Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
You probably know that under Clinton the definition of the CPI was completely changed?

Some examples from ftd:
Cars, an international tradable goog, have become 6% cheaper between 1996 and now in the US according to the official CPI. In the Euro area in the same time cars have become 14% more expansive. Do you think the Dollar has rocketed in that time against the Euozone currencies? Anyhow this will only be adjusted for core inflation, which not includes e.g. oil and food prices and house renting has become 43% more expansive in that time (according to CPI), while the Shiller index increased 160%.

The trick is e.g. the hedonistic CPI calculation in the US. If a computer doubles its price, but has double the memory and processor capacity, in the US it counts as no inflation. In Europe a computer is a computer. For cars probably kW or whatsoever is used to determine the 'hedonistic use'.
Another trick is geometric CPI calculation. Let's say you have big cars and small cars and initially you both are bought to 50%. So now big cars become more expensive, but small cars don't because e.g. a Tata motors introduces a new cheaper car in the market. Then the US CPI calculation says, Ok as you can substitute aone type of car with another type of a car, likely more people will buy now small cars instead of big cars and you end up e.g. with only 35% buyers of a big car for the CPI calculation, for sure a Porsche driver won't care that he now drives a Tata. Or e.g. with more people eating the 1$ Burger instead of the steak.

If you want your money secured with something closer to what you would accept as CPI, you should buy inflation protected bonds denominated in Euro with the ECB inflation measure.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Mon Mar 3rd, 2008 at 09:31:36 AM EST
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