Saturday, November 23, 2013

Historical CPI numbers and CAGR projected into future

Ok  so I'm not done.

This is all quite fascinating.  Fascinating watching tribal politics trump common sense, and even more fascinating how it trumps simple arithmetic.  When we get things such as "semantic tells" or "Manichean view" thrown in the mix we have really fell off the reservation.

Debt is good, and simply a "policy tool." Nothing to see here, move along.  LOL!

Well, it so happens, we available to us, data to support what that policy tool has done and can do.  The Bureau of Labor Statistics has a plethora of historical data available in what they call the CPI, or the Consumer Price Index, to show us what the costs of goods and services have cost us over a period of years, sortable, and categorized to provide the data.  Let's take a look shall we?

I went back to 1980 for the data and compared those numbers to today (2013), then projected those number into the future using the inflation target number given by the Federal Reserve, which is 2%.  The exceptions are a couple that only went back to 1995, and the one I used 1913 for obvious reasons.

I then projected to the future 25, 50, and 75 years.  I chose that number as 75 years is a nice average lifetime of a human.

Projecting from 1980 (or 1995) to 2013 you can figure the CAGR (Compounded Annual Growth Rate) using a simple formula in Excel (the BLS site allows you to search and download the table data).

Using the current 2013 price data, and the Federal Reserve's 2 percent inflation target, we can project those values out the 25, 50, and 75 years to get an idea what things might cost in 2088.

From this data we can also see, the CAGR of these prices grew faster than the projected 2 percent the Fed is targeting (all but a couple of the example I used), which makes the 2 percent Fed number low, which many economists also believe.  And why shouldn't they, the numbers are what they are.

I chose random items we all have, use, or buy, and a couple others just for fun.

All data can be found at the BLS at; BLS CPI data or FRED (Federal Reserve Economic Data); FRED data

And for fun, let's take a look at those number if the Fed target inflation number is higher than their 2%.

At 3 percent:

At 4;

So debt and the resulting inflation is good.  Just a tool, nothing to see here.  Got it. Keep printing more money because more money will create more growth, or more prosperity, or more something.  That's some wild stuff right there.

Go sell your BS to someone else cause I'm not buying, I can't afford to, I can't keep up now.

As an aside, I didn't do this little experiment because of the debate in this thread.  I did this a month or so ago when some of the newer data came out.  I find this much more enlightening than listening to some MMT ((M)agic (M)oney (T)ree) screwball tell me how printing money will fix the world and the Fed insanity is a giant conspiracy theory.

No wonder this country is truly ******.

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