Meaning of Real
Real means inflation adjusted. But what is the best measure of inflation?
Home Price Not in the CPI
Home prices are not in the CPI. They should be. Economists generally disagree with me, but what good is a measure of inflation that excludes key prices?
The CPI ignores housing prices, what corporations pay for health insurance on behalf of consumers, what Medicare, and Medicaid pay for healthcare on behalf of consumers, stock prices, bond prices, speculation in cryptos, and only looks at the prices of so called “consumer goods”.
Q: How relevant is the CPI as a measure of inflation?
A: Not very if at all.
The Fed has ignored those things at its peril.
The result was:
- A DotCom bubble and a DotCom crash
- A housing bubble and a housing crash
- An even bigger bubble now