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Culture War Roundup for the week of December 26, 2022

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(2) is wrong. Inflation has broken the past few months into deflation. The only reason the mom numbers are positive is because of owner occupied rent numbers which is 40% of cpi running .7% a month. If you adjust that to real time data then we are currently experiencing deflation.

Honestly the fed stopped saying transitory 9 months ago so I think it’s fair to say this one’s both wrong on the fed response and wrong on the inflation data.

I hear what you're saying, you can't add our remove things ad hoc.

But it's important to realize that CPI itself isn't written on the Mosaic tablets, it's invented. Some unelected bureaucrats get together and decide on the basket of goods that we measure the prices of; when those go up it's inflation, when guns go up it's just my hobby getting more expensive.

While in normal times I agree it’s just a basket of things and made up.

But right now we’ve been having big gaps that are not about the basket. Here ive been showing the difference between CPI housing data (basically a 12 month average) and direct month to month changes in rent. There’s been a similar gap opening up in sticky prices (say union wages that adjust slowly) and non-sticky prices (oil an easy example but many more).

Usually we don’t have these giant gaps on these components. But we’ve also never hiked rates this fast so it makes sense that big gaps popping up between real time data/non sticky prices and smoothed data/sticky prices.