Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search

 

Dan Spillane: Con Job Finger-Pointing

Con Job Finger-Pointing


By Dan Spillane, The Liberty Whistle
--“Con Man” is actually “Dark Thief in the Night"

(SEATTLE) 10/13/04 -- Bill Gross’s " Haute Con Job” (Pimco, October 2004) drew quick criticism from Bloomberg’s John Berry and the Fed’s William Poole, according to the latest exchange in Gross’s rebuttal.

Yet, the main—and very financially relevant--point of Bill’s original story seems to have evaded both Berry and Poole. That being, over the long term, an increasing number of hedonic and other adjustments and non-adjustments (such as rent equivalence) have come to change--and in many cases lower--major headline inflation indices since the 1980s. However, during the same period, there is absolutely no evidence that government programs and financial instruments keyed on these inflation indices have factored such changes in. Thus, in practical terms, inflation expectations and fiscal actions related to inflation reports have been based on indices assuming constant measures—but instead, the measures have drifted. In scientific circles, this is heresy--imagine the consequences of changing the definition of a mile or kilometer. Suddenly, cars might be more (or less) fuel-efficient based on a government edict!

So all the talk about “inflation in the 1970s” related to present figures is based largely on non-comparable headline numbers. And in fact, more recently, and to some unknown extent each year, changes in inflation-measuring indices have lead to an unidentified gap between the actual cost of things, and reality. So Gross is right on track.

And speaking of reality, you have to question the application of hedonic measures in practical contexts. Take for example, the measures for personal computers (and as a side note-- Berry’s analysis correctly states the CPI computer weighting is small, but neglects to mention the high negative magnitude). In the case if computers, it is assumed that we are always getting “more bang for the buck” in terms of hardware. Yet, as everyone knows, computer hardware is fully dependent on software. And, as it turns out, new versions of computer software often require more hardware--which largely negates the hedonic price decay used in US CPI calculations. Therefore, if we assume we live in a globally competitive economy, in order to retain a level of relative productivity growth, it is correct to assume the amount spent on computers will not fall by nearly as much as reported in the CPI, if at all. In fact, as the number of software applications grows to cover more tasks, it is likely a more expensive computer will be not only desired, but be needed to handle new tasks. In other words, the notion of hedonics and price decay is a sham—or con job. Indeed, over time, and combined with other factors in the CPI, this heist has slowly and quietly slipped in to the US bond market and social entitlement programs. That is, very much like a thief in the night—who, being unnoticed, keeps coming back for more. Unnoticed…or willfully ignored, by Berry and Poole, as the case might be.

ENDS

© Scoop Media

 
 
 
Top Scoops Headlines

 


Keith Rankin: Some Important But Little Known Facts About Taiwan

The nuclear clock is closer than ever (since 1962) to 'midnight'. Taiwan and Ukraine are of course the two flashpoints. It is important that the citizens of the world understand the key facts... More>>


Dunne Speaks: Aspirations Are All Very Well, But It's Getting It Right That Counts
In a weekend television interview, the Prime Minister pushed back on a suggestion her government is far better at talking about things than achieving them. She countered that “I would not ever change the fact that we have always throughout been highly aspirational…what you’re asking me essentially is to shy away from aspiration”... More>>


Gilding The Cage Of Suburbia: Farewelling Neighbours
The statistics of Australia’s longest running drama series about sickeningly idyllic suburbia will interest soap show boffins. It lasted 5,955 episodes over 37 seasons, starting in 1985. Its anaemically thin plotlines, subpar acting, and emphasis on ideals bound to cause indigestion, did not prevent Neighbours from being mandatory viewing. Neighbours was, especially for British audiences, fetish and cult, shrine and devotion... More>>




Ian Powell: Colossal ‘Porkies’ And Band-aids Don’t Make A Health Workforce Plan

On 1 August Minister of Health Andrew Little announced what he described as the start of a plan for the beleaguered workforce in Aotearoa New Zealand’s health system: Government’s 5 year late health workforce announcement. In October 2017, when Labour became government with its two coalition parties, it inherited a health workforce crisis from the previous National-led government... More>>


Binoy Kampmark: The Fuss About Monkeypox
The World Health Organization has been one of the easier bodies to abuse. For parochial types, populist moaners and critics of international institutions, the WHO bore the brunt of criticisms from Donald Trump to Jair Bolsonaro. Being a key institution in identifying public health risks, it took time assessing the threat posed by SARS-CoV-2 and its disease, COVID-19... More>>

Dunne Speaks: Time For MPs To Think For Themselves
One of the more frequently quoted statements of the Irish statesman and philosopher, Edmund Burke, was his observation that “Your representative owes you, not his industry only, but his judgement, and he betrays instead of serving you if he sacrifices it to your opinion.”... More>>