Zero inflation?

[question everything]

I am not on Social Security, yet, but we know that many seniors will not get cost of living increase because the past year has had zero inflation.

But then, I got a letter from Comcast that it is raising its rate of basic cable. And, of course, Comcast has a monopoly here.

And now I came from City Hall and was told that water and sewer rates are going up 5% (I think).

And the gas company wants to increase its rate, even though all year we've heard report of glut of natural gas.

But, hey, we have "zero inflation."

[cliffordu]

1. It's like a dead fish. No movement.

[notesdev]

2. Actually we're in deflation

A lot of that is coming out of housing prices, and also a lot of retail goods - especially the kind that people on a budget can live without.

[question everything]

3. It is not as if people purchase houses every other day

but groceries, and utilities and, yes, cable TV - since we eliminated the aerial - are needed items.

How, then, is cost of living calculated?

[notesdev]

4. Cost of living vs. inflation

Cost of living is a bit different from how inflation is calculated, and the word inflation can mean a couple of things.

When we talk about inflation, normally we think of things in terms of price, since that is what has the real effect on us. But when economists talk about inflation, usually they mean monetary inflation, changes in the money supply.

The money supply is being destroyed at an amazing rate. The reason is that debt is part of the money supply, and loans made in the past are defaulting at unprecedented rates. Until this phenomenon is played out, monetary deflation is a given.

However, that may not translate in lower prices to you and me, since what they are doing to mitigate the damage is effectively printing money to fill the debt hole, and this in turn lowers the value of the currency. Lower currency value means more expensive oil, the price of which is reflected to some degree (primarily with respect to transport costs) in virtually everything you buy.

What is reasonable to expect given current policies is more of the same, prices for necessities stay even or rise (while prices for many luxuries drop due to dropping demand). If you're living tight and/or are on a fixed income, this will suck. More so if you have to commute by auto in the face of sharply rising gas prices.

The kicker is that when they calculate a cost-of-living adjustment, they do it using a formula that heavily weights things that depend on money supply, e.g. the price of houses. They're also using a witches' brew of heuristics to essentially pull the numbers out of their collective asses that generally translates to the lowest number they think they can get away with on a political basis. Look up terms like "owner equivalent rent" and "CPI calculation" for gory details on that particular sausage-making process. Nobody will blame you if you don't like what you see!

[question everything]

7. Thank you for a detailed explanation

Seniors, as a group, is the largest block of voters. After scaring them last summer with "death panels" and now cutting medicare reimbursements and freezing COLA - I think that come 2010 we are going to have some very angry "gray panthers."

[Hannah Bell]

6. not really, only in housing.

Inflation rose 0.4 percent in November, driven by large increases in energy prices. Over the last quarter, consumer prices generally rose at a 3.4 percent annual rate, while core (non-food, non-energy) prices rose at a 1.5 percent annual rate.

The glut of housing has now resulted in a third consecutive month of price declines in both rent and owners’ equivalent rent...Rent continues to hold down inflation; non-shelter prices rose at a 5.6 percent annualized rate since August.

The price of used cars and trucks rose 2.0 percent in November as a continued response to Cash-for-Clunkers’ impact on the supply of used vehicles. Over the last three months, used car prices have risen at a 31.5 percent annual rate.

Energy prices rose 4.1 percent in the month and at a 27.9 percent annualized rate over the last three months. These included a 6.0 percent jump in (seasonally-adjusted) fuel oil prices, which have now grown at a 74.4 percent annualized rate over the last quarter...

http://www.cepr.net/index.php/data-bytes/prices-bytes/rent-falls-third-month/

[Hannah Bell]

5. hardly. housing is the only thing going down.

Prices Bytes

December 16, 2009

Higher energy prices push down real hourly wages.

Inflation rose 0.4 percent in November, driven by large increases in energy prices.

Over the last quarter, consumer prices generally rose at a 3.4 percent annual rate, while core (non-food, non-energy) prices rose at a 1.5 percent annual rate.

The glut of housing has now resulted in a third consecutive month of price declines in both rent and owners’ equivalent rent....Rent continues to hold down inflation; non-shelter prices rose at a 5.6 percent annualized rate since August.

The price of used cars and trucks rose 2.0 percent in November...

Energy prices rose 4.1 percent in the month and at a 27.9 percent annualized rate over the last three months...

The November price report continues to show the pressures on state and local budgets. Tobacco prices rose another 1.0 percent in the month and nearly 10 percent annualized over the last three.

Public transportation prices rose 2.6 percent in November—the 25 percent annual rate of increase over the quarter in part reflecting higher fuel prices.

Non-fuel import prices rose 0.4 percent in November after similar changes in the prior three months...

http://www.cepr.net/index.php/data-bytes/prices-bytes/rent-falls-third-month/

[bobbolink]

8. It ain't just "seniors"......it's disabled people too. Where was the "liberal" outrage?

You can do without cable, even tho you think you can't.

Some of us will do without food.

Some already are.

Does it matter?

[Lugnut]

9. I am on SSDI.

My Medicare bill is $96 a month and my Medicare Advantage plan premuium is going up from $106 a month in 2009 to $138 a month for 2010. PPL is going up about $20 a month and the sewer bill is going up to an undetermined amount from $120 per quarter to who knows where. Real estate taxes are going up.

Basing SS COLAs on inflation is as stupid as is mandatory Medicare Part D minus negotiated drug prices. Seniors and the disabled are getting a royal hosing.