As reported by CNBC last week, the Consumer Price Index (CPI) figure of 6.5% shows how the mainstream media disseminates false economic information for consumption by the masses. Try to spot some of the more concerning parts:
Initially, the chart raises questions such as where this data comes from and who participated in the sampling. Once the data was compiled, how did statisticians determine what constitutes the “average” egg, frankfurter, or new vehicle?
In another article, CNBC tries to explain:
CPI is the most closely watched inflation gauge as it takes into account moves in everything from a gallon of gas to a dozen eggs and the cost of airline tickets.
As discussed on multiple occasions, calculating (price) inflation is the Art of Moving the Goal Posts. Consider the impossibility of comparing gas, eggs, and an airline ticket. Adding them up and dividing by 3 would not produce meaningful results.
However, if weights of relative importance were assigned to every individual item then apples could be compared to oranges, mathematically. Of course, statistical calculation doesn’t equal sound logic. In addition to using highly subjective guess work to arrive at these relative weights, other tactics such as adjusting for seasonality or simply excluding certain items if they’re “too volatile” are employed to massage the CPI.
Consider the two images below, the first being the latest snapshot of the CPI data showing the relative importance:
Now compare the relative importance from almost a year ago:
According to the charts, since last year, food has become less important while energy has become more important. Unfortunately, we live in a society that values statistical calculation and the ability to draw upon data more than reasoning.
Rather than argue with merits or lack of logic itself, mainstream economists found that the best career move is to not fight for the truth, but embrace the data, flaws included. This leads to Fedspeak like this excerpt from Andrew Hunter, a senior economists at Capital Economics who told CNBC:
The huge amount of inflation we had from rising gas prices has now almost completely reversed.
It’s one thing to say (price) inflation has slowed in recent months, but to claim “almost completely reversed,” simply makes no sense. The average person could only wish that prices have reversed, meaning price decreases, but this is not the case. At best, we can hope for a slowdown in the rate of increase.
He’s not alone in his inflation elation. In the same article, Mark Zandi, chief economist at Moody’s Analytics said:
I don’t think people will be talking about inflation this time next year.
And despite the skyrocketing price of eggs as purported by the abundance of memes on social media, he went so far as to say:
I think it’s already starting to feel better for people.
Naturally, Moody’s top economist is in a much higher income bracket than the average person; so his perspective could be skewed.
Ultimately, the biggest red flag is waved, not by the data itself, or the economists whose job it is to cheerlead the Fed and its support system, but it comes from this:
Inflation closed out 2022 with a 6.5% annual reading, as measured by the consumer price index, the U.S. Bureau of Labor Statistics said Thursday. It was in line with economists’ expectations.
Given the countless data fields and inputs, including relative weights of importance required to arrive at the CPI figure, how is it conceivable that economists’ expectations matched that of the bureau of labor and statistics?
Either these economists are really that good, or this data is really that bad.
THIS ARTICLE ORIGINALLY POSTED HERE.