CPI Index

Discussion of inflation, the CPI index and owners' equivalent rent.

Tags: CPI, inflation, owner's, equivalent, rent, deflation

Published: 7 April 2009, 16:39

Overal rating: 4.859375 Total ratings: 64 From: khanacademy Views: 6,790 Duration: 15:29 Category: Education

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Published: 8 January 2010, 11:27 , Edited: 8 January 2010, 11:27
Written by: starrychloe

Hi Sal, what do you think of shadowstats . com?

Published: 7 November 2009, 04:09 , Edited: 7 November 2009, 04:09
Written by: venttiarmas

I think it´s naive to talk about cpi with not mentioning hedonic adjustment, substitution and stuff like that.

Published: 8 September 2009, 00:01 , Edited: 8 September 2009, 00:01
Written by: anonymous915

I think you hit the nail on the head with the "owner occupied housing." I think you're wrong about the deflation, though - where I live, houses have almost doubled in price in the last year.

Published: 12 May 2009, 21:50 , Edited: 12 May 2009, 21:50
Written by: amirakhtar

but couldn't you make the argument, that an increase in the the money supply, may eventually lead to an increase in aggregate demand, thereby causing an increase in overall prices? Or will overall prices only increase if capacity utilization rates are high? But doesn't capacity vary over time? during times of recessions won't 'capacity' be lower than boom times?

Published: 15 April 2009, 12:16 , Edited: 15 April 2009, 12:16
Written by: highflyer1815

Fascinating

Published: 13 April 2009, 15:17 , Edited: 13 April 2009, 15:17
Written by: khanacademy

Monetary inflation, by definition, is an expansion in the money supply. Price inflation (which most people care about) isn't. The term "Inflation" was first used in the monetary context, but now the term tends to refer to price inflation.

Published: 13 April 2009, 14:03 , Edited: 13 April 2009, 14:03
Written by: lacon007

Inflation by defn is an expansion in the money supply, whether through more credit or more money being printed, without an commensurate increase in goods and services produced -- It's the inflation that leads to the price increases, but there also exists negative pressures on prices also. This index, like other stats the gov't puts out, should not be trusted.

Published: 12 April 2009, 06:06 , Edited: 12 April 2009, 06:06
Written by: Tehcarp

A facebook could provide a very biased sample. Complete with no assurances of data integrity.

Published: 12 April 2009, 02:50 , Edited: 12 April 2009, 02:50
Written by: gangs30

the title of this video bugs me, it should be just CPI as that stands for consumer price index, there is no need for 'index' after CPI. its like saying ATM machine, or GPS system, or even LCD display. redundant last word. otherwise, the content is good! keep going sal!

Published: 11 April 2009, 23:49 , Edited: 11 April 2009, 23:49
Written by: schmokay

Thanks for the video. The problem that they have with the CPI is that when the benchmarked teh CPI was regularly overstating inflation. That is a large reason for the twisting to bring the CPI more inline with reality. The pendulum has probably swung to far in the other direction. Also, even though fuel is > 4% of household expensed it is a factor in the cost of production and distribution of all goods, that is why it has a larger impact on the CPI than its base weighting.

Published: 10 April 2009, 03:29 , Edited: 10 April 2009, 03:29
Written by: Dariendfh

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Published: 9 April 2009, 04:59 , Edited: 9 April 2009, 04:59
Written by: mostolesdude

Fantastic video, it makes me think of government conspiracy theories.

Published: 8 April 2009, 10:49 , Edited: 8 April 2009, 10:49
Written by: hyperguy61

Here is all you need to know about inflation. One dollar in 1913 , which is when the fed , as we know it , came to exist , is worth about .04 cents today. Thank you Sal for showing one more way the govt. lies

Published: 8 April 2009, 10:31 , Edited: 8 April 2009, 10:31
Written by: HamiDjoukou

probably full of pesticides.

Published: 8 April 2009, 06:40 , Edited: 8 April 2009, 06:40
Written by: Lukeeeeo

Fruits and Vegetables 1.194 Bargain!

Published: 8 April 2009, 06:37 , Edited: 8 April 2009, 06:37
Written by: sieniawska

great content! - it's a pitty that there is some high pitch noise in the background.

Published: 8 April 2009, 01:26 , Edited: 8 April 2009, 01:26
Written by: BigBruddah101

Isn't that all the more reason for the Fed to allow deflation now, given how much inflation we were actually suffering from over the last decade?

Published: 8 April 2009, 01:01 , Edited: 8 April 2009, 01:01
Written by: hideflolife

devilmirror1, while the Fed has lent out a ton of money and increased their balance sheet, it's not clear whether the increased money supply is leaving the banks. They are holding this money, apparently for liquidity (many people claim that the banks are insolvent). So, if the money supply was entering the general economy, I would agree with you, but that's not what seems to be happening. hdll

Published: 8 April 2009, 00:43 , Edited: 8 April 2009, 00:43
Written by: hideflolife

I was thinking the same thing, except, you'd have a bunch of rabid politicos spiking the data.

Published: 8 April 2009, 00:41 , Edited: 8 April 2009, 00:41
Written by: hideflolife

Sal - again, great video. These "component" definitions are distorting key statistical measures. That's why I asked you a couple of days what they meant by "discouraged workers" - from where does that derive? hdll

Published: 7 April 2009, 23:57 , Edited: 7 April 2009, 23:57
Written by: khanacademy

Owner-occupied housing can be an investment, but its primary purpose is shelter and to maintain a standard of living. The CPI is used to measure how much the cost of maintaining a certain standard of living changes over time so the cost of things like housing should be included (most people are buying homes to maintain their living standard; not renting them).

Published: 7 April 2009, 23:28 , Edited: 7 April 2009, 23:28
Written by: khanacademy

I agree that the name is a little misleading. Disposable income is everything you take home (after taxes) while Discretionary income is what you have left over after you pay for food, shelter, etc.

Published: 7 April 2009, 22:17 , Edited: 7 April 2009, 22:17
Written by: lvecsey

A facebook app or some such could provide a viral survey that provides tons more transparency, and illuminate what is really going on out there. Why wait for the government to do it, and private investors to take advantage of what is or isn't there.

Published: 7 April 2009, 19:22 , Edited: 7 April 2009, 19:22
Written by: devilmirror1

Money that was created recently is not for ordinary people but it is used to bail out big corporations such as AIG. Moreover, the expansion in money supply is planned for government spending: war, health care, road construction, and Obama's plans. I think this is even worse. Hmm...

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