Blog Carnivals and Guest Post at NCN
May 6th, 2008 by Ana
First up, I’d like to welcome the No Credit Needed readers who are clicking through from my guest post over there about becoming debt free. I wrote that post shortly after I hit my big debt free milestone, and the enthusiasm and exuberance still shine through. Feel free to peruse the archives and check out my “Best of DFR” page which is somewhat up-to-date LOL considering I have a tough time determining which of my posts are actually “best” versus what the readers love the most. (A note: categories still aren’t fixed from my technical problems in March, still need to work on that…)
I set myself a blogging goal last week of participating in at least three blog carnivals per week this month, and hit that mark this week even with the blog carnival site refusing to acknowledge my URLs even exist. They’ve had their own site issues in the past week so I probably shouldn’t be too harsh. Blog carnivals I participated in:
- The 138th Carnival of Debt Reduction hosted by Rocket Finance. I just had to giggle out loud when I read his remarks about my post on Congress and the Fed Taking on the Credit Card Industry!
- The inagural Carnival of Wealth Money and Life was held at Dollar Frugal and included my post Safety Tips from Your Pizza Driver.
- Finally, Alpha Consumer held the (always huge) 151st Carnival of Personal Finance with a “surviving the squeeze” theme and gave a high listing to my post Stagflation Suvival Tip #1 - Stocking up.
Happy reading at the carnivals! Meanwhile I am still in my self-imposed (bad place) of researching the stagflation survival idea, particularly trying to find reliable sources on why the official government inflation numbers aren’t matching my experience. Talk about some tough reading! Most of the links I am finding are not only old, but written by academics and practically need an interpreter. This may take a couple days just to sort out.
Final blog carnival note: I am hosting the Carnival of Financial Goals tomorrow, a few days late because of the troubles at blog carnival site. Bloggers, you still have until I pull myself out of bed and grab that first cup of coffee in the morning to submit your financial goals posts!
Posted in blog carnivals |
May 6th, 2008 at 12:19 pm
The reason your personal inflation number is different is because you aren’t buying the exact basket of goods that they are.
Lets say for instance there are only two things on the planet to eat, Naval Oranges and Chicken. You eat 7 lbs of food per week, and it can be any combination of these two items. The average person eats exactly half of each (3.5 lbs).
This means that the average person had a cost of:
Jan 2007
3.5lbs of oranges @ 1.092 / lb = $3.822
3.5lbs of chicken @ 1.033 / lb = $3.6155
Total: $7.4375.
Jan 2008
3.5lbs of oranges @ 0.905 / lb = $3.1675
3.5lbs of chicken @ 1.163 / lb = $4.0705
Total: $7.238
Difference: -0.1995 = -2.7% . . . so they declare the CPI at negative 2.7%
What happened if you only liked chicken?
7lbs @ 1.033 = $7.231 2007
7lbs @ 1.163 = $8.141 2008
Difference: 0.91 = 12.6% . . . and they are a bunch of dirty lying government bums out to get you, right?
Now add in hundreds upon hundreds of items, and average consumptions, and change the prices and items each year and try to figure out a number. Just because you didn’t buy the oranges, doesn’t mean they are lying. The CPI simply states the average prices for an average bunch of goods, over a period of time. Nothing more, nothing less.
May 6th, 2008 at 12:53 pm
Traciatim, I appreciate the simplified explanation. I’ve seen it listed as the “steak-for-hamburger” substitution bias that was added in this last major change (1998) and some have even mentioned the “hamburger-for-chicken” substitution which I am trying to find even more info on. The problem with this substitution idea (and the “price hedonics” that you mention) is it masks the reasons WHY people substitute… oh heck, this needs its own post, which I planned to write anyway. If you want to see what I am (trying to) reading, you can keep up with my del.icio.us bookmarks. Link in sidebar right under the subscribe info.
But you might be correct in that my expenditures are only the basics still: and food and energy are accelerating in price!
May 6th, 2008 at 1:19 pm
Now I do agree they do some adjustments, but mostly those adjustments reflect average consumer purchasing, and not some sinister plot.
The one quality adjustment that I don’t understand in Canada (I’m in the great white north) is inside the CPPI (Computer and Peripheral Price Index) which is running at 22.1 (where 2002 = 100). They use some strange benchmarking scenario where if a CPU costs $100 in one year, and then 2 years later the ‘new fangled’ CPU costs $100 but does twice as much then you end up with a CPI of 50, even though the ‘then relevant’ technology is still the same price.
Though the argument can be made either way, I feel like the average PC today is near the same price as an average PC was in 2002, who cares how fast it is. I in fact made a complaint to statistics Canada on the point with a few examples and have yet to receive a response.
In the majority of cases though, the CPI and CoreCPI are very well described, well documented, and easily accessed. If they were hiding things then you would think the information would be hard to find. Perhaps it’s a little tooooo easy
May 6th, 2008 at 1:33 pm
Traciatim, the “new” CPI methods (post-1998) use that exact same methodology as your describe for Canada’s figuring of a computer. Except here in the US they apply it to everything, literally (if I am reading these econo-geeks’ writings correctly). The econo-geek example is in cars and computers, but they also toss in the effect of Wal-Mart’s pricing strategies here and apply it to food even … if I understand the jargon right. One semester of macro-econ and one semester of stats is just not enough to wade through this without difficulty.
May 6th, 2008 at 1:47 pm
Funny you should mention cars, in my complaint to Stats Canada I used the example:
I’m going to make a comparison using cars to the methodology. I only had US pricing here from the MSN autos page, but the point still stands. Using this page you can find the Pontiac G8 GT model car has an MSRP of $29,310. However the Chevrolet Aveo5 LS has an MSRP of $12,020. Now looking at this you would think that the G8 is more expensive. However, according to the CPPI methodology the G8 has 361 horsepower and the Aveo5 only 103. This results in a 3.5 times quality adjustment to the G8’s price making it’s final price only $8374. So very obviously, according to the methodology of the CPPI quality adjustment, the G8 is much less expensive than the Aveo5.
Though really that argument is moot, because I’m comparing an entry level vehicle to a performance vehicle. The real comparison should be an entry level vehicle in the same position of the line up 10 years prior to the one now and what has changed.
Though even with all this, the point still remains that the CPI and CoreCPI measure a very specific thing. Comparing something else to it can not be done since the results will always be different.
Oh, here is another interesting thing. In Canada the government cut the federal sales tax by 2% over the past few years. Final sales price (after tax) is used in the CPI and CoreCPI up here. So our CPI is at 1.4% and CoreCPI is at 1.3% from march to march. Keep in mind that the federal sales tax is not charged on food items, so as their price increases it was not ’softened’ by the tax cut. This lets the Old Age Benefit to fixed income seniors not be increased as much since it tracks the CoreCPI, and since inflation was low due to the tax cut lets our central bank cut interest rates to help our banking system. How’s that for conspiracy.
I’m still on board with the fact that they aren’t lying though. All they do is track prices, they really don’t have control over all these other factors.
May 7th, 2008 at 7:11 am
Ah! I wanted to submit to your blog carnival and submitted a link instead to one that begins in June! I was really excited that you were going to be my first carnival, Ana! Is it too late to be a part of the action? The post is written and on my blog: The Zen and Art of Coupon Clipping: http://breakingeven.typepad.com/my_weblog/2008/05/the-zen-and-art.html
May 8th, 2008 at 1:12 pm
I saw this link over at getrichslowly.org/blog and thought you may be interested.
http://www.nytimes.com/interactive/2008/05/03/business/20080403_SPENDING_GRAPHIC.html
May 9th, 2008 at 9:54 am
[…] 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 […]