Longest Expansion in History? Excuse Me, Not So Fast

If one doesn’t count inflation in housing/rents, education and health care, everything else is hunky dory, right?

Really? NO price increase? Tell that to the persons buying insulin.

My thought is you are in a different country. You are clearly looking at the wrong data and have no understanding of economic adjusted economic data. If you rely solely on the governments data you will never get a true picture of the economy. I advise major hedge finds and private equity firms on their energy investments and they are starting to see the big picture of inflation(or deflation). Many of these price distortions that you have noted are easily explained by noting the government’s printing of trillions of dollars to keep the economy from completely collapsing. This will tend to cause crazy price distortions that make no sense in the overall economy. I hope this post points you in the right direction.

Inflation has become like a religion. People believe what feels good to them, and ignore reality because if they looked at reality, they would know they are wrong. But, inflation measures have real impact on real people, particularly people on Social Security, because they only time they get extra income is when their check gets adjusted, so if the adjustment is too high, they end up better off, and if it is too low, they end up worse off. A single year’s error makes little difference, but over a decade, changes become obvious.

In the 60’s people on Social Security lived in poverty. Nursing homes of the time were merely warehouses to hold them until they passed, with little to no niceties, because they couldn’t afford any niceties. Thanks to the CPI significantly overstating inflation in the 60’s, 70’s, and 80’s, the standard of living for the elderly rose dramatically. By the 90’s, instead of nursing homes, people moved to “retirement communities”, with lots of amenities, because the elderly had plenty of spending power, and could afford them.

Now, if Shadow stats is right, the standard of living for those on Social Security has fallen by more than 2/3 since 1996, and they are obviously back in poverty. Retirement communities must be closing for lack of customers, and there must be a boom in nursing homes again, to once again warehouse the increasingly poor elderly. But wait, that’s not happening. Instead, they continue to build more retirement communities, and in fact, even nicer ones, proving that in order to believe Shadow stats, you have to divorce yourself from reality. The reality is that for the elderly, the standard of living continues to rise, though not nearly as fast as it rose in the 60’s, 70’s, and 80s, meaning that the CPI continues to exceed actual inflation, but not by nearly as much.

Now, if Ted is right, and inflation is 10% a year, whoa! The ramifications are huge! Since their CPI adjustment has been about 2% a year, their standard of living must be falling 8% a year. In the 25 years since they started adjusting CPI, their standard of living must have fallen nearly 90%! The elderly must not even be able to afford to eat cat food anymore!

I can’t keep you from believing things that are demonstrably false, but I can point out the ridiculously absurd conclusions that must follow if your beliefs are true.