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A comment on Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply. Parent comment

Re:Show HN: M1 Chart – The stock market adjusted for the US-... by YuriNiyazov on Saturday February 13, 2021 @07:45PM (#26128566)
The claim is that there is an asset bubble. In other words, stocks and real estate are being inflated, whereas the products that constitute the traditional measure of inflation (basket of goods with bread milk and eggs in it) are not.

This attempts to show the “real” inflation so to speak.

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Re:Show HN: M1 Chart – The stock market adjusted for the US-... by atombender on Saturday February 13, 2021 @08:25PM (#26128820)
CPI does show significant inflation [1] among things like dairy (3.8%) and meat/fish (5.1%). But it's offset by lower energy prices and airline fares. As a result, the overall increase from Jan 2020 to Jan 2021 was just 1.4%.

[1] https://www.bls.gov/news.release/pdf/cpi.pdf

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Re:Show HN: M1 Chart – The stock market adjusted for the US-... by lumost on Saturday February 13, 2021 @11:13PM (#26129609)
TBH the CPI index has had an air of funkiness for the last 2 decades. In the run-up to the subprime crises the measure was altered to use "rental equivalent" to avoid factoring in the increase in real real estate prices.

There were interesting arguments for this change of course, and pages of economic research. But the whole thing reeked of finding a justification for a foregone conclusion.

Ultimately there are many factors the CPI simply cannot include, or due to the lack of ground truth can be argued away. If tomorrow real estate prices 10x'd but this price change never made it to residential rents then CPI wouldn't budge. If every farm in the US shuttered due to commercial real estate shooting up 10x but consumers could still import food the CPI wouldn't budge.

Which ultimately goes to say that the use of CPI as the GDP deflator in monetary theory is arbitrary. Treating it as a gold standard measure of inflation risks ignoring inflation in other prices (and in turn systematically miss-estimating GDP).

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