There has been a real need to accurately gauge inflation. Using a metric such as housing prices is totally inaccurate, because you don't buy a house every day, or even every year. Even if the price of housing is cut by half, that doesn't mean your mortgage is cut by half. You are completely cut off from this "benefit". No one but a first time house buyer gets to enjoy the benefit of deflation in this area, and that's just once in a lifetime. But, deceptive inflation indexes would put that into the calculation and tell you there is deflation.
Same goes for computers. Sure the price of a byte of memory has gone down, but who's going to buy a 90's 166 MHz Gateway to "enjoy" the deflation that has occurred in the computer field? Things like housing and computer prices artificially reduce the inflation numbers in a way that doesn't translate into a consumer's everyday experience.
Thus, there is a need for "truth in inflation statistics".
So, it seems someone has finally come up with an answer: The Everyday Product Index
http://www.cbsnews.com/8301-505144_1...-as-you-think/
Quote:
Forget the modest 3.1 percent rise in the Consumer Price Index, the government's widely used measure of inflation. Everyday prices are up some 8 percent over the past year, according to the American Institute for Economic Research.
The not-for-profit research group measures inflation without looking at the big, one-time purchases that can skew the numbers. That means they don't look at the price of houses, furniture, appliances, cars, or computers. Instead, AIER focuses on Americans' typical daily purchases, such as food, gasoline, child care, prescription drugs, phone and television service, and other household products.
The institute contends that to get a good read on inflation's "sticker shock" effect, you must look at the cost of goods that the average household buys at least once a month and factor in only the kinds of expenses that are subject to change. That, too, eliminates the cost of housing because when you finance your home with a fixed-rate mortgage, that expense remains constant until you refinance or move.
The group maintains that this index better measures the real-world impact of price changes, particularly for people on a budget. And, largely as the result of the recent run-up in gas prices, this "everyday price index" (EPI) suggests that Americans are being pinched far more tightly than the official inflation measure would have you believe.
Over the past year, the EPI is up just over 8 percent, according to the economics group. The biggest factor: Motor fuel and transportation costs are up 21.06 percent from year-ago levels. The cost of food, prescription drugs, and tobacco also have increased faster than the government's inflation measure, rising 3.56 percent, 4.21 percent, and 3.4 percent, respectively.
On the bright side, prices of household fuel (natural gas and electricity) and supplies have increased only 2.74 percent; recreation and personal care products are up less than 1 percent; and telephone or Internet services are down 0.66 percent.
Admittedly, the purchases that the EPI tracks make up slightly less than 40 percent of the average household budget. But Steven Cunningham, research and education director at AIER, says these items are what contribute to the "sticker shock at the gasoline pump and the supermarket check-out line."
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