Yesterday in my masters class we discussed the “real” dollars spent on gas and how we’ve just crossed over the threshold that we were at in 1981 during the Iranian Crisis. People have been moaning a lot about how the price of gas is “breaking the camels back”, but in relative terms gas is at the same levels that they were in 1981.
Data provided from http://www.inflationdata.com/
Department of Labor – Inflation Hoax:
Now take a snapshot of the above inflation adjusted gas data. Then look at the rate of inflation in both 2007&2008 and compare it to 1980 & 1981.
Data provided from http://www.inflationdata.com/
Does something look a little odd here? To me something smells a bit rotten and that our department of labor is skewing the inflation numbers, because so much of our national debt is leveraged against the inflation rate and business are adjusted against the inflation rate as well. To me I really believe the Department of Labor is pulling the wool over our eyes and these numbers aren’t really factual. You and I both know that when we go to the grocery story that 1) Milk cost $2.55 last year and last week when I went to the store it cost $3.35, 2) Gas last spring cost $2.75/gallon and I just had to fill up on $3.54 gas today, 3) Fertilizer for my lawn last year was $5.80 for a small bag and this past weekend I paid more then $11. Now do those numbers look like 3%, 4%, even 5% inflation? Even a high school dropout can figure out that! Personally here is what I believe. I believe we the people need to take inflationary calculations into our own hands. Here is what I propose. List out 4 items that you will commit to track yearly on how much it will cost for those items each year. For example:
1) Milk
2) Bread
3) Gas
4) The same 3 homes in your neighborhood
Then you can figure out on your own…is the government telling us the truth? This puts the power back in your hands and helps you to make adjustments to your finances based on your factual data! As a result, you’ll get to retirement early and be able to hedge inflation while in retirement to sustain a comfortable lifestyle.
What do you think?
Subscribe to Frugal tips to retire early by Email
Gas Prices – Inflation Hoax Revealed!
May 7th, 2008 at 12:53 pm
May 7th, 2008 at 01:20 pm
FOOD AND BEVERAGES (breakfast cereal,
milk, coffee, chicken, wine, full-service meals,
and snacks)
• HOUSING (rent of primary residence, owners’
equivalent rent, fuel oil, bedroom furniture)
• APPAREL (men’s shirts and sweaters, women’s
dresses, jewelry)
• TRANSPORTATION (new vehicles, airline
fares, gasoline; motor vehicle insurance)
• MEDICAL CARE (prescription drugs and medical
supplies, physicians’ services, eyeglasses
and eye care, hospital services)
• RECREATION (televisions, toys, pets, and pet
products, sports equipment, admissions)
• EDUCATION AND COMMUNICATION
(college tuition, postage, telephone services,
computer software and accessories)
• OTHER GOODS AND SERVICES (tobacco and
smoking products, haircuts and other personal
services, funeral expenses)
• Goverment Services water
and sewerage charges, auto registration fees, and
vehicle tolls. In addition, the CPI includes taxes (such
as sales and excise taxes) that are directly associated
with the prices of specific goods and services.
They also use a geometric mean to calculate the categories.
source: http://www.bls.gov/cpi/cpifaq.pdf
May 7th, 2008 at 01:21 pm
calculated?
The CPI is a product of a series of interrelated
samples. First, using data from the 1990 Census of
Population, BLS selected the urban areas from which
data on prices were collected and chose the housing
units within each area that were eligible for use
in the shelter component of the CPI. The Census of
Population also provided data on the number of
consumers represented by each area selected as a
CPI price collection area. Next, another sample (of
about 16,800 families each year) served as the basis
for a Point-of-Purchase Survey that identified the
places where households purchased various types
of goods and services.
Data from the Consumer Expenditure Survey conducted
in 2001 and 2002, involving a national sample
9
Q U E S T I O N S & A N S W E R S
of more than 30,000 families, provided detailed information
on respondents’ spending habits. This information
enabled BLS to construct the CPI market basket
of goods and services and to assign each item in
the market basket a weight, or importance, based on
total family expenditures. The final stage in the sampling
process is the selection of the specific detailed
item to be priced in each outlet. This is done in the
field, using a method called disaggregation. For example,
BLS economic assistants may be directed to
price “fresh whole milk.” Through the disaggregation
process, the economic assistant selects the specific
kind of fresh whole milk that will be priced in the
outlet over time. By this process, each kind of whole
milk is assigned a probability of selection, or weight,
based on the amount the store sells. If, for example,
Vitamin D, homogenized milk in half-gallon containers
makes up 70 percent of the sales of whole milk,
and the same milk in quart containers accounts for 10
percent of all whole-milk sales, then the half-gallon
container will be 7 times as likely to be chosen as the
quart container. After probabilities are assigned, one
type, brand, and container size of milk is chosen by
an objective selection process based on the theory
of random sampling. The particular kind of milk that
is selected by disaggregation will continue to be
priced each month in the same outlet.
In sum, the price movement measurement (Question
8) is weighted by the importance of the item in
the spending patterns of the appropriate population
group. The combination of all these factors gives a
weighted measurement of price change for all items
in all outlets, in all areas priced for the CPI.
May 7th, 2008 at 01:24 pm
Limitations in measurement can be grouped into two
basic types, sampling errors and nonsampling errors.
Sampling errors. Because the CPI measures price
changes based on a sample of items, the pub-
20
lished indexes differ somewhat from what the results
would be if actual records of all retail purchases
by everyone in the index population could
be used to compile the index. These estimating or
sampling errors are limitations on the precise accuracy
of the index, not mistakes in calculating the
index. The CPI program has developed measurements
of sampling error, which are updated and
published annually in the CPI Detailed Report. An
increased sample size would be expected to increase
accuracy, as well as CPI production costs. The CPI
sample design allocates the sample in a way that
maximizes the accuracy of the index, given the funds
available.
Nonsampling errors. These errors occur from a
variety of sources. Unlike sampling errors, they
can cause persistent bias in measurements of the
index. Nonsampling errors are caused by problems
of price data collection, logistical lags in conducting
surveys, difficulties in defining basic concepts
and their operational implementation, and difficulties
in handling the problems of quality change.
Nonsampling errors can be far more hazardous to
the accuracy of a price index than sampling errors.
Hence, BLS expends much effort to minimize these
errors. Highly trained personnel ensure the comparability
of quality of items from period to period
(see answer to Question 8), and collection procedures
are extensively documented. The CPI program
has an ongoing research and evaluation program
to identify and implement improvements in
the index.