I don't think it's false, I just don't think it reflects anything realistic. My critique is with how they measure inflation, which is calculated in a way that ignores anything remotely volatile (meaning anything that has its prices adjusted to reflect reality) and was designed by someone who had incentives to make sure inflation was always low.

There is no need for me to re-write what is already written so I'll just link Investopedia's summary: https://www.investopedia.com/articles/07/consumerpriceindex....

Alternative measures of inflation put us anywhere from 6% to 8%, which seems to reflect reality much more than the official number. The concern about this is that high inflation is usually met with social unrest, political extremism, and declining standards of living. If inflation truly is understated, we should know because we'll begin seeing these things in the next couple of years. It will metaphorically be a case of bankers and policy makers saying "but inflation is below 2% - you guys should be happy" as a raging mob assembles a guillotine.

The GDP deflator is the most solid alternative measure of inflation I am aware of. It uses the whole GDP as the basket https://fred.stlouisfed.org/graph/?g=nNsE and is nowhere near 6%.

See also https://en.wikipedia.org/wiki/GDP_deflator

Just a note: graph does not start from zero, so growth is exaggerated.

Current value compared to worst: 360$ (2019) versus 309$ (1981) - 16.5% increase in 38 years. Taking first value of the graph in 1979 of 335$ gives - 7.5% increase in 40 years. IMHO it's abysmal result.

I hope this positive trend will continue, because if there will be some kind of downward correction - we will be back in 1979.

https://www.advisorperspectives.com/dshort/updates/2019/11/2...

Median doesn't tell enough of the story for what most of the population is experiencing.

Household size has been decreasing over the last 50 years (less people per family unit), and household income is therefore growing more slowly than per capita income. It's still growing though.

All this is available from FRED data.

To use figurative numbers, if a couple earns $30k each, then they split but both get a raise of $20k, the household average drops from $60k to $50k despite the large salary raises.

While you are correct that change in household size could be muddying the income numbers, I would say that the difference in behavior between top 20% and bottom 80% must reflect something driving the two apart.

You still have to worry about hedonic adjustments, though.

Gives the median salary in 1970 as $9,870 accounting for inflation the median salary should be $67,662.84 but currently its $56,516. So median wages have not tracked inflation since 1970.

But thats only half the battle the other side of the problem is runaway inflation.

https://www.census.gov/const/uspriceann.pdf https://www.census.gov/construction/nrs/pdf/uspricemon.pdf

In 1970 the median for a house is $23,400 accounting for inflation that should be $160,416.45 today, but the median price is $300,000. So the inflation reported by banks is not real.

It's important to separate value from $$$ as inflation generates $$$ but does not generate value.

A house is a good metric for real inflation, as it is a good store of value, every one needs a house or they will die from exposure so every one values a house, once the house is built the value does not increase.

In other words a house built in 1970 has the same value today as it did in 1970, but the price has increased a lot more than the reported inflation or the inflation of wages. Like I said this is fairly simple maths but it adds up for most other stores of value like gold.

Look at the fraction of GDP that goes to labour, capital and land at any point in time. No need to adjust for inflation this way.

Or viewed another way: you are adjusting for inflation, but your basket is the entire GDP, which you arbitrarily set to 1.

A more representative view of the same data is shown here: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...