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Tuesday, March 7, 2017

Another clear reminder that Gold Bugs are idiots

One of the constant mantras of the deluded Gold Bug who sees manipulation everywhere is that Consumer Price Index (CPI) is manipulated. This is apparently done to decrease demand for Gold, increase demand for Treasuries and "fool" the general public This is a remarkably well entrenched belief. They always cite some random prices like condoms, New York Hookers (that one may be true), or their dog’s chew toys to prove their point.

At the centre of promoting this is Shadow Government Stats. 

I have heaped a lot of criticism on dodos in the financial world, and this guy is definitely a top 10 contender. According to him inflation has been averaging 8 % over the last 30 years.  For those not familiar with the rule of 72, a 8% increase suggests a doubling over 9 years (72/8). So if inflation is running at 8% something costing $100 in 1990, would cost $200 in 1999, $400 in 2008 and $800 in 2017. Let’s see how this guy’s delusion compares to reality. I used numbers from non Census bureau sources.

First the CRB index from 1990. I am using this as it is impossible to debate the prices. These numbers cannot be manipulated. Started at 225. Assuming this fucktard’s numbers were accurate, CRB should have been trading at 1,800.

Actual number 189. 0.5% compounded deflation.

Well commodities do not have the inflation  you are going to say. Ok, what about homes? Surely the largest expense would match or exceed the 8% compounded, especially since commodities are down.  I used the S&P/Case Shiller home prices as the census data will be said to have been manipulated.

Starting value 75. 8% compounded would result in ending value of 600. 

Actual ending value 200, 3.8% compounded. ( I know the chart does not go to 2017, but that is the best I could find).

What about health care costs? Health care and tuition costs are definitely the ones that are driving CPI higher. Even the official stats have them running 2X-3X the overall CPI. They too are nowhere near the 8% compounded. For an independent source outside of the Census bureau I used NHI stats.

From a starting base of about $3,000, 8% compounded would have got us to about $24,000. Actual health care costs approximately $10,000, 4.5% compounded. 

BTW the US is hardly alone in this. Every developed country has struggled with this.

For tuition I used numbers from my Alma Mater, USC (from the Daily Trojan), one of the most expensive universities in the US. Tuition in 1990 was $15,000. 8% compounded would get us to $120,000 in 2017. 

Actual $55,000. 5% compounded. Even official CPI numbers for college tuition are around 3.6% and I believe that would be the average if less expensive colleges were used. 
So the most expensive items have not reached anywhere close to 8%. If deflating items (electronics, commodities, etc) are added to the mix, overall CPI is likely to be accurately measured around 2.5%-3%. 

And finally for the creme de la creme. Showing how one idiot has led thousands down the path of craziness, here is Shadow Government Stats subscription fees over the last 10 years (it is still $175 in 2017). Spot the 8% inflation. 

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