The Economy

7 percent year over year headline CPI number. Highest since 1982.

 

That wasn't coming from the guy who wrote that. It was coming from the BLS on how they discount the hedonic value improvement of something. They gave an example of a TV set and they gave those numbers in their example.

The point also wasn't about any one specific item. It was about how they have created convoluted methodology that has continually changed how the CPI is calculated and which has the effect of under-reporting the rise in the level of prices. The current numbers -- and we hit 7 percent year over year on the headline number this morning -- would be more than twice what they just reported if they still calculated the CPI the way they did using the straightforward formula they used in the 1970s.

 

FYI. ... This is what the BLS has on its website on that example:

Item A is a 26-Inch CRT EDTV with S Video Input and a Universal Remote. It cost $250.
Item B is a 42-Inch Plasma HDTV with S Video Input and a Universal Remote. It cost $1250

They don't tell when Item A was available at that price, or when Item B was available at its price.

But they give that example to demonstrate how using some nonsensical hedonic quality adjustment calculation they pulled out of their asses, the price of a TV somehow actually came down over time.

Frequently Asked Questions about Hedonic Quality Adjustment in the CPI : U.S. Bureau of Labor Statistics

 

This isn't someone trying to create a skewed example.

The example came from the people who calculate the CPI.

They were trying to explain how they take standard purchases at different points in time and adjust the prices based on their subjective notions of how the quality of the items differ.

Their example isn't the point.

The point of the Toronto Star article was that they continually change their methodology in ways like this and it has had the effect of making the changes in prices they report lower than they would have been under their previous methodologies.

If you're stuck on that example the way you seem to be, forget that they are talking about TV sets. Consider a widget that cost $250 X years ago and the modern version of that widget costing $1250. ... but intsead of calculating the CPI from a baseline of $250, the BLS valuing that $250 widget at $1,345.02 instead. ... based on some convoluted adjustment they started using (again, from THEIR example). So they are telling people the price has declined by 7.1 percent.