Rick Rule: Why doesn’t the Cost of Living Does include Taxes?

the second thing and this is astonishing
to me
is that the fed’s estimate of the cost
of living doesn’t
include tax while
government expenditures are over 40
percent of gdp
the idea that your cost of living
doesn’t include tax
i suspect daniella that would be okay
with you if you didn’t have to pay the
but given that you do a calculation of
cost of living that doesn’t include tax
seems very odd to me i reck i understand
that government probably shouldn’t be
considered to be a consumer good
unfortunately it’s a good which you are
forced to consume and fund
and people when they are thinking about
the impact of their savings
and their uh earned income relative to
their purchasing power
need to think about inflation very
than a slavish reliance on the cpi oh
that is so well said and i’m happy you
brought up the point about uh
tax a rick a real good one um so you
it seems like we’re living in this world
of you know fake earnings fake gdp
fake interest rates and super high
um the feds in a corner
i think the fed isn’t a corner uh i i
i think they’re there by popular demand
when i see what the fed does it reminds
me of an old
pogo cartoon from my youth where pogo is
in the swamp
and he says i have met the enemy and he
is us

Former Sprott executive Rick Rule speaks candidly with our Daniela Cambone on everything from the Fed’s current moves to the best safe havens for money right now. Chiming in on the silver squeeze, he also offers insight on why $PSLV has become such a popular vehicle.

In this must-see interview, Rule reflects on his career, explaining the game-changing mindset that has cultivated his success. “The essence of wealth is enhancing your wellbeing— and that isn’t all material,” he says.

Boskin Commission

The Boskin Commission, formally called the “Advisory Commission to Study the Consumer Price Index”, was appointed by the United States Senate in 1995 to study possible bias in the computation of the Consumer Price Index (CPI), which is used to measure inflation in the United States. Its final report, titled “Toward A More Accurate Measure Of The Cost Of Living” and issued on December 4, 1996, concluded that the CPI overstated inflation by about 1.1 percentage points per year in 1996 and about 1.3 percentage points prior to 1996.

The report was important because inflation, as calculated by the Bureau of Labor Statistics, is used to index the annual payment increases in Social Security and other retirement and compensation programs. This implied that the federal budget had increased by more than it should have, and that projections of future budget deficits were too large. The original report calculated that the overstatement of inflation would add $148 billion to the deficit and $691 billion to the national debt by 2006.

The report highlighted four sources of possible bias:

  • Substitution bias occurs because a fixed market basket fails to reflect the fact that consumers substitute relatively less for more expensive goods when relative prices change.
  • Outlet substitution bias occurs when shifts to lower price outlets are not properly handled.
  • Quality change bias occurs when improvements in the quality of products, such as greater energy efficiency or less need for repair, are measured inaccurately or not at all.
  • New product bias occurs when new products are not introduced in the market basket, or included only with a long lag.

The members of the Boskin Commission were:

The Boskin Commission was the first extensive evaluation of inflation measurement since the Stigler Commission in 1961. Griliches was also on that commission.


Boskin Report: Wild vs Mild

U.S. Consumer Price Increases Are Eating Away Worker Wage Gains

For the second month in a row, annual inflation fully offset workers’ average hourly wage growth

For a second month in a row, annual inflation fully offset average hourly wage growth in June, leaving workers’ real hourly earnings flat from a year earlier despite falling unemployment and a generally strong economy. Production and nonsupervisory employees, a category which includes blue-collar workers, saw their real average hourly wages fall 0.2% in June from a year earlier after a similar slip in May.

.. While workers made up for higher prices by working slightly more hours per week, the stagnation of Americans’ purchasing power underscores questions about the extent to which workers are benefiting from an economy that by many other measures is booming.

.. “Wage growth remains surprisingly weak,” said David Kelly, chief global strategist at J.P. Morgan Asset Management, in a note to clients earlier this week. “The remarkable ability of firms to lure more workers back into the labor force and get stronger productivity gains from them without raising wages is a clear positive for profits.”

..  in June, Fed “participants generally agreed that the economic expansion was progressing roughly as anticipated, with real economic activity expanding at a solid rate, labor market conditions continuing to strengthen, and inflation near the Committee’s objective,” according to meeting minutes released last week.

Economists said Thursday’s data generally supported their view that inflationary pressures are gradually picking up.

.. The impact of those tariffs, should they take effect, won’t be negligible, economists say.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the goods subject to the proposed tariffs account for almost 6% of the core CPI, meaning that a 10% levy would lift the index by up to 0.6 percentage point.

.. “The Fed can’t stand back and ignore a hit of this size, given the tightness of the labor market,” Mr. Shepherdson said in a note to clients dated Thursday. “People will seek to be compensated for the squeeze on their real incomes as a result of higher prices, and their chance of being able to force employers to pay up is better now than at any time since the crash.”