please Help.

http://sgtreport.com/2012/01/how-to-get-ron-paul-elected-step-by-step-democrats-please-help/

Ron Paul: People Call Me ‘Kooky’ Because They Can’t Defend Themselves Intellectually

Ron Paul gave a good account of himself this morning in a series of interviews following his second place finish in the New Hampshire primary. One interview in particular stood out as Paul defended his foreign policy from claims that it is “kooky”.

In a somewhat bizarre change of subject during an interview with Fox & Friends, host Gretchen Carlson seemed embarrassed, stating “Congressman, excuse me for saying this but do you believe some people call you kooky… for your foreign policy only? Is that the reason why?”

Paul responded “They use those terms because they can’t defend themselves intellectually.”

http://sgtreport.com/2012/01/ron-paul-people-call-me-%E2%80%98kooky%E2%80%99-because-they-can%E2%80%99t-defend-themselves-intellectually/

[Typhoon Jim]

This seems unconvincing. If you follow the path of headline inflation, you would have been running in fear of several phantom inflationary shocks as well as one giant deflationary one since 2000 alone. It seems like this information simply shows a stronger case for using core inflation, rather than the inverse.

[Brock]

Can anyone tell me why this graph does not include food and land/rent? This information is pretty useless without those two essentials.