|June 19th, 2012||#1|
Join Date: Jun 2009
beware of misleading statistics
6. Because the official "inflation" indices chronically understate the reduction in currency purchasing power, using these indices to calculate inflation-adjusted performance overstates the performance. That's why Malthusians such as Jeremy Grantham [and Kievsky] are able to use CPI-adjusted charts of the CRB Index to support their theories that the world is about to run short of valuable agricultural and industrial commodities. These CPI-adjusted charts suggest that the ultra-long-term downward trend in "real" commodity prices has ended, an implication being that commodity supply is now in a long-term downward trend relative to real commodity demand.
The picture is very different if our preferred method is used to adjust for the effects of inflation. As illustrated by the following chart, the IA CRB Index made a new all-time low in 2001 and then peaked in 2008 at well below its 1974 and 1980 highs. There is no evidence that its long-term downward trend has ended.
note: The CRB index is the Commodity Research Bureau index.
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