"CPI is worthless"

I wanted to plot M3 vs some measure of inflation to confirm what I'd been hearing on Libertarian talk-radio. Not being an economist, I wasn't even aware (thanks, CCList) that Friedman had done studies on the money supply's relationship to inflation in the late 60s and early 70s. (I'm the fool for not knowing. It should be noted that I am -not- an economics student -- I'm a statistics student. I do the calculations (often unnecessarily) in R and Excel so I "believe" them.)

I asked someone to point me to the M3 estimates on the web. As a result, there was an off-shoot discussion that had a discussion participant claiming the CPI was worthless. Shortly after that discussion, someone else pointed me to this web-site: www.shadowstats.com.

Amusingly, at shadowstats.com, we see this:

The CPI was designed to help businesses, individuals and the government adjust their financial planning and considerations for the impact of inflation. The CPI worked reasonably well for those purposes into the early-1980s. In recent decades, however, the reporting system increasingly succumbed to pressures from miscreant politicians, who were and are intent upon stealing income from social security recipients, without ever taking the issue of reduced entitlement payments before the public or Congress for approval.

The above came from here.

Here are some better charts that answer some of my questions:




And just for kicks:



(I was quite happy with the fact that www.shadowstats.com provides the Excel spreadsheets with their charts also. I love the internet.)

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