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Big Mac Index versus CPI

By AD follow AD   2014 Feb 25, 3:11pm 3,020 views   8 comments   watch   nsfw   quote   share    


The Big Mac Index vs. the Consumer Price Index

Since 1986, the price of a Big Mac has increased 171% from $1.60 to $4.33 today. During this same time period, the federal government reported consumer price index (CPI) has increased at a much lower rate of 109%…

see: http://www.munknee.com/the-big-mac-index-reveals-the-real-facts-on-u-s-inflation/

1   tatupu70   ignore (0)   2014 Feb 25, 8:09pm     ↓ dislike (1)   quote   flag        

I agree--the whole basket of goods is nonsense. We should be measuring inflation based on 1 single consumer good. You get a much better idea of overall inflation that way.

And look up arbitrary starting points while you're thinking of why I'm wrong.

2   AD   ignore (0)   2014 Feb 26, 7:55am     ↓ dislike (0)   quote   flag        

The BLS states the CPI does not account for food and energy prices because they are "volatile". However, Janet Yellen stated that the Fed uses the CPI to manage interest rates so that "inflation" remains at or near 2%.

3   dublin hillz   ignore (0)   2014 Feb 26, 8:12am     ↓ dislike (0)   quote   flag        

So I guess we should get used to the mexican peso pricing in 25 years...

4   AD   ignore (0)   2014 Feb 26, 8:24am     ↓ dislike (0)   quote   flag        

Gas was around $1.05 a gallon back in March 1991. Assuming 3% annual inflation, it should be around $2.10 a gallon now, or $2.60 if 4%.

Granted, there is more fuel efficiency available but unless you drive a hybrid, not a great enough efficiency gain to compensate for such a large increase in gasoline prices.

5   AD   ignore (0)   2014 Feb 26, 8:25am     ↓ dislike (0)   quote   flag        

In other words: Hedge your bets.

Invest in an energy mutual fund, etc.

6   Quigley   ignore (2)   2014 Feb 26, 8:37am     ↓ dislike (0)   quote   flag        

The cost of food is radically higher than 30 years ago. The cost of manufactured goods, however, isn't changed nearly as much and in some instances may be lower. This is due to advances in manufacturing, robotics, shipping technology improvements, an of course, off shoring.
However, if you compare apples to apples, where the energy/quality of a product is compared to today, and only use domestically produced products, what would that index look like?

7   tatupu70   ignore (0)   2014 Feb 26, 8:40am     ↓ dislike (0)   quote   flag        

adarmiento says

The BLS states the CPI does not account for food and energy prices because they are "volatile". However, Janet Yellen stated that the Fed uses the CPI to manage interest rates so that "inflation" remains at or near 2%.

This is incorrect. The CPI includes food and energy (and housing) and is what is managed. The "core" CPI does not.

8   AD   ignore (0)   2014 Feb 26, 8:49am     ↓ dislike (0)   quote   flag        

tatupu70 says

This is incorrect. The CPI includes food and energy (and housing) and is what is managed. The "core" CPI does not.

True, as it seems the Federal Reserve relies on "core" inflation.

http://www.frbsf.org/education/publications/doctor-econ/2004/october/core-inflation-headline


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