So what do the CPI numbers released yesterday, the inflation that they supposedly measure, and reality all have in common?  Apparently, not much … especially between the first and third.

If you’ve been following my ramblings on the CPI and inflation, you were probably as puzzled as I was yesterday when the BLS released numbers way way WAY  under what you expected.  If you missed the announcement, the official CPI says inflation was only 0.2% for the month of April, with the food and energy prices showing a complete divergence from reality.

CPI and Food Prices

According to the CPI data, food prices only rose a “seasonally adjusted” 0.9% for April.  Yet the report admits that fruit and vegetable prices rose 2% for the MONTH, bread prices rose 1.5% for the MONTH, and milk prices went up 1.2% for the MONTH.  Apparently what brought the official food inflation measure down was the idea that less people are eating out at restaurants, which only grew at 0.3% (still positive though).

The news media is calling this the sharpest food price spike in 18 years, with the official number of “year-over-year (y-o-y)” food price inflation being 5.1%.  That means according to the government, food prices overall were 5.1% more expensive in April 2008 than they were in April 2007. 

My personal y-o-y food price inflation looks a lot more like 12.5%, but I don’t count eating out in that figure because eating out is not a necessity.  In fact, that is where the “give” in the budget is coming from, partly.  Here we do follow the behavior the BLS uses.  However, cutting back on restaurant spending is an EFFECT of inflation, not a component of it.

And I haven’t quite figured out just what this “seasonal adjustment” for food prices is.  Does anyone have a link that explains it in plain English?  In my experience, many food prices go down during the spring because of produce sales.  So shouldn’t a seasonal adjustment for the month of April adjust those numbers UP to compensate for the sales?

CPI and Energy Prices

For those who have argued that the BLS’s CPI numbers are accurate, please explain the energy prices numbers released yesterday to me!  According to the official report, gas prices went DOWN 2% for the month of April after seasonal adjustment.  Of course, before the seasonal adjustment, gas prices show a 5.6% jump … so that must be one (heck) of a seasonal adjustment they made!!

Apparently, the number crunchers at the BLS figure that gas prices always rise in the spring.  So they seem to toss out any price rise for April, even though the Department of Energy and AAA say gas prices rose 10% and 9% respectively for April.  Also according to AAA, gas prices posted record high prices for SIXTEEN days in a row in April.

I have to really wonder what gas stations the CPI survey-takers are filling up at.  I also wonder what kind of discount card they carry … because I want one too!  At the beginning of April, I was grumping about gas being $3.28 per gallon locally.  By the end of April, that was looking good since gas prices were up to $3.49 per gallon.  According to my handy little calculator, which does straight math, that is a 6.4% increase in gas prices for the month of April.

The May numbers ought to be even more interesting, as gas prices have gone from $3.49 per gallon on Monday to $3.68 per gallon last night.  Local gas stations usually don’t raise their prices from Monday to Wednesday … they wait until Thursday night after they close to do the weekend hikes. (note to self: fill up again tonight after work!)

Experts Now Questioning CPI Accurracy

It isn’t just me scratching my head over these numbers that have absolutely nothing to do with my reality.  More and more economic experts are starting to publicly question the CPI methodology for figuring inflation, with the harshest being Bill Gross of Pimco Total Return bond fund calling the CPI

a “con job” that deliberately understates the price pressures faced by Americans in order to keep Social Security payments and other government costs pegged to the index unduly low. (source here)

These experts not only question the CPI accuracy, they are also questioning the BLS’s unemployment numbers … and suggesting both are “understated” by the government.  The alternative numbers they offer for both statistics suggest the American economy is in deep (doo-doo).  I won’t get into the unemployment numbers today, but I totally agree the CPI numbers are completely wacky and don’t seem to reflect reality, even to the most imaginative mind.

So, what do ya’ll think?  Am I still a “tin-foil hat” nutjob?  And just what is this seasonal adjustment that can swing the gas prices from a 5.6% rise to a 2% decline??  How in the world can the BLS claim gas prices went DOWN?  And that food prices rose less than 1%?  This doesn’t reflect MY reality … does it reflect yours?

Yesterday I had a case of spring fever (sometimes called cabin fever).  Not the elevated temperature type, but the type inspired by a pretty day where you just can’t sit still!

The day started out sunny and clear and mild, as opposed to the normal for this time of year where it is  sunny and humid and hot.  So, I left the computer to do a few things that had been waiting for a nice day … like getting that limb out of the yard from the previous weekend’s storms and talking to one neighbor who is worried about being laid off his job while my other neighbor fired up his lawnmower and tamed the jungle my grass had become.

My neighbor facing possible layoffs has already had his hours cut, so I mentioned pizza delivery to him and explained how we drivers get paid along with some driving tips to increase his gas mileage.

Once my son got home from school, it was off shopping.  The teenager needed clothing, rather a costume for a school project, so it seemed to be a good time to start his $20 per month clothing budget.  I took him first to the Goodwill, then to Wal-Mart, where he also bought his groceries.

By the time we got out of Wal-Mart, the storm clouds had rolled in, and the storms started just as I was going to bed last night.  They are still here, all dark and grey and rumbly with thunder.  About the only good thing about the timing is I work tonight, and bad weather usually means above-average tips.

Hopefully this series of storms will be mild enough to not bring down any more branches and limbs.  I am beginning to wonder just how many the old tree in my yard has that can come down!  One extremely large one hit the house last fall, scaring hubby and me and tearing off part of the guttering.  Then the one the other weekend landed right on the cable co-ax, tearing it out from the side of the house.  Hubby was wondering over the weekend how much it would cost to have that tree taken down professionally, since it seems to be half-dead anyway.

I’ve heard having an older tree taken down professionally can run as much as a couple thousand dollars, especially one that is close to the house, so I think it may have to wait until we have enough saved for both my son’s tuition and my tuition.

Meanwhile, gas prices have jumped 9 cents a gallon in 24 hours.  I could kick myself for not filling up two days ago when I spotted $3.48 a gallon.  To be fair, we were driving hubby’s truck at that time, and it didn’t make sense to me to go get the Pizza Taxi just to fill it up.  Next time I will!

Have a happy Wednesday, folks.  The week is half over!

Welcome to the 139th Carnival of Debt Reduction, the Debtors’ Prison edition.  We may not have debtors’ prisons any more, but there is still Credit Hell!  According to wikipedia, a debtors’ prison was a prison for those who are unable to pay a debt.  The first category for today are the progress reports of those definitely not headed to debtors’ prisons:

• Chief Family Officer says “Our car loan is officially paid off - in less than two months!” proof that the next best thing to paying all-out cash is to have an EXTREMELY SHORT loan.
• Nathaniel Scott offers up his progress report for month 4 of his debt reduction battle.
• FMF says that contrary to popular belief, he has a great credit score with no debt.  So much for that excuse to stay in debt!
• Amanda has her economic stimulus payment, and provides an update and a question in Me vs Debt: Debt Repayment Update - How Should I Proceed?

“Prior to the mid 19th century debtors’ prisons were a common way to deal with unpaid debt.”  Sounds scary, doesn’t it?  Fortunately, we have better, non-incarceratory ways of dealing with debt today!

• Michael Geoffrey presents How to Get Out Of Debt
• billspaced presents Getting Out of Debt, Part 3
• Debt Freedom Fighter presents Snowballing Debt: How to Make Bigger Payments To Your Creditors Without Making More Money

“In the United Kingdom, the Debtors Act of 1869 abolished imprisonment for debt, although debtors who had the means to pay their debt but did not do so, could still be incarcerated for up to six weeks.”  Student loan debt lasts much much longer…

• William Blake presents Getting Help Paying Off Student Debt
• nickel presents Thoughts on Minimizing Debt While in College
• Destroy Debt writes Learning to Spend Less So My Earnings Are Greater
• The Happy Rock presents Demystifying The Budget - Don’t Be Afraid
• debbie presents 8 Ways You Blow the Most Money

“In 1833 the United States reduced the practice of imprisonment for debts at the federal level. Most states followed suit.”  The state versus federal dynamic in American government makes some interesting legal situations, which brings us to credit cards:

• Christopher Johnson presents Getting A Handle On Your Credit Cards
• Maria O’Brien presents Dealing with Credit Card Debt
• Brice Hogan presents 3 Steps to a Lower Interest Rate
• Ray presents Debt Reduction With Low Interest Balance Transfer Credit Cards
• J. Savings presents Budgets are Sexy.: Credit Cards are cool

“The Province of Georgia in the colonial United States, was originally intended to be settled by debtors.”  I found this little tidbit quite amusing!

• Chris Kakaras presents Situation Analysis - debt statistics
• The Baglady presents The Nuances of Good and Bad Debt
• Mike Leonard presents Debt by Stealth – this is the cause of your Debt
• paidtwice presents “Emergencies” Happen A Lot More Often Than I Ever Thought

“Debtors’ prisons varied in the amount of freedom they allowed the debtor. With a little money, a debtor could pay for some freedoms; some allowed inmates to conduct business and receive visitors; others  even allowed inmates to live a short distance outside the prison–a practice known as the ‘Liberty of the Rules’”

• Stephan Grindley presents Debt Consolidation: The Scare Tactics
• Alexander presents How to Stop Collection Calls
• MITBeta presents Using a Twice Yearly Pay Bonus to Meet Your Goals
• Jason presents Should I Stop 401(k) Contributions to Pay Off Debt?

Whew!  That’s a lot of quality entries this time around!  I do hope y’all enjoyed the fun with the debtors’ prison theme and be sure to read these great posts on reducing or eliminating debt.

Just some odds and ends this morning.  The beautiful weather we had yesterday didn’t last as storms rolled in last night, but at least this time there are no limbs down nor damage to the property here!  The news says Oklahoma, Missouri, and Arkansas got hit yet again with tornadoes, so I plan to donate a bit to the Red Cross tomorrow, including a pint of blood if I have tomorrow night off work.  I’d love it if those of y’all here in the States would join me on this.

Carnival of Financial Goals Readers’ Choice(s)

I didn’t get a whole lot of response on this (?) so the Readers’ Choice was a four-way tie.  Here are the four financial goals posts that got votes from last week’s Carnival of Financial Goals:

• The Zen and Art of Coupon Clipping from Nicole at Breaking Even
• Create Your Own Dollar Plan: Step 1 from Madison at My Dollar Plan
• Making Goals Adaptable from Brice Hogan of Financial Zip
• The Importance of Savings Goals from Alison of This Wasn’t in the Plan

Big thanks to all the carnival entrants and to those of y’all who voted for them!

Magazines for Military Troops

Reader Sheila emailed me to let me know about a couple of websites that provide magazine subscriptions to active duty military folks, and give you the ability to donate a subscription for just $10!  I hadn’t heard of it, and neither has hubby, so a big thanks to Sheila for calling this to our attention

If you are active duty military, you can start up a wish list of magazine subscriptions at Subs4Servicemembers.  If you would like to donate a subscription to an active duty military servicemember, the website is Subs4Soldiers.  Sheila says:

People who know a serviceperson can select that particular serviceperson. But otherwise, the donors and recipients remain anonymous … What better way to celebrate memorial day than by giving to someone on active duty?

Well said, Sheila!  And thank you for the heads-up.

It’s been a beautiful mild sunny day here!  Hubby, son, and I went out for brunch then hit the grocery for a couple essentials while son got his hair cut so he doesn’t get written up at school.

The guys just embarked for the gaming shop, intent on getting table to use as a battlefield and should be occupied for at least six hours LOL  It’s been a bit of a goof-off day for us all.

Meanwhile, tomorrow I will be crowning the “Readers’ Choice” for the Carnival of Financial Goals, and currently there is a three-way tie for it.  So if you haven’t voted for your favorite financial goals post for this month, be sure to leave your comment

Also, Monday I will be holding the Carnival of Debt Reduction.  This has long been my favorite of the blog carnivals (gee, I wonder why?) and I am hoping for a good turnout.  Bloggers, be sure to submit your debt-killing posts by tomorrow night!

Just checked the account balance, and our “economic stimulus” payment is finally here.  While others got theirs early, ours came when the IRS schedule said it would.

I am underwhelmed with the government’s “generosity” here: we only got $600 total, which breaks down to $300 each.  Apparently an E-4 at the top of the pay scale for that pay grade doesn’t make enough to get the full economic stimulus.  I really didn’t expect to get the full $600 for myself, since I only had an income of a little over $3,000 delivering pizzas only on the weekends, but sheesh … one would think the government would pay its active duty military enough of a taxable salary to get the full stimulus!  I had thought we were getting $900 for our “economic stimulus.”

Yes, I am griping (or whining, if you prefer).  We didn’t plan to do much “stimulating the economy” other than our trip to Florida next month anyway, but this just cut the amount I had hoped to sock away into the big emergency fund significantly!

Hubby asked for $150 of that $600 for himself.  I agreed without asking if that would go towards our vacation fund.  I have to trust that he won’t go blow it at the wargaming shop, but he indicated yesterday when we sat down to discuss money over coffee that he feels like he doesn’t have any money for fun stuff anymore, and it makes him feel poor.  Or maybe he plans to use that money tonight taking me out to a nice restaurant for our belated anniversary celebration (quite possible).

So, as it stands right now, our emergency fund will only be stimulated by $450.  So much for hopes and plans when they rely on the government.  I feel like our financial progress has slowed to a crawl, when last year we were running at full speed.

I know I should be thankful since we are out of debt now.  I know there are quite a few readers who are still working towards that goal, and are probably wanting to tell me to shut up LOL  But it’s a bit discouraging to see what should be the benefits of getting out of debt - extra money that no longer goes towards debt payments - disappear into the gas tank and at the grocery store and to school as tuition bills seem to go up even faster than the price of gas.

Where’s this “financial peace” I’m supposed to be feeling?  Expenses have crept up about 12% since the beginning of the year, while our income took an $800 per month hit.  This has resulted in over $1000 per month difference in the monthly budget numbers, and is probably why I am feeling so anxious lately.  This so-called “economic stimulus” payment doesn’t even make that difference up for one month!  Heck, it only covers two months of increased expenses, with a little left over for the anniversary dinner.  No wonder the latest CNN/Money poll says the average American doesn’t think it will help anything.

I’ve been on this stagflation kick, and a few readers haven’t shied away from calling me out on the official BLS CPI numbers.  This has sparked an intellectually interesting conversation, and a whole lot of mind-numbing research on my part in finding out how the CPI (Consumer Price Index, the government’s measure of inflation) is calculated and how this has changed over the years.

And it HAS changed over the years, with major changes in the methods in 1983 and 1998.  That isn’t what is up for debate LOL  The debate is whether those changes are a more accurate way of measuring inflation or just number manipulation to ensure we don’t see  inflation numbers like we did in the 1970s again.

These changes also mean people cannot compare today’s inflation numbers to the 1970s inflations numbers without adjusting for the changes (just as wages and prices get adjusted for inflation when comparing time periods).  To compare today’s inflation numbers the pre-1998 inflation numbers without the adjustment is apples-to-oranges.  To compare today’s inflation numbers to pre-1983 inflation numbers is apples-to-bananas.  That is why I posted that chart last week:

If we use the pre-1983 numbers to compare today’s inflation to the inflation experienced in the late 1970s, we have to use the 11.6%, not the official 4% that gets used in news reports.  Otherwise, it would be like comparing minimum wage in the 1970s versus minimum wage today, without any adjustment.  Without the adjustment, you’d think minimum wage workers today make out like bandits at $5.85 per hour, as opposed to $1.25 per hour they used to make in the 70s.  Trust me, when I get my hourly check from work, I don’t feel very rich.

So just why did the government go and change the inflation calculation methods, anyway?  One argument is that it wasn’t an accurate reflection of true consumer behavior, which is why the substitution bias was introduced.  Yes, consumers DO substitute when the price of one thing gets too high.  The classic example is steak.  When steak gets too expensive people will forego the steak for something cheaper (the classic substitution is hamburger).  But figuring that into the CPI sort of masks the reason WHY people substitute.

Then there’s this strange thing called “price hedonics” which weights the price versus the perceived “quality” of an item.  Commenter Traciatim used the example of cars, and the other classic example is computers.  If you look at the price tags from earlier computers versus today’s computers, they haven’t changed much.  Yet according to the BLS’s numbers, computers have come down in price significantly.  Their rationale is that even if you pay the same price, you get a faster and better computer, so they have a complex mathmatical/statistical formula that says the price for a computer today is much less since you (theoretically) get more bang for your buck.

That’s the pro-changes argument in a nutshell and vastly simplified by me.  I am firmly in the cynical con-changes camp, and offer up four little words as a reason why the government changed the methods of calculating CPI: cost-of-living adjustments.  Social Security, disability (SSDI and VA), plus all the civilian government employees and the military all get their annual raises through cost-of-living adjustments.  If the inflations numbers aren’t as high, then the COLA isn’t as high.

If I want to indulge my truly cynical side, I could offer up another reason: No politician ever wants to be associated with double-digit inflation ever again.  But that would be hideously cynical of me, especially during a presidential election year.  But I digress … sorta.  Could y’all imagine the media feeding frenzy that would be going on if we still used the pre-1983 method of figuring inflation?

In the interest of equal air time for the opposing view, here is one blogger who doesn’t think the CPI numbers are manipulated.

The bottom line with inflation numbers is that they are different today than they were 25 years ago.  Whether you agree with the changes or not, we can at least agree on that much.  And I advance the notion that to compare inflation rates then and now, we have to use the same methods … so to compare today’s inflation to the 1970s, we need to go with that top line on the chart and say “Using pre-1983 methods of calculation, we are currently running 11.6% inflation which is comparable to the double-digit inflation rate of the 1970s stagflation period.” 

Let the CPI and inflation discussion continue …!

Hubby came home early, surprising me at 0300 (zero-dark-stupid) when the dog woke up and barked at him as he fumbled to get the key into the door lock in the dark.  He grumbled that the dog makes it difficult to sneak up on me in the middle of the night to surprise me, which I think is still a good thing.

Today is hubby’s birthday, and I gave him a handcrafted ink pen from Hans that almost matches mine :)  Of course, I tried to be slick this morning by setting it next to his fresh cup of coffee, and ended up spilling my coffee in the process!

Instead of going out to eat to celebrate his birthday, I am fixing him a steak dinner tonight, and baking him a birthday cake.  Hubby picked the sirloin tip that I scored on big sale over the weekend, proof that his eyes are bigger than his stomach because he first thought he could eat the giant steak by himself until I pointed out I will be fixing side dishes.

Tomorrow he will be taking me out for dinner and either a movie or a show at the local theatre to celebrate our second anniversary (which was Monday).

So basically, there won’t be a whole lot of activity here on the blog for a couple days.  He’s been gone for “only” two weeks, as opposed to the year he spent in South Korea for almost all of 2007.  His unit is scheduled to deploy to NTC in California in July, then off to Afghanistan in the fall for a year.  Such is the life in today’s Army.

Somehow I feel it was easier when I was the one going places and doing things, instead of the one staying home.

We’ve already sat down and discussed money and plans for that money over coffee this morning, but more on that later.