How Inflation Bites Much More than the Official Hoax

No one escapes, not even the Japanese suffering from “deflation.”

This is a principle every consumer has experienced: Official inflation is low, and there is scaremongering by central banks and the media about deflation even. But in reality, when it comes time to buy big-ticket items, prices are much higher than they’d been a few years ago. Everyone who bought new vehicles over the years knows this. It’s called “sticker shock.” But it purposefully doesn’t show up in the inflation numbers.

The situation is particularly blatant in Japan, a country that is supposed to have been in a “deflation spiral” for two decades. So here is the example of the prices of cars. According to a retail price survey conducted by the Ministry of Internal Affairs and Communications, cited by the Nikkei:

  • The average price of top-selling cars with engine displacements of 1.5 liters or less has jumped 18% over the past ten years, to ¥2.01 million.
  • The average price of cars with 1.5- to 2-liter engines has skyrocketed 50% over the past ten years to ¥3.19 million.
  • The average price of compacts has soared 30% over the period.

The price changes occurred as manufacturers built cars of higher quality and with more gadgets and features, such as heated seats, more elaborate safety devices such as automatic brakes, better batteries for hybrids, and what not.

Here are a few examples, cited by the Nikkei. But this sort of thing is happening in every country, across all brands and models:

Nissan Motor partially remodeled its Note for the first time in four years; the small car was released last month. The Note X goes for ¥1.49 million ($12,921), up 15% from four years ago. The hybrid model is even more expensive, starting at ¥1.77 million.

Subaru maker Fuji Heavy Industries raised the starting price of its new Impreza, released in October, by about 20%, to ¥1.92 million from about ¥1.6 million.

Toyota Motor fully remodeled its Prius at the end of last year, boosting the hybrid’s capacity by adopting lithium-ion batteries and improving its fuel economy by 20%.

So since 2009, Toyota has jacked up the price of its Prius by 18% for the base model, which now goes for ¥2.42 million, up from ¥2.05 million in 2009.

Now consider this: Manufacturing has gotten much more efficient over those ten years. Automation has progressed further. Component manufacturing in Japan has been offshored to cheaper countries, such as Thailand, China, and Vietnam, particularly after the March 2011 earthquake and tsunami and the disruptions they caused to the supply chain. And the prices of many commodities have collapsed. All of them combined should have resulted in cheaper cars.

So now the industry and the government lament that auto sales dropped in 2015 from the year before, for the first time in four years, and that sales for the 11 months this year are down another 2.2%. This type of price increase can do that.

But still, all the talk is about how inflation in Japan isn’t big enough, how Japan is still in a deflationary spiral, etc., etc.

So this is the official “deflation spiral”: The Consumer Price Index in October rose to 100.4, up from 99.8 in September. At its peak in October 1998, the index was at 104.5. Since the early 1990s, it has hovered around 100, which is where it is today – hence, official price stability (via Trading Economics):

But this chart reflects the official measure of inflation. Numerous price increases that consumer feel painfully don’t make it into the index for logical-sounding statistical reasons. When a product in the basket that makes up the index disappears from the market, it is replaced with a similar product.

So when a new model of a car comes out, and it has better safety items, more gadgets, heated seats, and is of higher quality in other ways, and thus costs more than the prior model, statisticians take that into account. By their definition, this isn’t inflation (currency loses value), but product improvements (product gains value). And so they make adjustments to prevent these often sharp price increases from entering into the inflation index.

Every statistics agency that figures inflation makes these “hedonic adjustments.” They’re estimates, designed to lower the official inflation number. The US Bureau of Labor Statistics makes no secret of it.

For statisticians, it makes sense. But for consumers, things just get more and more expensive, even for Japanese consumers who’ve been told for two decades that they’re suffering from “deflation,” and that the Bank of Japan has to conduct outlandish and risky wealth-redistribution shenanigans to create inflation.

But ultimately, underreporting price increases, and therefore underreporting the rise in the cost of living, is very convenient for over-indebted governments and companies.

A million things are adjusted for inflation so that they can be compared over the years. Often, “real” is used to denote inflation adjustments, as in “real GDP” and “real wages.” Even slight but consistent underreporting year after year improves the appearance of “real GDP” and “real wages” by big margins.

Pension payouts and social security payments are pegged to some inflation measure (cost of living adjustments and the like). Bond yields are constantly compared to official inflation. Bond prices fall, and yields rise, when inflation is expected to pick up seriously because investors are leery of getting their pockets cleaned by inflation without proper compensation.

Thanks to our conniving central banks, for savers and many government bond holders, “real interest rates” and “real yields” have long been negative.

That’s a given. It marks the era of financial repression. But blatantly underreporting the actual increases in the cost of living makes this already bad situation much worse. It cheats workers, consumers, retirees, and investors quietly. And that is by design. And if folks don’t like it, they get to eat the explanation about “hedonic adjustments.”

Now whiffs of inflation are wafting through the economy, and traders got even more nervous on Friday, after having been twitchy all Thursday, and they alleviated this condition by dumping government bonds. Read…  Government Bond & Mortgage “Carnage” Enters Sixth Week

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  162 comments for “How Inflation Bites Much More than the Official Hoax

  1. walter map says:

    Alternate Inflation Charts, for those of you who don’t like being lied to:

    • walter map says:

      The real rate of inflation in the U.S. is presently around 5%, which is about how much you’re losing by holding cash instead of setting yourself up to lose your ass in the stock market.

      • Frederick says:

        We will see how much inflation we have when the DOW crashes 90 percent and real estate takes a huge hit again

    • ERG says:

      Bravo! I like that site a lot. Even more disturbing are the REAL unemployment numbers.

  2. Wolf Richter says:

    On a personal note: Japanese doll artist (& my mother-in-law) Tomoko Ikeda will give her next exhibition from Jan. 4 through Jan. 10, at Matsuya Ginza, Tokyo, on the 7th floor. If you’re in the neighborhood, check out her work.

    Here’s her bilingual website. You can’t buy anything on the site – just a treat for your eyes:

    • Petunia says:

      Beautiful work! I meant to mention it before. Give her our best wishes.

    • Chicken says:

      It seems like ages since I’ve been to Ginza, Yen was about 142/$ I believe. Or 138, don’t recall exactly.

      Anyway, it’s the ritziest shopping district in Tokyo (Japan), all the worlds highest end department stores are there.

    • d says:

      Wont load in Firefox or Safari even from google search.


      Dose she do any Historic traditional ones I really like those I had some but gave them away as you need a safe stable environment to keep them in.

      • Wolf Richter says:

        You mean the site as linked doesn’t load in Firefox? That’s strange. It loads just fine in every browser I use, including Firefox. Since the site is image-heavy, it doesn’t load very fast, so if you’re on a slow internet connection, that might be a problem (but that still doesn’t explain why it wouldn’t load at all).

        Do you use an updated version of Firefox?

      • Edward E says:

        Beautiful! Her site loads fine through Verizon 4Glte, the Campbell Soup can satellite internet cannot open it.

    • David Calder says:

      I’ve passed this along to doll collectors in Seattle.. All are very impressed..

    • PrototypeGirl1 says:

      What a joy to have such incredible talent in the family Wolf, you are very blessed.

  3. Chicken says:

    Inflation – That’s right, where’s wage inflation? Most men are making less than their fathers did in the 70’s

    • Wolf Richter says:

      Inflation without compensation….

      • d says:

        Employee compensation is the only thing not keeping pace with true inflation since the 1970’s..

        As you wrote more and more has been taken out of the stats to make them how the State wants them.

        In total Western numbers are not as bad as chines numbers but neither are close to accurate. OR reality.

        House I owned in 1982 cost 55k today 1.3 M same house. Only 34 years older with the same roof.

        • Arctic Melt says:

          If you think inflation figures are phony now, just wait for the figures coming out of the Orange Administration.

        • Me says:

          The price of the house didn’t change. The paper changed.

    • Frederick says:

      Thats true I was making 250 dollars a day in the mid eighties doing window and door installations for a general contractor Try doing that today

    • nhz says:

      Many ex-government pensioners in my city (e.g. former teachers and city/county officials) have incomes that are far above the current incomes for people who now get the same job, thanks to all kinds of automatic wage increases, extras and compensations they were/are ‘entitled to’, and that are no longer offered to newly hired workers. In addition to that they are living in millionaire homes that were purchased for pennies compared to todays prices, so many of them made a million or so by simply owning a home.

      Life is still good, for some … but they complain loudly about how much the government is ‘stealing’ from them, because pensions haven’t been growing as much as they expected over the last ten years or because the government subsidies for the housing market are gradually cut (at a glacial pace that one will only notice in 10-20 years …) so that their housing piggy bank is slightly less profitable than in the last 25 years.

      I’m from Generation-X and the majority of people that I know of my age make far less money in real terms than their father did one generation ago (sometimes even nominally less money…). Many of them are renting or living in homes with a mortgage that they will probably never be able to pay off.

      But the good news is: if your parents were wealthy and didn’t spend it all, they can donate 100.000 euros a year to their offspring totally tax-free, on the condition that it is used for purchasing a Dutch home. Not for Gen-X though, this is only possible for those under 40… Sometimes I see twenty-somethings right out of college shopping for million euro properties, thanks to the parents who can pass their huge untaxed housing bubble profits to the next generation :-(

      • Kent says:

        Saw an article in the paper yesterday that said the majority of 30 year olds in the USA are making less than their parents did at age 30. And this is the first time in known American history that this has happened.

        • nhz says:

          Same in Europe, but I think this has been going on for 10-20 years already (if you use true inflation statistics etc.). Basically the problem started with the financialization of the economy around 1980, but it took some time before the results became obvious in the real economy. The switch to two-income households around the same time was another factor (two incomes are now needed for the same real household income, so those with one income per household are out of luck, unless the income earner is a banker or other finance sector worker).

        • Ed says:

          When the economy was globalized a global labor market was introduced and that global labor market has been grinding US wages down toward the global rate.

        • economicminor says:

          “When the economy was globalized a global labor market was introduced and that global labor market has been grinding US wages down toward the global rate.”

          For the benefit of the few at the expense of the many. Changing this was just one of Donald’s many hollow campaign promises.. Ok, we’ll see but a very big skeptic I am.

    • interesting says:

      I’ve been lowing my rate for years…..forget about any increase….based on the “bogus” inflation rate my income should be 50% higher now when compared to 1997.

      so i make 1/2 of what i did then….when homes were 1/3 of what they are now.

  4. Petunia says:

    While gas is down 50% from 4 years ago, our grocery bill is twice as big. So we are spending 4 times the savings on groceries. We used to say that every thing in the supermarket seem to cost $5, now every thing costs $6. Groceries prices are exploding and we don’t buy anything fancy. But they keep saying there’s no inflation. I don’t know how poor people are feeding themselves.

    • night-train says:

      ” I don’t know how poor people are feeding themselves.”

      With food stamps and a lot of cheap, unhealthy food choices. Many of the really poor live in areas with few shopping options. And their goal is to not be hungry. So volume and calories become more important than nutrition. Nutrition is a luxury for many in our country.

      • Frederick says:

        Thats VERY true and it will backfire on us all as healthcare costs for the same people will explode higher Its already happening but will get much worse longer term Add GMOs to the mix and the skies the limit

      • economicminor says:

        “With food stamps and a lot of cheap, unhealthy food choices. Many of the really poor live in areas with few shopping options.”

        And then there are those who want to reduce or eliminate health care for the poor because it is the poor’s fault that they are not healthy.

        The ability of people to justify their greed and selfishness. What a great shining light the USA has become! And many of these same selfish people want to pretend that this is a Christian nation.. what a cruel joke!

        They have sold this propaganda well and even some of the poor believe this garbage. Yes, let us have more inflation. For the deserving Aholes!

        • Mary says:

          For many of the rural poor, their only nearby food source is gas stations. And the station owners know it.

          I used to drive Route 5 through central California every few months. It did not take long to notice that gas stations featured food sections as large as neighborhood grocery stores. Those food sections were stocked almost entirely with chips (every variety in the universe), sugar and salt laced “nutrition” bars, beef jerky, aisles of candy bars, soft drinks and so on. Kids are raised on this diet.

        • mvojy says:

          Not giving healthcare to the vulnerable isn’t fair but there has to be a decent mortality rate since there are not enough jobs, not enough affordable housing and not enough natural resources to support the entire human population living 100 years or more

        • economicminor says:

          “Not giving healthcare to the vulnerable isn’t fair but there has to be a decent mortality rate since there are not enough jobs, not enough affordable housing and not enough natural resources to support the entire human population living 100 years or more”

          Yes but the discussion needs to be a public one and not just by those who have attained positions due to special rules, luck of the draw or inheritance. We are all supposedly equal under our nation’s base law and as such at least the majority needs to buy into limiting the population and the consequences of not doing so.

          The past and current leaderships are insane to believe in exponential growth on the finite planet earth.

          Then again, maybe they don’t. Maybe they only believe in the value of an inflationary monetary system and how it will eventually transfer all the wealth to them so that they can win the Monopoly game. While nothing else matters except for them to win.

          And I earlier said that a lot of the homeless were mentally ill.. Seems that both ends of our social spectrum we have very disturbed individuals.

      • Enquiring Mind says:

        Ethnic markets and dollar stores have some grocery options to help stretch food budgets. When you see the identical item, and within the expiration date, at a regular grocery store for a multiple of the price, then you start asking how many more items have price distortions.

        In the old days, we called that type of pricing activity probing one’s demand curve. I’m sick of that abuse, and do not feel very enriched by all the new tech and purported labor-saving features that claim to make my life so much easier, either. Those features are supposed to represent economic benefits, but they don’t seem like benefits when I still have sticker shock at virtually every conventional retailer.

        In an era when the news is fake, lame or otherwise not to be trusted, what is left of social fabric beyond community interactions? /Rant

    • GSX says:

      Petunia the Supreme Leader will fix it. Thats Trump. Good luck!
      He’s too smart to be briefed on it as well. So you got that going for ya…

      • walter map says:

        You have to admire a billionaire who will give up his ten-million-a-week job for one that pays only 400,000 a week, just to help out the working people. And he’s only able to make that kind of sacrifice because he’s never paid any taxes. Saintly, that one.

        • Did you mean $400,000 per year ?

          ( Clearly of no importance to a billionaire. )


        • Petunia says:


          Trump and many of the other appointments, the rich guys, are only taking $1 a year as salary. I am under no illusions that they won’t make it up in “with the volume”, but it’s a start.

        • walter map says:

          Plus two percent of the gross.

        • economicminor says:

          Except that it appears he ISN’T going to give up his day job!

          So the question is he just going to use the P45 job to increase his holdings and personal wealth?

          He seems to admire Putin and isn’t that what Putin did?

        • nhz says:

          now remind me how much the Clinton Foundation made after Bill’s lousy job for the government …

          In Europe too, most politicians make their real money after their official term is over. And that is not because of their vast experience after working for the government, but usually because of the favors they granted at the time, or the ‘network’ they have grown. Usually the clueless and morally bankrupt ones make the most money, not the politicians who have shown that they can take care of the country.

        • Smingles says:

          Oh don’t worry, DJT and his administration will more than make up for it in the hundreds of millions of tax-free cap gains they will be ‘forced’ to take for divesting of their holdings. After all, having to pay taxes because you are doing a ‘service’ to your country is not fair.

          I think I just threw up in my mouth a little bit.

      • Edward E says:

        Inflation is so bad that two car garages have become two family garages.
        The nation is prosperpus on the whole, but how much prosperity is there in a hole? (Quote by – Will Rogers)

        Wonder how much all these crazy hacking and fake news/propagandists gone wild stories are trying to influence the Electoral College?

        • walter map says:

          “Inflation is so bad that two car garages have become two family garages.”

          They have to be small families. You still need space for the Bentley.

      • Petunia says:

        I trust Trump’s intuition more than I trust Hillary’s experience. That being said, we are way down the rabbit hole at this point. So it may all come down to just plain luck, or lack thereof.

        • Edward E says:

          At this point what difference does it make? Every election since 1980 has been Make America Goldman Again…

        • RD Blakeslee says:

          Also, there ARE genuine altruists in the world – it’s hard to acknowledge that in the mood the country’s been in during the current divisive administration.

          I believe Trump is motivated to help all of us as best he can.

          Is his best “the right stuff”? We’ll see

        • nhz says:

          @ Edward E:
          and over the last 15 years or so, make Europe Goldman property again as well :-(

          where-ever you look it is the Goldmanites and their ilk running the show; only some corners of Europe like Hungary still make their own policy decisions.

        • Edward E says:

          “Every insider, getting rich off of our broken system, is throwing money at Hillary Clinton,” said Donald Trump during his nationally televised speech. “The hedge fund managers, the Wall Street investors, the professional political class. It’s the powerful protecting the powerful. Insiders fighting for insiders. I am fighting for you.”

          Well, perhaps not so much. How do you fight for us with Guilded Goldman & Gazillionaires all throughout your cabinet?

        • Observer says:

          @ RD Blakeslee
          “I believe Trump is motivated to help all of us as best he can.”

          How do you figure? His cabinet picks smack of crony capitalism for the 1%. And Steve Bannon??? How do you see Steve Bannon, producer of Breitbart “news”, helping “all of us” when some of us are people of color?

    • nomaspls says:

      Its called EBT

    • Aqua says:

      to save on groceries I go to Dollar Tree for 4 oz Tilapia, Salmon and Flounder, individually packed, frozen fruits and vegs…$1ea, then I ck out Big Lots for their Non Gmo foods from Europe and then I go to Trader Joes for the rest…..

    • PrototypeGirl1 says:

      It’s not only the poor it’s the people like me who can’t find the work we have always had. I have felt this coming on for several years now mostly because of the lack of traffic in Tulsa and also watching people’s health failing because of medication and procedures. Instead of saving money I have bought a lot of food, coffee, supplements, essentials, as well as keeping my truck in good repair. Now I’m working on solar, all I need are batteries and cables which I will get in the next couple of days. It’s really a feeling of strength to be this prepared. I also have good renters and truck insurance.

  5. james wordsworth says:

    The real inflation is not measured.
    Take a shirt today. the number of times you can wear it before it falls apart is far far fewer than say 20 years ago. Yes the shirt may be cheaper, but the cost per use has gone way up.
    Take a washing machine. They used to last 25 years. These days with some models you are lucky to get 6 or 7. So overall cost down, cost per use way way up.
    And it is the same in so so many things. Hedonics only seems to take into account enhancements not degradation.

    • Wolf Richter says:

      We got our washing machine 9.8 years ago, and it started falling apart (literally) 0.5 years ago. So we’re lucky :-]

      • dwkunkel says:

        We have a Speed Queen washing machine which is also what’s used in 90% of laundromats. It uses old fashioned relays, steel gears in the transmission, and is designed to last. It also costs almost twice what most washing machines cost.

      • Chicken says:

        My Kenmore washing machine must be 30 years old, still going strong. I’ve replaced a couple of small parts and repaired the knob maybe cost me $10 so far. I think it was abused by the original owner, it was about 7 years old when it became mine.

        No way I’m trading it for new unless I simply can’t repair it, maybe the parts will be NLA?

        • economicminor says:

          re: older washers; About that time (30 yrs ago) we bought a Speed Queen that was sold to us as commercial. Lasted about 25 years. It had a stainless steel tub and I thought it would be repairable for a very long time.. When the spindle bearings went out we found out that lots of the older *quality* washers had aluminum spindles that would corrode themselves onto the shaft and they were impossible to get apart… Oh well. So we bought an old Maytag for $150 that has been gone thru and is still runs great… My daughter bought one of those Samsung front loaders and it lasted 5 years. She replaced it with a new LP… front loader.. We’ll see how that lasts.

        • Wolf Richter says:

          Ours is a Kenmore as well :-]

        • night-train says:

          I am splurging for a new washboard for the wife for Christmas. No compliments please. I’m just a prince of a guy.

    • mynamett says:

      There is no quality anymore. Just look at Nissan with its new CVT transmission. Go on YouTube and search for Nissan transmission CVT problems. Reading the comments on these videos is really informative.
      These types of problems with new cars apply to all makers now

      Because of the lack of quality, inflation figure are much more higher then the published ones,.

      • nhz says:

        it’s not just a normal lack of quality; many of these problems are by design, to make sure that you need expensive servicing as soon as the warranty period is over. Many recent products (especially electronics) have obsolescence build in, often in ways that the buyer cannot foresee. And the more electronics in cars, the more cars will suffer from this as well. This in addition to the standard decline in product durability, which is very real for many products…

        • walter map says:

          You have to blame those millionaire union workers. They just ruin things for everybody.

        • Petunia says:

          I use the washer dryer every day and we go thru a set every four years. Now we own a set that may blow us up, according to recent news articles. How’s that for innovation and planned obsolescence. Maybe that’s how they plan on thinning the herd, ummm.

      • Chicken says:

        I think some of the problems are on purpose, government requirements dictate design many times, such as the 6 speed automatic that until now wasn’t necessary, and direct injection are a couple examples. The catalytic converter has limited fuel mileage even, with it’s requirement for a richer fuel mixture for operation with perhaps fewer precious metals..

        Yes, I fully expect newer vehicles aren’t being built that will be trouble free for over 200k miles, like the leather interior “jalopy” I’m driving now with 250k and still running fine with just normal maintenance.

        • Aqua says:

          It would be better if car makers just had a new model every 5 or 10 years…. yes all those requirements.. and better to keep those old very more reliable vehicles, refrigerators, washers and dryers, fixing them instead…

    • interesting says:

      i seem to have a yearly vacuum budget.

      the things just fall apart in what seems like months.

      Growing up we had one vacuum……it lasted 20 years.

      • Petunia says:

        Our old Hoover finally bit the dust. We got one of those Rocket/Sharks they advertise on tv all day long. I just love it. It is light weight, great swivel action, and a light that shows up dirt I didn’t know existed. How long it will last is a post for another day.

        • night-train says:

          “Our old Hoover finally bit the dust.”

          LOL. Good one. You are very wrong about Trump, but at least you are witty.

      • Ross says:

        Same with refrigerators. My six and a half year old bottom freezer that I loved until the compressor died six months after warranty expiration would cost about 75% of the cost of a new one to fix because it was all spot welded instead of using screws.

      • economicminor says:

        Answer to your vacuum problem is to get rid of your carpet and install hardwood floors and sweep them. Ride a bike to work eliminates your vehicle problem.. Of course a good bike now costs what a car use to.

        • nhz says:

          I ride a bike and don’t have a car. My bike is a cheap secondhand one that has lasted 15 years despite almost daily use and little servicing, and it is nearing the end of its life. We have new bikes costing around $100 here in Netherlands (made in China, I would not feel safe riding them; it might break on the first speed bump). If you want a solid one it’s more like $ 1000-2000 which is 1/2-1 month salary for the average person. But that is still some progress compared to +/- 60 years ago, when a good bike would cost 2-3 months salary.

          And yes, there are electric bikes costing up to $ 10.000 or even more, but they are probably purchased by people who buy them for a tax deduction or to show their green roots and never really use them…

        • Dan Romig says:

          As one who spent 7 years in the North American ProAm peloton, and 5 years racing on velodromes, I do indeed have a bike that costs more than a decent used car. My Wilier CentoUno Superleggera with Campy Super Record 11 was $12,000 when new! Damn sweet machine that weighs about 7.5 Kg. Of course, I have Minnesota made Hed Ardenne wheels on her.

          To nhz, I also have a nice classic Gazelle AA-Super Crit. bike.

          Retired long ago, but still ride most every day. Chose not to use EPO & HGH, and still alive and healthy-never quite made it to the Olympics because of my decision. Oh well???

        • nhz says:

          if you enjoy riding your bike or are serious about sports I can imagine spending a lot of money on it.

          I sometimes think about buying a really nice lightweight bike, but my main use is cycling to locations in nature were I can take pictures. With an expensive bike I would have to worry all the time if the bike is still where I parked it when I return. Plus I would have to carry my photo gear on my back instead of in the cycle bags ;-(

    • Edward E says:

      Replaced the dryer exhaust duct connector last night and realized that the washer/dryer are almost 20 years old. Kenmore

    • Frederick says:

      My fridge from Sears/Kmart lasted a year and they refused to warrantee it Now they are facing bankruptcy Talk about Shadenfreude

    • Me says:

      But, James, this is what the people want. They want “affordable” clothes and washing machines. If somebody really built a washer that lasts 25 years, and it can be done, it might cost $100 more than the one at Home Depot.

      The PEOPLE want it cheaper and cheaper. Trump can bring millions of jobs BACK to America but the people will have to pay more for it, but they don’t want it.

      4.95 cent Chinese hammer, puts a 5.00 American hammer out of business. Don’t blame others…..we all need to blame ourselves.

      • Observer says:

        I think people want good quality at a reasonable price. They expect the low, medium and high prices for an item (washing machine for example) to reflect lower, mid or higher quality. If I understand it correctly, hedonic adjustments to inflation calculations are supposed to take improved quality/added value into account, thus justifying higher prices so that they need not be counted as “inflated”. But there seems to be a trend toward increased prices for goods of inferior quality (above comments as an illustration), due to practices like planned obsolesence. Pricing no longer seems to indicate quality.

        Me – To your point about people choosing cheaper items, it is not necessarily because they don’t care about quality, but because wages haven’t risen with inflation, and they can’t afford what are perceived to be higher quality things.

    • Aqua says:

      I shop at Salvation Army on Wacky Wednesdays half off, I get designer clothes’ sweater, shirts, tanks, jeans for $5. or less, I love my Baby Phat Jeans…. they were $4.50…..
      ..and thank you wolf street for not having to have to sign in to post…

  6. Thor's Hammer says:

    From my individual vantage point the most pernicious area of inflation is in the cost of food as Petunia pointed out. I live near the major apple growing region of the country, but an apple-a-day to keep the doctor away costs more like a vice than a staple. Of course the escalation of food costs has nothing to do with the monopoly position of the Monsantos of the world who provide chemicals and seeds to their sharecropper/customers in our soil & water mining industrial food system or the capital cost of the farm equipment necessary for an individual to farm a thousand acres —-.

    Speaking of Monsanto, I was recently chatting with the owner of a second home in our valley who had worked for a major drug company in Switzerland for five years. He was raving about how much better and healthier the ordinary food is in Europe. I pointed out that it was partly because the FrankenFoods developed by his former employer, Monsanto, were not allowed there.

    A bumper sticker seen recently on an old Subaru– “Eat the Rich”.

    • nhz says:

      We don’t have the Frankenfood in Europe (yet, but it’s coming soon thanks to the European Commission), or the most extreme forms of hormone- and antibiotics saturated meat. But there is plenty of other problems here with countless pollutants in ‘healthy’ food (including ‘biological’ products). Most of this is related to the Big Agri mob and the food processing industry.

      I don’t know the price structure in the US, but in my part of the world over 90% of the price of most fresh food like fruit and vegetables is packaging, transport, storage and profit. The real cost of producing this food is very low, problem is that most consumers can no longer buy directly from the local farms that produce is. My guess is that the real production cost here has declined over the last decades (and even if not, it hardly makes a difference for the total cost), but most of the other costs have gone up.

      • Dan Romig says:

        One of my simple pleasures is going to the local farmers’ market on Saturday mornings, from the end of April to the end of October, and purchasing fresh, healthy and great food from those wonderful humans that work the soil directly.

        In addition to my small garden and apple trees, getting fresh produce and veggies straight from the source at the farmers’ market adds to my quality of life.

        When my dad was head of R & D at Syngenta’s Northrup King Seeds, he was given a ‘Platinum Parachute’ and forced to retire at age 63. Syngenta brought in a new CEO, and he wanted new people at the top, so Dad got the axe. Funny thing was that the Swiss hierarchy did not have Dad sign a non-compete clause, so three weeks after being terminated, we set to work building a wheat seed breeding/genetics company to compete with Syngenta’s AgriPro wheat seeds company.

        When we sold to Limagrain in 2010, it was Dad and me competing against Monsanto, Syngenta, NDSU, SDSU and the U of MN (my alma mater)!

        • nhz says:

          yes, farmers markets can be great but we don’t have them over here even though it’s an agricultural area. There are some ‘collectives’ though where you can sign up for weekly delivery of fresh biological products.

          We also have Syngenta over here, they purchased most of the important seed companies in Netherlands over the years (often companies that had been family businesses for ages); some of those are very important parts of the company now. My impression is that much of the traditional research and products of these companies have been terminated after Syngenta took over, which is going to bite them later on.

          IMHO the Big Agri / GMO bubble is looking for a pin to prick it, with all the research surfacing about disaster caused by Glyphosate, GMO genes spreading throughout nature etc. These companies rely on their friends in science and in the government protecting them from damage claims, but I don’t think that will work forever.

        • Chicken says:

          Quite a story, bravo! :)

        • Lee says:

          Go Bison!!

    • walter map says:

      “I live near the major apple growing region of the country, but an apple-a-day to keep the doctor away costs more like a vice than a staple.”

      Apples cost ten times as much now but they’re ten times better than they used to be, so the price hasn’t really changed.

      Some people just can’t understand inflation statistics no matter how it’s explained to them.

      • Dan Romig says:

        Walter, I am not sure that apples are ten times better. The U of MN has released some great apple varieties recently such as Honeycrisp, SnowSweet and SweeTango, but in my front yard: Cortland from 1898, Harrison from 1922 (still my favorite of all) and Zestar from 1999.

        Grabbing a fresh Haralson from the tree in September is as good as it gets!

        • Dan Romig says:

          Damn automatic spell-check! Haralson not Harrison.

        • David G LA says:

          Dan- Walter’s “ten times better” was sarcasm.

        • Dan Romig says:

          I figured it was sarcasm, but I wanted to point out that there are some things that stand the test of time. General Mills’ Wheaties cereal is made using only Klassic wheat; a variety my father bred for Northrup King which was released in 1982.

          Apple breeding is an interesting art/science. Apple seeds are all different genetics, and apple varieties, once perfected, are replicated via grafting.

      • Chicken says:

        Have some subsidized corn instead, Apples and fruit are fully taxed with no subsidies to pay for the corn you devour. Imagine the healthcare mess if corn fields were planted in fruit?

    • Lee says:

      Food costs – wait till you see what you’d pay for food in Australia if you moved here.

      At least we have had a kind of grocery price war that has kept the lid on some prices and with Aldi moving in that has also kept the two big players from increasing prices too much.

      The downside of Aldi is that the big two here are now limiting the choices of products in the supermarkets. There is always a ‘store brand’ product which IMO is a crap product and then a few others, if that.

      Many products have completely left the market.

      Sorry Aldi, but I’ll never shop at your store regardless of my situation.

      As a result of bad weather here the price of cherries has gone way up. Some people are already paying A$20 per kilo.

      Only one of our trees made in through the bad weather with some cherries on it so our harvest will be down and of course late.

      Hopefully we’ll get around 20 kilos (44 pounds) this year.

      • Edward E says:

        “The downside of Aldi is that the big two here are now limiting the choices of products in the supermarkets. There is always a ‘store brand’ product which IMO is a crap product and then a few others, if that.”

        Over here the ‘store brand’ almost always comes from the same places as the name brands, it’s just that when a large store buys in large quantities they are allowed to put their label on the products. I have transported many a load of these ‘store brand’ products. For example, a trailer load of vegetables from Del Monte may have Kroger, Great Value, Hy Vee or Meijer labels but they are coming off the same packing line as the Del Monte brand. Sometimes the van will have both the private label as well as Del Monte brand on the same order from the same packer. One way to tell is that the packaging will be the same except for the name.

  7. Bob says:

    My basket of goods includes rent (in Seattle), saving for college, health care, and food including restaurant costs. These are the big ones. They are all going up about 10% per year, and I sense the quality is going down. My salary varies a little but hasn’t really increased for seven years.

    I don’t understand where the 1.5% inflation comes from. They obviously aren’t weighting the basket properly.

    • Cam says:

      Oh they’re weighing the basket alright, just not with your scales!

      • polecat says:

        Watch out … those baskets are loaded up with financial blood sucking ticks …. namely bureaucrats & politicians …

        • GSX says:

          Wait the Supreme Leader is draining the swamp…get on board. Things are great. What ? Dont you know that by now. Dont bother tweeting to the Supreme Leader he has already read your mind……

    • nhz says:

      I’m in Netherlands and I see much of the same. The costs one cannot avoid – in my case mainly taxes, rent, mandatory healthcare insurance etc. – are going up with 5-10% per year while official inflation is near 0%.

      In my country food prices are relatively stable thanks to a supermarket war that has been running for years (Netherlands is one of the cheaper countries in Europe currently for food). Compared to 40 years ago most food in the supermarket is definitely cheaper in relation to incomes. However, if you want healthy food it is another story, cost of biological food has increased by at least 100% in the last ten years and IMHO it is a more honest reflection of cost because of ‘quality’ issues.

      Another interesting example is telecommunication costs (phone, internet, TV etc.) – they have been relatively stable over the last 20 years or so and you get a bit more bandwidth or options every year, but most of that is consumed by ‘progress’ (bloated operating systems, internet pages loaded with advertisements, more advertising on TV etc.). I have an old Amiga computer from 25 years ago that is quicker to start and write a short document etc. than a recent Windows computer, and the nominal cost of both is about the same ;-(

      If you take quality of products and services into account, I’m sure inflation is running at over 10% per year :-(

      • walter map says:

        The bright side is that flowers are lots cheaper. You Dutch used to have to pay thousands for them. Some people just don’t have any appreciation.

        • Petunia says:

          The reason tulips were so expense and rare was because they were the official flower of the Ottoman Sultanate. The use and growth of tulips by anyone other than the Ottoman royal family was punishable by death. The exportation was prohibited and so they became rare in the world outside the Ottoman royal residences.

          Tulip mania was an example that branding mattered, then as it does now.

        • nhz says:

          There was also a lot of knowledge and innovation involved for growing tulips (up north) and for producing the best bulbs and the prized varieties that the Ottoman empire didn’t have; of course the people involved tried to keep all this information secret.

          One of the reasons that the tulip bubble crashed in 1637 was that it was discovered in France that some of the extremely rare (valuable) varieties where due to a plant virus (spread by an insect, if I remember correctly). A tulip worth a fortune could turn out to be worth almost nothing the next year. They didn’t quite understand yet how this worked but this discovery traveled through most of Europe within 2-3 days, and the Dutch market lost nearly 90% of its value within a week. That was before the telephone and the internet, when news traveled by horse and pigeon ;-)

    • Edward E says:

      Health care and especially drug prices are about to go up a lot faster, I would think. The problem is that many of 22 million new insured won’t be there if the Reflubs repeal the ACA. They always raise prices to make up the difference.

      • economicminor says:

        Because the new Supreme Leader is a Crony Capitalist and is promoting policies to Make America Great Again and the giant health care / big pharma complex is highly profitable which in my opinion is what he means by MAGA (more profits for his elite friends). He and his cohorts will probably change Obamacare in ways that only make those PE and VC partners even more money. After all, those are the people who pay the BIG $ to stay in his hotels.

        His opposition will be what is left of the Tea Party who are Libertarians more than Republicans and will look like wishy washy whores if they don’t stand up for fiscal restraint.

    • Ed says:

      And don’t forget all the insurance you have to buy. That goes up a good bit every six months or year.

  8. Michael Francis says:

    Anyone noticed Toblerone’s are getting smaller and smaller but the price remains the same.

    A classic case of Central Bank deflation.

    • MC says:

      In “technical” parlance that’s a practice known as “The Incredible Grocery Shrink Ray”. It also has a much sneakier cousin known as “Slack Fill”, which is considered sneaky enough to warrant laws throughout the world to regulate it. Which, much to chagrin of our modern day Philokleones (obscure quote of the day), are as effective as CPI measurements.

      While this practice was apparently first employed by Hershey’s in 1977, it’s really nothing more than a version of the ancient practice of using cheap fillers: during the long, drawn-out death of the Western Roman Empire, bakers were routinely accused of “cutting” the wheat flour used to bake bread with either cheaper flours, such as barley and rye, or more creative fillers, such as ground acorns. As in those times bakeries were mostly government owned (a practice which lasted in the Eastern Roman Empire down to Heraklios’ days and possibly beyond) and run by contractors, suspicion of corruption and collusion at top level was widespread.
      Things haven’t changed much, as usual…

    • walter map says:

      “Anyone noticed Toblerone’s are getting smaller and smaller but the price remains the same.”

      In his essay ‘Phyletic Size Decrease in Hershey Bars’, Stephen Jay Gould predicted that by 1998 Hershey’s would at long last introduce the weightless candy bar, costing a mere 47 cents.

      That never happened, no doubt because of market forces.

  9. economicminor says:

    Inflation transfers money from the working class to the asset holders and the financiers. It is also good for the tax collectors. I just don’t think it can work forever as this is a finite world.. And Interest and Inflation are exponential. But I may be broke or dead before it crashes the system.

    Another great piece, Thanks Wolf

  10. Bruce Adlam says:

    We are lied to all the time and it gets me that we just accepted it we dont challenge it or them

  11. mynamtt says:

    Again for 12-dec-2016 nikkei 225 finished positive. It has been like that for the last two weeks. Japan is printing money like crazy now. Not sure who gets this money first, probably the banks.

  12. luckylongshot says:

    Understating inflation figures enable countries to overstate their GDP figures and so present themselves as more successful than they really are. In the US since the year 2000 there seems to have been an average 5% understatement of inflation each year, according to Shadowstats. When the true figures are applied to US GDP it drops from $17.9 Trillion in 2015 to just $7 Trillion- a $10.9 Trillion reduction.

  13. ft says:

    My grandfather retired in I think 1957 and lived on Social Security for the rest of his life. I retired in 2014 and (especially living in $ilicon Valley) Social Security covers less than half of what I need to live on.

    My salary when I retired was about ten times what it was in the late seventies when I was starting out, but most things now cost at least ten times what they cost back then, so it was a career of no financial progress.

    Little single digit inflation numbers don’t sound too bad taken year by year, but when you look at it over a lifetime it’s easy to see inflation as the evilest of evil taxes.

  14. Oliver says:

    San Francisco public MUNI tickets were $1 in 2002, and they are $2.25 for the same identical service as today. That is a cool 122.5% rise, a 5.96% annual rate in 14 years.

    Since 2008 gross Social Security payments have gone up an average of 1.79% a year, not including increases in mandatory witholdings for Medicare.

    Looks like a loss of 3% per year to me, before compounding, in purchasing power for MUNI users.

    Ahhh, but you now get to ride in a hybrid bus, rather than a screaming all-Diesel bus to get from A to B.

    If that is deflation, what will “acceptable” FED sanctioned inflation look like ?

    Oh, and why bother with 2.5% yields on the 10 year bond – SF MUNI tokens demonstrably yield 5.96% annually, tax free … ;-)

    The process amounts to a systematic empoverishment of large swathes of the (working and retired/disabled) population, much of which is so busy trying to survive that they don’t have the time, energy or health to get involved in a nationwide uprising or movement.

    • Chicken says:

      Costs more to clean those MUNI cars now, I’m sure, reclassified as bio-hazard area?

  15. night-train says:

    Under-reporting inflation isn’t new. I remember the late great newsman David Brinkley saying “Inflation measures, measure what they measure. People buy what they buy.”

    Nearly everything I regularly buy has increased in price over the last several years. And by much more than 1.5%.

  16. nhz says:

    I think there is another factor involved. The article mentions how costs of cars have increased by ‘moving up’ the product (more gadgets/features/luxury). I see something very similar with one of the other main products from Japan: cameras and lenses. And there may be a similar factor involved.

    Prices of the more capable cameras are on an undeniable uptrend here in Europe (probably some 10% per year), which started probably 3 years ago. This is strange, because with the rapid progress of technology prices should be going down (especially for cameras, less so for lenses). Although features are definitely increasing at feverish pace, image quality is improving much slower (far less than specifications suggest) and the real quality under the hood, like optics in the more affordable lenses, is going down.

    Part of the reason for the price increases is euro depreciation (the US hasn’t seen most of these price increases yet) but something else is happening: for many consumers a smartphone is now ‘good enough’ so the numbers of the more capable cameras like DSLR are steadily declining. If manufacturers cannot grow the market they have to move to more expensive products where they can take more margin, and this is what is starting to happen. Looking at the income and profit statements of the big camera companies, the problem is easy to see.

    The same might start happening with cars too: if we get autonomous cars, or more ‘car-sharing’ because younger people no longer aspire to own their car, the sales numbers are going to decline and the only way for prices will be ‘up’. At some time smaller/leaner alternatives to current cars may become a viable product (small/light electric or hybrid cars like the Aptera, Lit Motors C1 etc. – I’m not aware of any that is ‘affordable’ and more than a niche product) and then the car industry might get in real trouble. Another ‘solution’ might be that the product is no longer sold but only leased, e.g. a Dutch startup is promising an electric car that can last 1 million miles and that you can only lease/rent, not buy – the idea is to use the very best technology and make sure the ones that are build are used continually (= by different users) instead of taking up parking space 95% of the day.

    But whatever happens, I’m sure the statisticians will find a way to ‘prove’ that life is getting cheaper every day ;-(

    • BrianC says:

      The alternative is the bicycle. When I started working in Portland OR ~30 years ago, there were maybe 1 or 2 hard core bike people at work. (Folks that didn’t own a car, or if they did, used it sparingly.) My last contract I would estimate ~40 percent of the client’s employees commuted by bicycle. For a majority of them, a car didn’t pencil out cost wise.

      • nhz says:

        I’m used to bicycles and my country (Netherlands) is probably the most bike-friendly country in the developed world. This is partly out of necessity, because our old inner cities simply don’t have the room for all those cars. I ride a bike (plus some public transport if I have to) and don’t own a car, but it is far from ideal … for longer distances or in bad weather (we often have strong winds over here) a bike isn’t great especially when one gets older.

        Like in much of the developed world, public transport is getting more expensive and the service is getting worse all the time (it’s a disaster compared to when I was young). I fear that in 10 years there may not be any public transport in my part of the country as it is no longer profitable. So I hope some good alternative to current cars emerges in time, car-sharing might be an option but I don’t think it is mature and it isn’t a good alternative anyway if you seldom drive a car (self-driving cars could help there…).

        Also, I think the statistics about bike use are often unreliable. A prime example is the Dutch EPA/CDC, who offer huge subsidies to every worker who travels by bike to the office instead of by car. Almost everyone signed up for this, which was a bit strange given the very remote location of their office. Then somebody from outside the organization checked and their car park is just as packed as it was before they started subsidizing biking. So all these clever government workers grab the subsidy, maybe buy a bike and sell the bike to someone else, and enjoy their heavily subsidized cars ;-(

    • Mike G says:

      the real quality under the hood, like optics in the more affordable lenses, is going down.

      I have a 14 megapixel camera that produces crummier images than the 4mp camera I bought in 2005, even though the files are 5x larger.

      • Chicken says:

        I’ve noticed this with digital cameras too, my 1st one I got in Akihabara Japan and it was SLR, no zoom. When zoom was offered I bought a new camera but now I see these super high res cameras make large files but the image on my pc screen is no better.

        Facebook must be a hog, with all those photos people are compelled to post….

        • night-train says:

          A PC screen is a poor measure of image quality. Unless you have a dedicated high end photographic monitor, like an Ezio and have it properly calibrated, you aren’t getting the best image quality. Good lenses are still on the market, but they are pricey. A time tested photography axiom is put your money in the glass. Most folks put their money in the camera body, when the glass is much more important.

        • nhz says:

          @ night-train:
          agree, glass is more important and there are very good lenses (both for small compacts and for DSLRs), you just have to look for them. I’m using a modest 24″ calibrated Eizo ;-)

          Optics clearly show that the ‘deflation’ in electronics is not the norm, the price of quality optics hasn’t improved much over the years despite ‘progress’, probably because there still is significant human handling involved in production. Most of the progress has been in extra features – usually related to electronics – like autofocus, image stabilizers etc. and not in optics quality.

          There is some change though, it seems that especially Canon is automating most of their DSLR lens production so they probably have significant extra profits on new lenses and better yield (more consistent high quality). If this translates into lower prices remains to be seen, given the declining sales numbers probably not ;-(

      • nhz says:

        yes, this is frequently the case. However, I think that 4MP camera with better images was also more expensive.

        And sometimes you can get lucky, some of the recent digital cameras still have very good optics for a decent price. Unfortunately it is much easier to sell more megapixels or features than selling good optics quality …

  17. roddy6667 says:

    It’s hard to measure healthcare costs these days. The monthly premium may be a little lower, but with ObamaCare deductibles of $6500-$8500 a year and co-pays on top of that, it’s skyrocketing.

    • Wolf Richter says:

      These high-deductible healthcare plans came into being during the BUSH administration. We’ve had one since 2005. They’re great for certain people because you get to start a health savings account (HSA) to which contributions are tax deductible (like an IRA only better since you’re NEVER taxed on it). Plus the premiums are a lot cheaper. So healthy people with few medical problems benefit from lower premiums AND big tax deductions. We’ve saved a TON of money over the past decade. And our HSAs (one for each of us) are flush with money.

      HSA money – like an IRA – can be invested in the markets via a broker and gains are tax free as well, forevermore. This is for federal taxes. State tax rules depend on the state.

      These plans are a really SWEET deal. But being a Republican thing, they work best for those with enough incomes to benefit from the tax deduction.

      So quit blaming Obamacare for every good thing!

      • roddy6667 says:

        Those plans are good until they are not. A headache becomes an embolism, a chest pain becomes a heart attack.
        You say these plans are good for those with good incomes. The problem is, they are being sold to the people who get paid on Friday but are broke on Wednesday. They don’t have the luxury of funding an HSA or investing in the market.
        62% of the population doesn’t have $1000 for an emergency.
        Your argument is specious.

        • Wolf Richter says:

          As as I said they’re great for some people, but not for all. They’re a superb OPTION to have. One of many options in the US. Health care – as anything else – is not one-size-fits-all.

  18. kk says:

    My consultancy day-rate is the same today as it was in 1990….. It’s not just the working class that are feeling fed-up

  19. Greatful again says:

    The BLS is pretty useless. Higher education and healthcare have seen huge price growth. Even though oil has come down a lot in the last two years, it was in the high $20s in 2000.

    The boomer generation was probably the zenith of US wealth accumulation. Almost everyone of my siblings and most of our reference group have way more than our parents, even though our education levels were no greater than theirs. But our offspring , who are in their early thirties, are not on track to repeat this. Well, not until mom and dad kick the bucket anyway.

  20. Uncle Frank says:

    Those flat-panel televisions keep getting cheaper but it’s kind of tough to eat one.

    • Wolf Richter says:

      Good example!

      But are flat-panels as cheap as the vacuum tube TVs were five years ago? When flat-panel TVs entered the CPI basket, they were considered a new product. They cost $2,000+ at the time, but it had no impact on inflation. But for consumers, they replaced a $450 vacuum-tube TV of the same size, and their life just got a lot more expensive, without impact on CPI.

      Since then, prices of the flat-panels have dropped, and those lower prices over the years had a “deflationary” impact on CPI, but they’re still more expensive than the vacuum tube TVs used to be.

      • RD Blakeslee says:

        Wolf, “evolving” products confound attempts to price some generic product, for purposes of an accurate CPI.

        For example, my wife needed some “oatmeal” for a recipe, so I found “old fashioned” oats (Quaker Oat brand), various quick oats, flavored oats and house brand oats priced below the others, all with different prices. Moreover, I’ve observed net weights of processed food packages to decrease with various changes in volume of packages and pricing.

        So, for purposes of the CPI, what does “oatmeal” cost?

      • BrianC says:

        I went TV free in ’93 and really haven’t missed having one around the house. Huge waste of time, and no redeeming value for 99.99% of what is available.

        Plus no cable bill…

        My nephews came out to visit two summers ago… They were astonished I had no TV in the house… “Uncle Brian, what do you do???”, was the cry. We survive just fine without it, was the answer.

      • nhz says:

        mostly true and a bit similar to what has been going on with computers and digital cameras over the years. However, it strongly depends on when you start entering prices in the calculation basket and how you calculate the ‘value’.

        When flat-panel TV’s became affordable they replaced tube TV’s that were a very mature product by then with cut-throat competition (so much that manufacturers conspired to keep pricing up). But those same tube TV’s were certainly more expensive in most of the nineties on a relative basis than current flat-TV’s, especially for the bigger sizes. And if you used those big tubes often, the electricity bill would start to add up as well.

        Around 1995 I paid over 2000 euro for a high quality 26″ tube TV; my EUR 500,- Samsung 40″ flatpanel from two years ago is many times better in almost every way. At the lower end of the range, you now have small $100 flatpanel TV’s that are probably better in many ways as well than the small $100-200 tube TV’s of the nineties when $100 was really more money. 2500 euro nowadays buys one a 55″ 4K OLED screen that is leagues ahead of those 1995 tube TV’s (except that it may be less user-friendly).

        The main catch is that the lifetime of those flatpanel TV’s might prove much shorter. If you take product lifetime into account, current flatpanels might still be more expensive indeed than tube TV’s (although the last of those weren’t very solid either …).

        For ‘personal’ computers my impression is that the general price point hasn’t changed much over the last 25 years, maybe cost for a decent product has been cut in half or so but that’s about it (definitely less than the CPI calculations suggest). What you can do with it has changed tremendously, but for some people that may not matter and in fact the old computers may sometimes be better (WAY more simple, easy to learn, less technical problems etc.). On the other side, the cost of keeping those systems running has been steadily increasing due to far more frequent updates that are required and steadily decreasing product quality. Add those costs and people are probably spending about the same on computers and communication as they did 25 years ago.

        • j. says:

          old engineering joke: “…if something works really well, it doesn’t have enough features yet…”.

  21. r cohn says:

    Let’s say that a family earning the median income in 2014 anticipated that they needed to buy a car in 2016 . .With an “OFFICIAL” inflation rate of %1.7 ,the family income would be just enough to buy the car in 2 years.Two years go by and the price has gone up by %5,but the official stats show that the price of the car went only %1, because of so called hedonistic adjustments.They no longer can afford the car.

    Ten years ago we remodeled our kitchen and installed a high end Miele stackable washer/dryer in this kitchen to supplement our 10 year old Maytag in the basement .Last July ,the Miele started making noises.The repairmen said that they would have to take the washer back to their shop to repair it.The charge would be around $900,not too far below the cost of a less “prestigious” new washer AND dryer.

    • nhz says:

      I have an older Miele washer, purchased second hand six years ago for 75 euros and 15-20 years old now. It still works ;-)
      I know the latest Mieles are far less solid than those from long ago; the warranty period is much shorter too.

      When it finally breaks down I’m going to look for another used one. I learned that many wealthy households ditch the washer as soon as the filter gets clogged, and buy a new one; just like many people replace their computer when performance slows down too much or they get a virus …

  22. Kent says:

    Hedonic adjustments are fine in theory, and I haven’t noticed the inflation in food prices mentioned by others here. But I tend to only by fresh and on-sale, and adjust my diet accordingly. Odd, I know.

    In theory (again), increasing prices due to improving products should be okay as long as wages are growing along with them. If they are not, then there comes a point where manufacturers will have to stop making those improvements in order to maintain market share.

    I purchased a Honda Civic a couple of years ago. It was a little more expensive than models from 2009 (bought one for my son then), but it has a number of electronic improvements (backup camera, etc…) that I’d consider worth the extra money.

    The issue in the USA is wages, not prices. The US became a “middle-class country” for only one reason: labor unions. Americans have been conditioned to believe labor unions are somehow terrible. That somehow if you don’t like what you are earning, you can just pick up and find a guy who will pay you more. The world just doesn’t work that way.

    I’m a public sector worker (upper management at this point) and have never been in a union. But I deal with them all the time. And I see so many private sector employees railing against public sector union workers and blaming them for what has befallen their lives. My only response is that your fathers had a high standard of living because they were either in a union, or their employers were forced to compete with union wages. Forming unions has always been difficult in this country. Your great-grandfathers were beaten and killed when they tried to form them. But we have thrown away the sacrifices they made for you.

    • BrianC says:

      Pretty much this.

      My grandfather left home at age 15 to work as a scab on the Milwaukie Road. He was hired to run a 16 horse team on a horse drawn road grader. (The owner ran the machinery that controlled the blade in back while my grandfather drove the team. Driving a 16 horse team meant holding about 100 lbs of leather in your hands. He weighed about 110 lbs back then.)

      On that job they worked 7 days a week. A work day was from 15 minutes before sun up until 15 minutes after sun down. If the work bell rang, and your team wasn’t on the grade when the bell rang, you worked that day for free.

      I asked him why he left home at 15 to go to work, and his answer was “there wasn’t any food.”

      He talked about sneaking into the yard past the strikers, because if they caught you they’d beat you up or kill you. If you were a striker, you ran the risk getting killed by the Pinkertons. He lost friends on both sides, and told me of seeing bodies floating in the river that ran through town.

      A lot of people have forgotten what it took to win an 8 hour day and a 40 hour work week.

    • nhz says:

      I don’t think unions work with the fast pace that jobs and companies are changing nowadays; people skip to very different careers all the time. In my country unions work great for the oldest workers, but most young people hate them because of their disastrous policies (disastrous for younger workers).

      When I started my computer/imaging company in the nineties, I got a visit from the government who then decided that my company would fall under the metal workers union, because he had seen that someone in the back of the room was soldering some products together (we did mostly product development then). But it was really an IT company, and metal union was entirely inappropriate classification; but I got stuck with that forever and had to abide to the dictates of the metal union workers (an extremely privileged group in my country) – for me a clear sign of how outdated the union system was, even then.

      • Kent says:

        Union leadership in the USA has been disastrous for decades. While I think unions are essential for a decent standard of living in any country, implementation of union systems and leadership are essential for success.

        While its obvious a metal workers union is inappropriate for soldering electronics, in the US unions have often been lead by organized crime. That doesn’t mean unions should go away, just that the government should do a better job of regulating them.

      • Petunia says:

        Union rules don’t mesh well with the tech industry because the work is defined by the clients. I can just image the union dealing with time sheets listing a 120 or 130 hour work week. And how can you dictate that in the following 8 hours you must come up with a design for a complex application.

        As an aside, I shake my head every time I read an employment ad for a govt tech job. You can see they have no idea how to hire tech people.

        • Tom Kauser says:

          I work in the back of one of the big blue box retail outlets!
          Stockup and prepare to move down and pay more?

        • Tom Kauser says:

          Help wanted ads read like penthouse letters and keep your hometown paper conservative?

        • Kent says:

          I’m a public sector CIO, so I understand (resemble?) that remark. You’d be surprised (or maybe not) at the poor quality of tech leadership in most public sector organizations.

          That is a direct result of the quality of elected politicians. Most local pols are small business owners or political gadflys of some sort. There idea of technology is MS Excel, google and some cheapo single user accounting package.

          There idea of “tech leadership” is the guy who walks buy and has them reboot when something seems weird.

          As for labor and tech not meshing well, I agree. I’ve never been in a labor union, but have always worked for large companies with unionized work forces (started at GM in the ’80’s). The unions set the core labor rate. The rest of us road on those broad shoulders.

        • nhz says:

          yes, poor tech leadership in the public sector …

          I heard an interesting discussion yesterday about the woes around voting machines in my country. The CEO from a computer security company lamented how he had to explain every few years again to politicians what all the problems are with voting machines. Public sector ‘leaders’ keep coming back with the idea that electronic voting is ‘so much better’ than paper and red pencil, while they have no idea what they are talking about. Just like the US, we have had our failed trials with electronic voting, huge amounts of money were spent on voting machines that were easy to manipulate and eavesdrop on. In hindsight nobody knows if those elections were valid. Of course, nowadays it’s ‘voting over internet’, with smartphones or similar clueless ideas that simply disregard all the potential problems.

          Even in the 1930’s there was already a push for (mechanical) voting machines in my country. Fortunately the minister in charge decided that he didn’t understand the details of the technology and could not judge if it was sound, so he decided NOT to use them. Unfortunately, current politicians are not so wise.

          Big public sector IT projects: almost always a total disaster. A recent survey found that 40% of those projects are never implemented/finished, despite the huge amounts of money and efforts that were spend on them over the years. And the projects that ARE implemented are sometimes worse than what came before it …

    • Frederick says:

      Odd Not really I do the same thing as do plenty of others I notice that the sale items sell out VERY quickly nowadays Its just smart

  23. Greatful again says:

    “Sponsored” entries have no comments section? Or is it my device lacking a needed capability?

  24. /sarc = on

    Not to worry I have personally been made whole !

    HOORAY !

    Just got this in the mail : “Your Social Security benefits will increase by 0.3% in 2017 because of a rise in the cost of living.

    Why would I need to apply for food, rent or energy assistance, I GOT MY COLA ! ! !

    /sarc = off


  25. ML says:

    Thinking that goods and services should be cheaper because of technological efficiencies is very socialist.

    The private sector is not an extension of social services. If you are going to have two different systems running the economy then higher prices from the private sector are more likely, partly to maintain and increase profit margins, but also to differentiate.

    Where the public or state sector goes wrong is in thinking itself more important than it is, and paying its managers handsomely just for doing their job.

    The private sector might be associated with cheap labour but only because most cheap labour can be relied upon to work its socks off.

    I run Snow Leopard on my iMac but i have gotten a new iMac so am about to change to Sierra because the app developers that I use no longer provide support for SN and my browser is out of date, as websites keep reminding me! In addition to the capital cost of the iMac, i am going to have to fork out getting on for $1000 in sierra compatible versions of all my software. However, I am typing this using an elderly ipad which one day when it packs up I am unlikely to replace because ultimately I have to decide whether to be a member of the audience where I am required to do as I’m told or on the stage where I can be myself and do as I please.

    Yesterday I quoted my charges for some work and was told I was underpricing. That if I upped the price by 25% I would be more likely to get the work. The money to support the perception that it cannot be done for the lower amount has to come from somewhere. Somewhere is usually the socialism, the ideology of fair shares for all.

    • Observer says:

      Doesn’t compute. First you say the idea that goods and services should be cheaper because of technological advances is socialist. Then you say you were told to quote your work 25% HIGHER, because of socialism. Am I missing something?

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