Everyone knows CPI is not accurate BUT not everyone knows WHY & HOW it became inaccurate

 

Statist bootlickers will call you a fraud for questioning the data or claiming its manipulated.

 

So lets settle this once and for all...

 

The DATA is NOT MANIPULATED.

 

The CPI EQUATION they plug the accurate raw data into IS MANIPULATED.

 

The above statement isn't conspiracy theory.

 

Gov has published many papers describing their changes to the CPI equation over the years.

 

1) WHY

To minimize the cost of living adjustment for Social Security.

 

"CPI serves as a guide for the Federal Reserve Board’s monetary policy and is an essential tool in calculating changes in the nation’s output and living standards [GDP]. It is used to determine annual cost-of-living allowances for social security retirees and other recipients of federal payments, to index the federal income tax system for inflation, and as the yardstick for U.S. Treasury inflation-indexed bonds." ¹

 

"A 1996 report by a congressionally appointed committee - known as the Boskin commission after its chair - estimated that the CPI was overstating the rise in the cost of living by about 1.1 percentage points a year and recommended changes in the way the CPI is designed and estimated." ¹

 

That's right, a small 1.1% deviation was used as the justification that led to the major changes that produce today's multiple % point inaccuracies.

 

Modern Monetary Theory (MMT) was not as popular after the mania of the dot-com bubble as it is today.

 

At that time, rising costs could not be justified by an academic theory that opined zero consequences to printing unlimited currency units SO a change to measuring CPI could be used to shrink the budget deficit and strengthen the outlook for US gov fiscal position & economy.

 

2) HOW

By the Bureau of Labor Statistics (BLS) changing from using a Cost-of-goods index (COGI) to the less accurate, ever changing Cost-of-living index (COLI).

 

"Traditionally, COGI measures the change in expenditures required by a household to purchase a fixed-weight basket of goods and services when prices change between some initial reference period and a subsequent comparison period." ¹

 

In other words, COGI measures full inflation for out-of-pocket expenditures and thus the cost of maintaining a constant standard of living.

 

"In contrast, COLI measures the change in expenditures a household would have to make in order to maintain a given standard of living." ¹

 

In other words, "COLI provides a rationale for taking account of the fact that, when prices change, consumers do not continue to purchase the same fixed basket, but shift their purchases toward goods whose relative prices have fallen.

 

COLI measures the effect of this substitution behavior in reducing the expenditure required by a consumer to maintain a given standard of living when prices change." ¹

 

"While a COLI framework offers some conceptual advantages, giving up the relative simplicity of the COGI comes at a cost" ¹ which is accuracy.

 

3) CONCLUSION

Authentic data is worthless when the equation used to run analytics is regularly altered to distort the signal.

 

Today we are dealing with the consequences of taking accurate data and plugging it into a constantly manipulated equation designed to change its output based on the BLS' ever-changing interpretation of their decided "standard of living".

 

Don't worry! We are going to #MakeDataGreatAgain by providing the original COGI data on our new website.

 

Stay tuned!

 

Opt out of #Bitcoin

 

[1] Source: National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. https://doi.org/10.17226/10131.