Fuzzy Inflation & GDP Numbers !!!!

I thought hedonic regression was going to Vegas for fun.

We're just like China now!

The reading came in lower than expected, with a consensus of economists predicting inflation would touch 5.5pc.

However, there were suggestions that the figure had been “massaged” after China’s National Bureau of Statistics (NBS) said it had changed the composition of the consumer price index basket, reducing the weighting of food.

http://www.telegraph.co.uk/finance/china-business/8325000/China-inflation-hits-4.9pc-raises-doubts-over-food-costs.html

Did you two get up together this morning?

According to the video i posted, the Hedonic adjustment method has been implanted under the Clinton administration. What was he thinking?
To me it shows that the US economy has been contracting since 2003 and the shit hit the fan in 2008.
That means that we would have actually entered a recession in 2003 and slipped into depression territory in 2008.

The video is there to rile up ignorant people. Here's what I had to say a few months ago on what the inflation & GDP numbers used in that video would imply:

inonada
about 5 months ago
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Riversider: "Inonada, I would defer to people who actually calculate the numbers. The only person I know that does something like this is John Williams of Shadow Government Statistics. "

The government numbers say that we as a country produce 150% of what we produced back in 1990 in terms of real GDP. Meanwhile, population has grown 24%. That means per-capita productivity is now 26% higher than what it was in 1990. About a 1% annual per-capita improvement came from productivity gains (think of all the technological and other sorts of improvements we've had since 1990).

Here's what your data guy thinks happened with GDP:

http://www.shadowstats.com/alternate_data/gross-domestic-product-charts

According to the chart, he says real GDP averaged -1% a year since 1990. He's saying that we as a country produce only 80% as much real value as we used to back in 1990. On a per-capita basis, that amounts to us producing 64% of that which was produced in 1990 (a loss of a full third of our per-capita productivity), each year producing 2% less than the prior year for 20 years.

Do you actually believe these numbers? I don't know if you were around back in 1990, but I was, and I can surely tell you that it does not at all feel like the average person is only producing 2/3rds of what they produced back in 1990.

There's nothing wrong with hedonics, in theory. The problem is the practice.
Hedonics removes transparency and ignores money spent.
If APPLE improves the IPOD but it still costs the same and you don't have the option of buying the phased out model, then your out of pocket stays the same. Also it's not clear to me that the gov't infers a higher cost to a product when say Toyota engages in decontenting.

RS, a very intelligent guy I know had the same viewpoint as you. I tried to explain it a little to him, and he went off and educated himself. I'll tell you his conclusion. What he had in his mind is a cost-of-living index. He wanted an index that included improvements because that's what he saw his future costs as: when that ipod improved, he was going to have to buy a new one for his son. These "money spent" indices exist, and they look nothing like CPI because that's not what inflation seeks to measure.