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Sunday, January 10, 2021

The Implausibility Of The Chapwood Index

The Chapwood Index has become a popular source to cite by hard money proponents who are pushing the line that inflation is really much higher than what government statisticians suggest. It has taken over the limelight from Shadowstats, which pioneered pushing that particular line. Although it is entirely expected that individuals can face cost of living increases that rise faster than official the CPI inflation rate, the levels of inflation suggested by the Chapwood Index do not appear to offer any plausible information about the price level as the concept is used into macroeconomics.

Update 2021-02-21: If one searches for “Chapwood Index” on a few search engines, this article shows up, but not the Chapwood Index itself. My link is broken. I think what has happened is that they have attempted to pivot to chapwoodindex.org. There’s a site at that URL, but in terrible shape. The text quoted here may not appear on that site.

Trust, But Verify

Equity analysts can survive being trusting (or even gullible) -- they only need to find a big winner to cancel out losers, and the winners often need to be bought when a firm is still in a early stage of development, requiring optimism about growth prospects for an unproven business. By contrast, fixed income investors only receive a relatively small amount of interest when compared to the capital at risk, so they generally cannot afford any significant credit impairments. (The exceptions would be high yield and emerging market fixed income investors, and distressed debt specialists that invest based on recovery values.) Since it is generally poor form to tell everyone that you are dealing with that you assume that they are lying thieves, one instead generally projects the attitude of "trust, but verify" (using a well known Cold War era phrase).

I have not spent a great deal of time looking at the Chapwood Index (URL: https://chapwoodindex.com/) or the entity behind the calculation, but the website declares that they are a financial firm. (Note: as stated above the link seems to be broken. The website may have moved to chapwoodindex.org, but that site as URL is also in bad shape.) Since the Chapwood Index is a form of advertising, it is clear that they have a financial incentive to have the most extreme results possible -- nobody would care if their index suggested that the cost of living is half a percent higher than CPI inflation. The question is: can we verify their results?

Based on what I saw of their website, there does not appear to be a way of validating their numbers. To do so, we need two things.
  1. The prices used for each city for each of the 500 items in the index.
  2. The weighting methodology.
For the latter, they declare the following:
We take the precise price for the same item quarter by quarter and calculate the increase or decrease. We tracked the prices on a quarterly basis and created a weighted index based on price. These items include basically everything that most Americans consume during the regular course of their lives. 
One possible interpretation of this is that the weight is according to price. Roughly speaking, take the price of 500 items and add them up, and see how the total changes each year. This is problematic, as was noted in a Reddit article that I ran into when doing a web search (link). For example, the price of a litre of gasoline where I live is currently just over $1. This would have a small weight on a price-weighted index, but it ignores that I buy many more litres of gasoline in a year than I buy Blackberry services (which amazingly is in the index). However, the word "based" is vague, and the rule they use could be more complex.

Although they offer some examples where certain items rose more than the aggregate CPI (an unsurprising outcome; price changes are not uniform), there does not appear to be any way of validating the numbers. You have to trust the producers of the index.

Other Price Indices are Not Transparent Either

By itself, the lack of access to underlying data is not that unusual -- we cannot see the underlying prices that are used in the CPI calculation. Historically, this would not have been technically feasible, but one could imagine such data being made available at present (probably for a fee). It would certainly be interesting if that data were made available, but doing so might pose issues around confidentiality. It would be possible to reverse engineer pricing strategies used by the retailers being polled (as well as the household expenditure data used for weightings), which might not be desired by the retailers.

Since it is unlikely that any fixed income analysts have the time to trawl through the raw data, there is no constituency pushing for its release. Although stories about governments cooking inflation numbers float around, the way to verify them is to look at them in the context of other economic and price data.

Nobody sensible would attempt to use personal experience with prices to look at global fixed income pricing. For example, I have no way to judge price changes in Toronto or Vancouver -- never mind Dallas, Sheffield, Osaka or Toulouse. Very simply I cannot pretend to know how the cost of living of Americans is evolving on a personal basis, but I can judge whether aggregate price level indices are coherent with other economic data.

Size of the Discrepancy

The Chapwood Index is not actually a single index, rather is given in terms of annual price changes for 50 American cities. The website for some reason compares the national CPI index to their city-level series, seemingly unaware that there are regional CPI series. I will use Boston as an example.

In order to stick to full year data, I will compare the Chapwood data to the Boston CPI data ( which I accessed at this webpage, series IDs: CUURS11ASA0,CUUSS11ASA0) for 2016-2019. The Chapwood data suggests annual inflation rates of 11.5%, 11.1%, 9.9%, 8.7%, whereas the BLS rates are 1.5%, 2.5%, 3.3%, 1.9%. This is an extremely large difference, dwarfing the dispersion between other recognised inflation series.

I will not attempt to aggregate the Chapwood Index, but would note that the lowest 5-year inflation rate (ending mid-2020) they report is 6.9% (Mesa), the median is 9.5%, and the highest is 13.2% (Oakland). 

It would be completely unremarkable that someone could develop a methodology that suggested inflation rates were higher than CPI, since we know that methodology changes have lowered CPI inflation rates. Meanwhile, it would certainly be possible to design an inflation index that has much more volatility than the CPI, which would allow for more divergences on a year-to-year basis. This allows higher inflation rates in some years -- balanced by deflation in other years (which is not happening in the Chapwood data, where only one city had a single inflation print below 6% in 2016-2019.) Nevertheless, I see no way of bridging the gap between the Chapwood Index and the CPI on good faith technical differences -- the compounded growth rate differentials are far too high.

Cost of Living Versus Price Indices

As the Bureau of Labor Statistics notes, the CPI is not a cost-of-living index. They write:
The CPI frequently is called a cost-of-living index, but it differs in important ways from a complete cost-of-living measure. We use a cost-of-living framework in making practical decisions about questions that arise in constructing the CPI. A cost-of-living index is a conceptual measurement goal, however, and not a straightforward alternative to the CPI. A cost-of-living index would measure changes over time in the amount that consumers need to spend to reach a certain utility level or standard of living. Both the CPI and a cost-of-living index would reflect changes in the prices of goods and services, such as food and clothing that are directly purchased in the marketplace; but a complete cost-of-living index would go beyond this role to also take into account changes in other governmental or environmental factors that affect consumers' well-being. It is very difficult to determine the proper treatment of public goods, such as safety and education, and other broad concerns, such as health, water quality, and crime, that would constitute a complete cost-of-living framework. Since the CPI does not attempt to quantify all the factors that affect the cost-of-living, it is sometimes termed a conditional cost-of-living index.
The creators of the Chapwood Index by contrast came up with an overly simple approach to calculating the "cost of living," and made decisions that would obviously increase the rate of inflation.

A key example is the inclusion of what they label as "Federal" in their list of 500 index items. Since they also include "state" and "property" in the list, this presumably refers to taxes. If we lump income taxes paid by a household as part of the "cost of living" it is clear that we should expect that the taxes will rise faster than the cost of goods and services, even in a magical world where there are no relative price shifts.
  1. Due to productivity, average wages should rise faster than the price of final output (otherwise all real income growth is captured by capital, which is not predicted by almost any economic theory, nor shows up in the data). By implication, there should be rising real consumption by households (the magnitude of the rise in the standard of living is a point of debate).
  2. The way seniority is treated in the market place, an individual's wages is expected to rise faster than the average. (If we compared "seniority cohorts" over time, each cohort should have wage growth in line with the average.)
  3. Income taxes feature rising marginal rates, and tax brackets are not indexed.
The net result of these factors is that an individual's income tax payments should rise faster than the cost of goods and services. Since the Chapwood Index providers offer no information on the details of their methodology, we have no way of knowing how they treated this effect.

On a personal basis, the "cost of living" is very much dependent upon life decisions. Income differentials are growing, and goods and services aimed at the wealthy have typically seen price rises that are faster than those consumed mainly by the poor (although there are exceptions, such as various medicines in the United States). If you pursue a lifestyle that is filled with markers of class position, your personal cost of living is likely to have risen faster than average. Based on some Chapwood Index components -- private school, cat grooming (spoiler: cats groom themselves), luxury box rental -- such items are probably overweighted, given the price-weighting scheme allegedly used.

Questionable Definitions

Another way the Chapwood Index could be constructed to give a high inflation rate is to take advantage of the vagueness of definitions. They specify "laptop computer," which provides almost no information. I looked at the website of a large American electronics store, and they list laptops that ranged in price from $169 to $4199. Unless there is a very specific criteria to ensure comparability from year-to-year (in an environment where laptop models are continuously changing), this leaves a spectacular amount of wiggle room to pick which price to use. (E.g., start at a low end laptop, then slide up the quality scale in later years.)

(This also shows up in "Play Station" [sic], which skates over the fact that normally only the latest versions of PlayStation™ consoles are for sale.)

We have to take on faith that the construction of the Chapwood Index handles the changes to index components in a fashion that does not lead to higher inflation rates.

Economic Implausibility

Now that I covered how someone could end up with a cost of living index that rises faster than CPI, we then turn to the economic implications. The results are implausible, for the exact same reason that the Shadowstats inflation numbers were implausible. There are a large number of critiques of Shadowstats that already exist that outline this argument. (The critiques of Shadowstats methodology details would not be applicable, of course.)

We need to look at how we define the price level from a macro perspective. We say that nominal GDP growth is (roughly) equal to real GDP growth plus the growth in the GDP deflator. The GDP deflator is an economy-wide price level, which can diverge from the price level of final consumption goods and services. However, we would not expect divergences between the economy-wide price level and consumer prices to be sustained indefinitely. 
Figure: GDP And The Effect Of Inflation Hypothesis
The above figure illustrates why the above decomposition matters. The top panel shows that reported nominal GDP growth has typically been in the neighbourhood of 5% during expansions. The growth of the GDP deflator (not shown) results in real GDP growth rates that bonce around 2-3% (also not shown).

What happens if the government was misrepresenting inflation? If we replace the reported GDP deflator with an index that grows at 2% a quarter (implying just over 8% a year inflation, which is probably below what the Chapwood Index implies, although it does not go back to 1995), we see that there is a massive divergence in the level of real GDP. As basic mathematics suggest, it is shrinking rapidly, falling by more than half since 1995.

Obviously, for inflation to be "really" 8%, either one or both of nominal and real GDP numbers have to be also manipulated. (If one looks at national accounts data, that implies that there has to be a lot of series being manipulated, since they all add up to GDP.)

Cross-Validation

We do not have to take these numbers purely on faith. As noted earlier, the government cannot just manipulate one CPI series -- they have to manipulate everything, since governments offer comprehensive national account data. We can validate the internal consistency of the data by a number of techniques.
  1. International comparisons. In addition to trade data, multinational corporations imply economic linkages across countries. A country that doctored its data would end up with data that is out-of-sync with international peers.
  2. Nominal GDP is equal to nominal gross domestic income (GDI). If we assume that nominal GDP is growing faster than reported, then nominal incomes have to be growing faster than reported as well. Average hourly earnings are reported, and one can compare that to local experience to see how plausible the numbers are. Meanwhile, earnings of corporations are relentlessly scoured by equity analysts that have nothing better to do with their lives. National accounting of profits follow different conventions than financial accounting, but analysts would pick up on corporations in aggregate massively outperforming nationally reported data.
  3. Real GDP is a vague concept that has theoretical issues if you think too much about it. However, it is expected to be highly correlated with real activity variables. Falling real production implies that workers are becoming far less productive, unless one starts inventing alternate employment data that suggests that unemployment is continuously rising beyond what is being reported. Many important real activity variables -- automobile production, oil production, railroad car loadings, even cardboard box production -- are reported by private sector bodies. If the real economy were shrinking, so would those reported figures. (I do not pay for such data sources, but based on my experience from when I did, all of them were coherent with officially reported GDP data.) By implication, a large number of private sector bodies have to be in on the conspiracy to cook internally consistent data.
  4. Many prices (e.g., commodity prices) are either available from market data, or are compiled by trade bodies. These can be compared to official price indices. Since CPI inflation is a traded financial product, there is a lot of interest in doing such comparisons. (For example, private data is narrower, and produced in a more timely fashion.)
All of these data are being scoured by analysts looking for an edge in macroeconomic prediction, and most of these analysts are happy to tell you how smart they are, and how much they love free market economics. Other than the handful of believers of Shadowstats/Chapwood Index, all of these analysts are allegedly being fooled by all of the available data sets.

Raw, Stinking, Misinformation

The government’s baseline CPI measure excludes items such as taxes, energy, and food. [emphasis mine] It is clearly manipulated and biased, therefore it is rarely accurate.

This is a line that is popular on fringe hard money websites, but is incorrect. The official CPI used for cost-of-living adjustments is the headline CPI, which includes food and energy. Economists strip out food and energy to calculate "core inflation," which is only used by them for analysis.

Including such a statement is a glaring red flag. 

Concluding Remarks

I will summarise my arguments into two key takeaways.
  1. It is entirely possible to define a "cost of living" index that rises faster than reported CPI (especially if one compares a regional price versus a national average). An individual's cost of living is based on their lifestyle choices; if you wish, you can have a very expensive lifestyle.
  2. The Chapwood Index numbers are too far away from published data to be chalked up to technical index construction issues. If we believed that the price level of the economy moved in line with the Chapwood Index, it would imply that government statisticians across the developed world are creating an elaborate fantasy world with thousands of internally consistent economic time series, and the private sector is in on the act, producing data that are coherent with the government's story. 
(c) Brian Romanchuk 2020

54 comments:

  1. I would like to confirm your view about the reliability of private and public data sources. I worked for 25 years with privately compiled data sources (oil, gas, refined products, e.g. motor fuel, forest products: pulp, paper, paperboard, corrugated products, lumber). The private sources tended to be more timely than the Stats Can data (which I also used), although not usually by very much. The data in both sources was confirmed by my own observations in the producing facilities and by conversations with many workers in them. I worked for the union but my management counterparts used this information as well. The idea that the numbers could be falsified and not noticed is not believable.

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    1. Thanks. I was not an industry analyst, but periodically would look into random private industry data based on some macro angle (or to support other analysts), so I had a handle on the variety of data that are available.

      Delete
  2. Trading has become easier and comfortable with online trading applications.
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    ReplyDelete
  3. 2010-2020 annual cpi inflation

    USA 1.7%
    CHINA 2.7%
    INDIA 6.7%

    THE INFLATION DIFFERENTIAL IS ACCURATELY REFLECTED IN THE INR:USD FX RATE MOVEMENT FROM 45.0 TO 73.0

    INDIAN PROPERTY INFLATION HAS BEEN BALL PARK IN THE VICINITY OF 7% TO 8% PER ANNUM OVER THE LAST TWO DECADES

    IT IS CLEAR THIS CHAPWOOD GUY IS TRYING TO GET ATTENTION WITH HIS OUTRAGEOUS REMARKS.

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  4. Your analysis gives this soon-to-be retiree relief because I won't have to chase yield to (mostly) stay even. Jeff Snider INSISTS that inflation is not an issue, but I've had a hard time reconciling his view with the Chapwood Index. Your analysis is helpful, substantiates Jeff's belief, and accordingly, provides peace of mind. Thank you for that! And I've always taken Shadow Stats figures as gospel. Hmmm, maybe not anymore.

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    1. The Chapwood Index and Shadowstats are seeking attention.

      The only caution is that inflation has been at low levels, but there is no guarantee that holds forever.

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  6. Why exactly should we believe you? For the same amount of man-hours worked 20-30 years ago, you could get full tuition, a house and keep your family afloat. Why do you keep believing these lies that inflation is at 2%? No one cares you live in Nunavut or Labrador, we are talking about the 95% urban population with insurance, medical costs, tuition costs, gas costs, property taxes, asset costs annualized over 20 years dude. Stop screwing around. Now it takes a dual-income earner family to live the same standard of living, fucking bs.

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    1. 1) What you can purchase depends on wages. Wages do not magically rise in line with inflation.

      2) This is a question of raw numeracy. If one believes Chapwood that the inflation rate is 10% per year, that means that prices allegedly have risen by a factor of about 17 since 1991. Trying finding goods that have risen by that amount.

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    2. Technology creates deflation. Fracking for instance pushes costs down. Technology is the savior here. Technology can't save healthcare and tuitions though. So money goes where it's treated best. That means stocks/investible real estate, gold, etc. That's your inflation, in assets. The bulk of money is owned by a small fraction of people. This explains the widening gulf between rich and poor, which is at ludicrous levels now (populism growing). W/out indexes like Chapwood, things wouldn't make a whole lot of sense - CPI numbers are only informative if you plan on living in your moms basement for the rest of your life. You're not going to understand how you're losing more purchasing power over time, forever.

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    3. Did you even read what he posted Brian?

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    4. I read it, it did not make a lot of sense, sorry.

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    5. Let's think of the CPI as an arbitrary number, because it's just as made up as the Chapwood. Let's create our own inflation metric. Does the cost of a home matter? (my younger brother was priced out of home ownership recently). The price of an annuity stream? (the ability to retire). Obviously healthcare, education. The stock market - which has become more and more dislodged from traditional methods of valuation? These are all at 7%

      Why not create your own inflation number? Your own hurdle rate? This seems much more logical. Food and energy are getting cheaper (via technology), but, why would a rational actor view food and energy as a relevant gauge for inflation? I think Michael Saylor's views on asset inflation are getting more to the truth. Even if we see deflation, or if the "CPI" continues to hold under 2% forever, who cares? Your purchasing power gets obliterated over time, wages don't go up, more wealth inequality. Millennials are going to have to pull something out of their ***. Not to mention the seemingly perpetual boom and bust economic cycle.

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    6. What part of the “CPI is not a cost of living index” is complicated?

      The CPI is not a arbitrary number - it’s the number that inflation-linked bonds’ face value are multiplied by every single day to get the nominal face value. People’s entire careers are based on trading that number. Some of those people who do that trading are my readers.

      I grew up in the 1970s. Inflation was a problem them. Now? Nobody who doesn’t have a political bug up their butt about something cares.

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    7. I think that a lot of people are waking up to the fact that the CPI isn't quite as useful or accurate of a measurement as we've been told. Bonds following it doesn't give it any sort of objective truth. I find that there is typically never a good response to the sorts of inflation that have been mentioned. As long as the Fed can keep their own basket below a number, the country will technically *never* see inflation. But I wonder if it's really that simple.

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    8. The complaints I am seeing are about a falling standard of living. If you read my latest book (MMT and the recovery) you will see a discussion of why worker’s living standards have fallen since the 1990s. Why did this happen? These were the results of neoliberal policies to fight inflation.

      If you run around labelling things that resulted from inflation fighting “inflation,” people who know the correct definition of “inflation” are not going to take you seriously.

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    9. I agree with the original poster. Inflation does not need to be "maroeconomized" by someone who thinks they are smarter than the rest of us or overly statistically analyzed by shadow stats. It only takes a common person to see the price increases on the items they normally purchase to know that inflation is occurring. Gasoline - up, food - up, lumber - up...and it is all up much more than 1.5%!

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    10. The reason why we are interested in inflation because it is tied to the macroeconomy, so asking it not to be “macroeconomised” is not helpful. If you just want to track the prices you are paying for goods, go ahead. But you cannot expect people doing macroeconomic analysis to be concerned about anecdotes.

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  7. So you haven't spent much time learning about the chapwood index and its calculations, but you dismiss it? Seems logical.

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    1. I know everything that is publicly available on the website, and I have the added advantage of understanding how compounding works.

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  8. What happened to the Chapwoodindex.com site....? It has be down for a couple weeks.

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    1. First I heard of this. Maybe my harsh comments led them to rethink their work... 😀

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    2. Hi - they might have moved to chapwoodindex.org. There’s a version of the site up there, but it looks like the hand-coded HTML I developed in 1994. I added a note to that effect in my article.

      The various quotes I make here could easily not be available on the new site, they mainly got the data in there in an old school html table.

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  9. So Brian....what source to you recommend to follow for the actually U.S.A. inflation rate?

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    1. If one is in fixed income, there is one inflation index that matters: CPI-U. That’s what TIPS are indexed to. You can go to other sources for particular prices, but any credible one - not Shadowstats or Chapwood- has data that can be reconciled to the BLS numbers.

      If you are worried about your personal “cost of living,” feel free to read up on the theory. From what I saw of the discussion, nobody calculates “cost of living indexes” for very good reason. (The BLS quote gives a good summary.) If you want something more specific, you are delving into the realm of personal finance - your personal cost of living is based on your life choices. You would have to calculate it on your own, since nobody else knows what your life choices are.

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  10. Dear Brian, Thank you for your comments. The truth is hard to find and also as you mention inflation is a personal number. However I think you are wrong. Let us have a simple approach and look at the price of housing. That has risen substantially and as a result you can derive rents from that and see that just that single factor has increased the cost of living a lot. Same with local taxes and so on. Another factor I refuse is the use of hedonics. So all in all inflation according to me is significant higher as stated officially. The reason is obvious to sell it to the public to justify low rates and deny the fact that real gdp numbers are much lower as stated so it is a political tool. I guess the truth is somewhere in between the official number and the chapwood index. Unfortunately a lot of people do complicated calculations based on garbage numbers like the inflation numbers and garbage in is garbage out.

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    1. House prices went up to a large extent because interest rates went down. This reduces required mortgage payments, which would need to be taken into account. However, statisticians around the world threw asset prices out of the CPI. However, rents are in the CPI, so you can’t say that this is ignored.

      It’s not a cost of living index. It makes no sense to randomly include taxes within the basket unless you start compensating for services rendered by governments.

      As for hedonics, its importance is greatly overstated. It was a big debate in the 1990s, and the hedonics worriers were not convincing.

      Saying the number is between the two is a great disservice to the BLS numbers, which should not be lumped into with the Chapwood Index, which shows no indication of even being based on a plausible methodology.

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  11. Housing is the largest part of the CPI approx 25%. Since 2010 the case shiller index went up 50%. As the required rate of return stayed 5% that means that rents also rose 50%. That alone accounts for 12.5 % in 10 years = 1.2 % inflation per annum. Average inflation last 10 years is 1.8%. So you think rest is 0,6% ?

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    1. You’re just making up a required rate of return.

      The CPI housing data is based on actual rents and not based on arbitrary assumptions, and were up 26% over the period. https://fred.stlouisfed.org/graph/?g=AWZt

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  12. Talk to any real estate investor and 5% is normal because of costs, below that you cannot afford to rent out. So this is pure logic that is contradicting the BLS. Yes the housing part is complex but BLS do adjust numbers. 26% would mean a real negative return for RE investors and below carry costs for RE so that would be illogical. But I appreciate your effort I am afraid that I have not a lot of faith in government statistics and have the current manipulated bond prices to testify for me. Thanks for your effort.

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    1. You are making up numbers and attributing them to other people. You are also assuming that the Case-Schiller index matches the rental stock. You are also assuming that profit margins are fixed.

      Statistical agencies don’t put house prices into CPI, since they would then need to account for how they are financed. You might not like it, but your side lost the argument.

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    2. None of this is complicated. House prices are asset prices, and values depend on discount rates. They do not want to target asset prices, rather the prices of currently produced goods and services. Rents are captured, by taking actual surveys, and not assuming that they move proportionally to house prices.

      People scream at the Fed for destroying price discovery. Price discovery is relative price shifts. Unless you want to centrally plan all prices in the economy, you have to accept that not all proce changes are proportional.

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  13. found this on the internet seems to me supporting my case. https://www.thestreet.com/mishtalk/economics/why-the-fed-chases-its-tail-rent-measures-vs-case-shiller

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    1. I don’t view Mish as an authority. He’s a hard money advocate who grasps at any straw to complain about the Fed.

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  14. Well thanks for the discussion Brian.

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  15. Hello Brian, today I stumbled upon this piece of Joe Carson, I am curious what your response would be. I do not need a public discussion just your opinion.
    https://www.thecarsonreport.com/post/two-decades-of-price-mismeasurement-policy-confusion

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    1. House prices are measures in house price indices. They are not in the CPI. The consensus wants to keep it that way.

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  17. The problem with your analysis is that the methodology used to calculate the CPI in 1980 produces the same rate of inflation as Chatwood. So, was the federal government subject to the same errors in 1980 are prior you assert Chatwood is subject to? Granted, that method has changed, but one has to wonder why. Could it be that without an artificially low rate of official inflation, SSA disbursements, federal and state pensions, bond rates, etc. would blow up? Nahhh.....

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    1. Your statement is ambiguous.

      1) In 1980, inflation was near the rate claimed by Chapwood for 2020. Inflation was higher then, nobody who was alive then doubts this.

      2) Otherwise, you are mixing up your “alternative” data sources. Shadowstats incorrectly claims they get the same results as the old methodology. However, their claim is either a blatant lie or they are tragically innumerate. Chapwood - when the website was still functioning - made no such claim. The BLS never used a methodology as ridiculous as Chapwood.

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  18. I think its really dangerous to criticize one index and defend another without actually tracking some prices yourself. While I agree that the chapwood index seems elevated it strikes me as more realistic then the CPI. You say to ask yourself two questions in a previous post so I will answer them so that others think about it themselves.

    1. In most jobs I have held or managed the average employee caps out their capabilities and reaches their top role/title within 5-10 years. After that they receive 1-3% wage increases a year which tracks close to CPI. More scary though is that median household income has underperformed CPI.

    2. I would say I certainly have been more aware of prices since 2000 then 1990. and the chapwood index would say that since then the prices would have risen ~700% (including partial 2021). CPI meanwhile would state that they rose ~52%. Ask yourself, are housing costs 50% more then they were in 2000? What could you get from a dollar menu in 2000 now cost $1.5? Anybody with a brain knows this is BS so I would be cautious to complain about alternate metrics in a world where the financial system does their best to discredit them anyways.

    Those with knowledge can and should raise issues and concerns to educate others. This is key to the scientific method, but what you are doing is not just raising issues with a new system in attempt to form a better system but promoting a clearly failing system. That will only contribute to our wealth inequalities in this country.

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    1. I am Canadian, so my tracking of prices will not help my ability to look at the Chapwood index. Statscan publishes the prices of commodity groceries it uses, and I can compare that to what I see.

      House prices have gone up because mortgage rates are lower. That is why people can afford to make the payments. This is true in Canada as well as the United States.

      You cannot just cherry pick a few items, to be a useful metric for economic analysis, you need the entire basket. Even if one quibbles about the CPI, it has to be roughly correct, or other macro data makes no sense, as I explain.

      As for promoting a better system, I do not push my politics on people. The situation in Quebec is radically different than the US, so I have different preoccupations. In any event, people interested in bond markets have a conservative bias.

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    1. Try finding an economist who has fundamental disagreements with my analysis, and get back to me.

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  26. The average price for a loaf of bread in 2018 was a little under $2, the average price of bread now in 2021 is about $2.50 a loaf. Although it is a simple example, it makes an 11% inflation rate look very feasible.

    As you are a big proponent of the Modern Monetary Theory which promotes increasing the money supply with little impact, you clearly have a conflict of interest as increased money creation is a significant element in the current increases in prices experienced throughout the country. May be the Chapwood Index has flaws, but the CPI is clearly full of them as well.

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    1. 1) Picking one price change to stand in for the entire price level won’t work. Somebody else can pick a price that fell. That’s why statistical agencies look at tens of thousands of prices.
      2) Increasing the money supply has almost nothing to do with inflation.

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