Interesting, and very academic. On first glance I'm getting that there are many ways of looking at inflation and many components, and differences of opinion on how to conflate them. I can't disagree with that. Again, my original post on this was in direct response to poptart's post on a single one of these measures, part of my point being exactly what is being said in this paper.
I pulled this chart directly from the paper. It appears that their preferred measure of CPI peaked at around 18% in 2022 but was at 10% in November of last year, and falling rapidly. I still don't see where your 12% is coming from, or are you cherry picking to make your point, like you love to accuse others of doing?
Here is the abstract:
Unemployment is low and inflation is falling, but consumer sentiment remains depressed. This
has confounded economists, who historically rely on these two variables to gauge how consumers
feel about the economy. We propose that borrowing costs, which have grown at rates they had
not reached in decades, do much to explain this gap. The cost of money is not currently included
in traditional price indexes, indicating a disconnect between the measures favored by economists
and the effective costs borne by consumers. We show that the lows in US consumer sentiment
that cannot be explained by unemployment and official inflation are strongly correlated with
borrowing costs and consumer credit supply. Concerns over borrowing costs, which have
historically tracked the cost of money, are at their highest levels since the Volcker-era. We then
develop alternative measures of inflation that include borrowing costs and can account for almost
three quarters of the gap in US consumer sentiment in 2023. Global evidence shows that
consumer sentiment gaps across countries are also strongly correlated with changes in interest
rates. Proposed U.S.-specific factors do not find much supportive evidence abroad.
"Unemployment is low and inflation is falling, but consumer sentiment remains depressed." They go through a lot of analysis to show some correlations affecting consumer sentiment. But what they ignore is the constant pounding from one side that we are totally fucked with nothing to mitigate our suffering, and everybody is so polarized that they only listen to one side of the story.
You seem to resent that I live an apparently comfortable life, and believe that I'm somehow unaware of economic turmoil (and even insulated from it?). You don’t know what I went through in the 70s (when inflation and interest rates were a lot higher than now), and the next 40 years to get where I am, and the uncertainty involved in living off of savings and dealing with the fact that Social Security may not last. All I can add at this point is GFY.
