CPI - January Recalc / Base effect 1982 to 2020 MedianFriday, I received a call from a friend, she was beside herself in disgust, anger, and disbelief by the
latest disturbance in the Farce.
Her communication caught me completely off guard, left me overturned in anger, shock, disbelief.
Questioning as to whether I should have seen this coming, anticipated the exponential change in
outright "distortion" - the effect was as if someone had set off a Nuke inside my head.
The BLS website confirmed the change, Zerohedge picked it a few hours later.
Media outlets ignored it - given Fitch was the only rating agency to contact EverGrande... Moody's
and Standard and Poors made no attempt... the News was left in the Dumpster Fire of Inequity.
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1982 has been used in the Majority of CPI Methodology for CPI Calculation.
Friday the BLS Issued the following statement - "January 2022 CPI weight update
Starting in January 2022, weights for the Consumer Price Index will be calculated
based on consumer expenditure data from 2019-2020. The BLS considered
interventions, but decided to maintain normal procedures."
Effectively reducing the Denominator for CPI by a large Margin.
www.bls.gov
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CPI Formula:
CPI_t = ( C_t ) / ( C_0 ) x 100
CPI_t consumer price index in the current period
C_t = cost of the market basket in the current period
C_0 = cost of the market basket in the base period
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1982 was chosen as the Shocks of the late '70s to 1981 were beginning to subside from a High of 14.6%.
By Example, for simplicity:
Base Years:
2012 / 2013 / 2014
Base Basket of Goods / Services Consumed:
$15 / $20 / $25
2012 @ 15 / 12 x 100 = 125
2013 @ 16 / 12 x 100 = 133
2014 @ 17 / 12 x 100 = 142
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Inflation Rate Calculation - Year over Year Base Adjustment
2012 to 2013: ( 133 - 125 ) / 125 x 100 = 6.4 % Year over Year
2013 to 2014: ( 142 - 133 ) / 133 x 100 = 6.67 % Year over Year
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Using the BLS Base year for Cumulative Rate of Inflation as the denominator
is where Reality sets in and provides a cumulative result.
1982 to 2013: ( 133 - 75 ) / 75 x 100 = 77.3%
The Cumulative Base Effect using the 1982 CPI - Inflation Rate of - 77.3 %
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Beginning January 2022 the Denominator will be changed - to precisely where we do not know.
What we do know is this, it will be moved far higher.
This will reduce the Rate of Inflation.
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By Example ( Assumed Newly Adjusted Base Unknown )
2022 to ~2020 Base
( 102 - 96 ) / 96 x 100 = 6.25 %
102.1 is the BLS Stated Rate of 2021 CPI
My Inflation rate is far higher, as it includes all Goods and Services weighted by average Household Consumption
It currently remains on an increasing trajectory @ 28.96%.
It includes an approximation of most, if not very close to ALL of the "Things We Need".
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The impact of this change will have far-reaching Economic, Political, and Social consequences.
I'd prefer to hear your thoughts on the ramifications as opposed to providing commentary.
