Chances of losing (and winning!) are close to zero.

[Kshartle]

The inflation doesn't always show up evenly across the board. Tastes change and the government uses force to re-direct resources. Healthcare and education have gone up much faster than the inflation rate (real numbers or government numbers) because the government is invloved there. Prices in electronics and SW have gone down and quality up becuase there is very little government invlovement. Fuel is no doubt lagging since so many people are unemployed. You guys can decide what role government has played there (hint- they tax work and subsidise sloth).

Cheap labor abroad has kept some things down.

No one will agree on the inflation rate unless they first agree on the definition. What's your definition?

[MediumTex]

If I was going to pick a small basket of goods and services to measure price inflation I would select items that are not subject to dramatic technological breakthroughs, offshoring, or other price distorting market changes unrelated to currency devaluation.

With that in mind, here are a few good items to consider:

1. The price of a dozen eggs and a gallon of milk

2. The price to have an average sized lawn mowed by a lawn service

3. The cost of a plumber's visit to fix a clogged drain

4. The cost of a windshield replacement

5. The cost of a 12 pack of Coca Cola

6. The price of a pack of cigarettes (with the applicable taxes excluded)

7. The price of a doctor visit for a typical respiratory infection (excluding drug costs)

What I am trying to do is capture items that involve a blend of goods and services in a single price and involve services that must be provided on-site and/or goods with production that can't be easily offshored.

I'm fine with saying that there has been inflation in the 3-4% range, but if we go much higher than that on an average basis across all prices, the numbers get very large very quickly and current prices just don't reflect that.

***

I readily admit:

Health care costs have risen wildly.

College costs have risen wildly.

Concert ticket prices have risen wildly.

***

However,

Computer prices have been tumbling for decades.

Big screen TV prices are falling.

Smart phone prices are falling.

***

This dynamic of some prices rising due to government-driven market distortions, natural resource shortages, and rising prices of rare items like certain types of artwork (such as selected concert performances), while other prices are falling due to efficiency increases and technological breakthroughs, offshoring of production and collapsing profit margins in some industries is just a normal part of a capitalist economy constantly adjusting itself.

None of the factors above driving increases or decreases in the prices of selected items has anything to do with currency devaluation.

With t-bills paying 0%, aggregate wages not rising, and private sector credit not expanding, I'm surprised people are so worried about inflation.  It seems like there would be so many more things to worry about that have a higher probability of occurring here in the U.S.

[Pointedstick]

I would add rent to the list. That's probably the biggest expense for a non-homeowner.

[Marc De Mesel]

No one will agree on the inflation rate unless they first agree on the definition. What's your definition?

I have the impression we all agree here on the definition of inflation: the rising costs of living expenses.

Since we agree on the definition and since the prices of living expense items are hard numbers, it is possible to estimate them quite correctly.

I understand that MediumTex agrees that - since 1972 - true inflation can be estimated around 5% annually. So we agree that the PP since 1972 had 9.5% annually, after deducting 5%, 4.5% remains. We still disagree on how much needs to be deducted for - historical - expenses, direct expenses of taxes, brokerage fees, spreads on assets and storage - as well as - historical management costs. I estimated these at 1% each (see my argumentation here), so I deduct 2%, leaving me 2.5% real return since 1972 for the PP. MediumTex and Pointedstick have not agreed on any deduction of historical expenses, so they are left with 4.5% real return of the PP since 1972.

Since 2000 the difference in opinion is wider since we don't agree on the true inflation estimate. Here I understand MediumTex estimates true inflation around 2%. I estimate true inflation since 2000 around 5%. This makes a big difference since average return of the PP since 2000 has been 7.5%, so deducting only 2%, still leaves you 5.5%, but deducting 5%, only leaves you 2.5%. We also differ in opinion about the expenses since 2000. I claim that you should deduct 0.5% for taxes, brokerage fees, spreads, storage and another 0.5% for management costs, independently if you manage it yourself, or you outsource it. So I deduct another 1% from the 2.5%, leaving me with only 1.5% real return of the PP since 2000. I understand Pointedstick and MediumTex have not agreed on any deduction for expenses, so they still have 5.5% real return for the PP since 2000. A real return of 1.5%, or 5.5%, is an enormous difference!

One of us is wrong. MediumTex and Pointedstick think I am wrong. I think they are wrong.

Would you agree with my summary MediumTex and Pointedstick or did I misrepresent/misunderstood your position?

Systemsceptic, I understand you also estimate true inflation considerably higher. What is your estimation of true inflation since 2000? Also I am curious what your opinion is on my estimation of the expenses I deduct?

[Pointedstick]

Would you agree with my summary MediumTex and Pointedstick or did I misrepresent/misunderstood your position?

I would agree, yes.

One thing that I still don't understand is why you deduct management expenses for managing your own investments. I understand calculating the opportunity cost of doing something yourself vs. hiring someone else, but actually calling the opportunity cost a fee that you pay to someone and then making that someone yourself makes no sense to me. The time has a value, for sure, but if you're paying yourself for that value, you still have the same amount. It's moving money from one pocket to another and calling it a cost.

When it comes to inflation, I think part of the problem is that it's so personal. Who cares what the general rate of inflation is if the inflation rate of the goods and services you purchase are above it? My rent inflation has been more than 10% per year for example; pretty punishing. It's also location-dependent. Real estate in Detroit has deflated by probably 50% a year. Rent in many parts of the USA is stagnant or falling while in other parts, it's rising. Someone whose biggest expenditure is rent living in a falling rent city has no use for an inflation calculation that assumes it to be rising, for example.

It's not so simple as to say, "Inflation destroys 5% of your purchasing power per yer." Maybe it does and maybe it doesn't. It all depends on what you actually buy and from which geographical market. Your personal rate of inflation could easily be zero or negative if you don't have a car, own a modest home with no mortgage or one that falling rates let you repeatedly refinance, grow a lot of your own food, don't have any recurring medical expenses, and aren't paying for someone's college education.

[Marc De Mesel]

I would agree, yes.

One thing that I still don't understand is why you deduct management expenses for managing your own investments. I understand calculating the opportunity cost of doing something yourself vs. hiring someone else, but actually calling the opportunity cost a fee that you pay to someone and then making that someone yourself makes no sense to me. The time has a value, for sure, but if you're paying yourself for that value, you still have the same amount. It's moving money from one pocket to another and calling it a cost.

When it comes to inflation, I think part of the problem is that it's so personal. Who cares what the general rate of inflation is if the inflation rate of the goods and services you purchase are above it? My rent inflation has been more than 10% per year for example; pretty punishing. It's also location-dependent. Real estate in Detroit has deflated by probably 50% a year. Rent in many parts of the USA is stagnant or falling while in other parts, it's rising. Someone whose biggest expenditure is rent living in a falling rent city has no use for an inflation calculation that assumes it to be rising, for example.

It's not so simple as to say, "Inflation destroys 5% of your purchasing power per yer." Maybe it does and maybe it doesn't. It all depends on what you actually buy and from which geographical market. Your personal rate of inflation could easily be zero or negative if you don't have a car, own a modest home with no mortgage or one that falling rates let you repeatedly refinance, grow a lot of your own food, don't have any recurring medical expenses, and aren't paying for someone's college education.

You are right, inflation is personal and can differ widely. I should say I estimate 'average' inflation around 5% since 2000. For the average person. Some indeed have much lower, some much higher. So indeed, you can say correctly my inflation was only 2%. And indeed this means your investment returns are higher.

However, I think that when discussing how much to deduct for average inflation you can't just skip it by saying 'it's personal'. I, you, and MediumTex are choosing the activity of evaluating and promoting investment strategies. When doing that, I think 'average' inflation is what needs to be talked about, and what needs to be deducted from investment returns. Even when your personal inflation is lower or higher. So that is what I do.

Also note that MediumTex is also talking about 'average' inflation, when talking about inflation adjusted returns:

Marc has made this point in his past writings, and unfortunately he is simply wrong.

The PP has consistently provided a 4% or so inflation-adjusted return over four decades.

I wish it was true. But it is not. As you can see in my Permanent Portfolio table for the USA the inflation adjusted returns have been dropping dramatically for the PP. From close to 7% in the 70's, to only 2% in the last decade. That is excluding any expenses!


When it comes to deducting your own management costs. I don't do that neither on my spreadsheet so I understand it looks far fetched. But I do deduct it when promoting the PP strategy as we both agree it is a cost. The counterargument you give that because it goes from one pocket into the other for a do it yourself investor does not invalidate my argument. The fact that it goes from one pocket into the other does not nullify the cost in any way. You can make a case that it reduces the cost when doing it yourself, but you can also make a case that it raises the cost when doing it yourself. So the middle ground is: the management costs for a do it yourself investor are the same as when you outsource it. You deduct them, not to calculate how much money you have, because indeed you still have it, you deduct them to calculate what the actual profit is from your investment activity!

Just like when you grow your own healthy vegetables. No need to deduct your own management costs if it's just a hobby. But once you are going to calculate your profit, you should. And when you decide to promote to others 'grow your own healthy vegetables and look what decent consistent returns it made in the past', I think it becomes most important.

[melveyr]

Marc has made this point in his past writings, and unfortunately he is simply wrong.

The PP has consistently provided a 4% or so inflation-adjusted return over four decades.

I wish it was true. But it is not. As you can see in my Permanent Portfolio table for the USA the inflation adjusted returns have been dropping dramatically for the PP. From close to 7% in the 70's, to only 2% in the last decade. That is excluding any expenses!

Marc, your inflation numbers are just entirely made up. If you make up numbers you can get them to say anything. A 4% inflation rate for 2008 is so far removed from reality that it discredits your whole process.

[Marc De Mesel]

Marc, your inflation numbers are just entirely made up. If you make up numbers you can get them to say anything. A 4% inflation rate for 2008 is so far removed from reality that it discredits your whole process.

My estimated inflation numbers are not just 'made up'. I put considerable amount of research into it. 

Yes, 4% true inflation in 2008 in the US is my best estimate.

A big mac is one item I have quoted here (5.9% in 2008).

Maybe you can give your estimate? As well as some empirical proof to support it, as I did?

[Kshartle]

With 50% of the PP in fixed dollar investments and 25% in business that suffers distortions due to inflation, I'd bet that the higher inflation goes the lower the real return. I think prices are going to be rising much faster than they have been and with rates this low the PP is not going to produce any real return for years (until ST rates get out in front of it and we see a big stock sell-off or T-bonds default or the government slashes entitlements). Basically I think the PP is due for a couple years of negative real returns because bonds have done really well in spite of all the negative things the government has done to the dollar.

The CPI has been altered so many times by the government it bears few similarities to the measure back in the 70s. I've seen a study or two that suggests if they were even using the Clinton era CPI it would be at 5.5% for the past couple years. It would be north of that using the numbers from the 70s. This would be more consistent with the growth in the money supply.

It was mentioned earlier that 600 billion of the dollars are exported every year. I've said the biggest fear is the tidal wave of dollars coming back in a currency crisis. That is the biggest risk to people's savings. The reserve currency status is ultimately a curse because American's have lived beyond their means for so long we can no longer support a lot of our basic needs with our own production. I think Europe will crash first but after that the world will turn it's eyes on the dollar's problems. We need higher interest rates and people employed in productive activity. The government is doing it's best to prevent both of those things.

[MediumTex]

Marc, your inflation numbers are just entirely made up. If you make up numbers you can get them to say anything. A 4% inflation rate for 2008 is so far removed from reality that it discredits your whole process.

My estimated inflation numbers are not just 'made up'. I put considerable amount of research into it. 

Yes, 4% true inflation in 2008 in the US is my best estimate.

A big mac is one item I have quoted here (5.9% in 2008).

Maybe you can give your estimate? As well as some empirical proof to support it, as I did?

As a parent to three kids, I watch the McDonald's menu and pricing closely.

McDonald's has increased its prices at a significantly higher rate than its competitors in recent years.

A kids meal at McDonalds now costs more than a kids meal at many nice restaurants.

I would not use any McDonald's menu items as a proxy for overall inflation because McDonald's has IMHO been conspicuously raising its prices in a manner that is out of synch with its competitors and the larger economy.

On the housing front, I am currently refinancing my home for the umpteenth time and it will lower my monthly payment by several hundred dollars.  The reduced cost of borrowed money through low interest rates has translated into a very real reduction in my overall housing expenses.

It takes a LOT of Big Macs, eggs, milk, and other small expenditures to equal the savings I will realize from refinancing my home at a lower rate.

The one inflation item that HAS affected most people in the U.S. in a real way relative to other expenses is the cost of health insurance.  As has been discussed many times, however, this increase in cost is not the result of currency devaluation, but rather government mismanagement of the health care industry generally, along with new drugs and medical procedures that cost more because they are more involved/complicated/have more research expense to be recovered than the drugs/procedures that came before them.

I don't know why the inflation discussion never seems to take account of the significant overall reduction in household expenses that a few well-timed refinancings can have.  Over the last 12 years, I have reduced my house payment amount by almost 40% through refinancing.  Considering that my house payment is my largest single monthly expense, my overall household expenses are actually lower today than they were when I bought my house in 2001.

[MachineGhost]

It's an important point that capitalism mutes the effects of inflation through increased productivity, but that isn't the same as saying capitalism causes disinflation.  Inflation is inherently unproductive government spending, excluding resource shortages which are self-correcting.  Who corrects the government?  Only the Bond Market Vigilantes do and they've been asleep at the wheel.  As Clinton infamously said about his planned deficit reduction in 1993: "You mean to tell me that the success of my program and my reelection hinges on the Federal Reserve and a bunch of fucking bond traders?"

[align=center][/align]

[Kshartle]

Prices rise and fall for so many different reasons that it really is a poor measure of inflation. The only measure that makes sense to me is the money supply. We measure our investments in dollar terms. If the total global supply of dollars increases by 10% (on average) we should be able to position our investments to grow by 10% as well (on average). That is regardless of purchasing power and I consider keeping pace with the rate of growth to be the bare minimun increase to qualify as an "investment". If the money supply shrinks it should certainly make sense that our investment account is more than likely to shrink. I think the PP as constructed is very good at protecting you from drastic shrinks in the money supply (i.e. total dollars in circulation drops by 50% the PP should in no way drop even close to that). Conversly a 50% increase in the money supply is unlikely (IMO) to result in a 50% increase in your portfolio. That's because half of the PP is in fixed dollars.

That's my beef with it because I really think they are going to increase the rate of expansion in the money supply. The Central bank/gov't is not going to let any delflation to take place regardless of what the market is trying to do. They are determined to not allow deflation and the PP right now can't hope to keep pace. (IMO)

BTW if we had rates in double digits, a slashed government budget and everyone was hoarding gold I'd be loading up on bonds.

[rocketdog]

If I was going to pick a small basket of goods and services to measure price inflation I would select items that are not subject to dramatic technological breakthroughs, offshoring, or other price distorting market changes unrelated to currency devaluation.

With that in mind, here are a few good items to consider:

1. The price of a dozen eggs and a gallon of milk

2. The price to have an average sized lawn mowed by a lawn service

3. The cost of a plumber's visit to fix a clogged drain

4. The cost of a windshield replacement

5. The cost of a 12 pack of Coca Cola

6. The price of a pack of cigarettes (with the applicable taxes excluded)

7. The price of a doctor visit for a typical respiratory infection (excluding drug costs)

What I am trying to do is capture items that involve a blend of goods and services in a single price and involve services that must be provided on-site and/or goods with production that can't be easily offshored.

I'm fine with saying that there has been inflation in the 3-4% range, but if we go much higher than that on an average basis across all prices, the numbers get very large very quickly and current prices just don't reflect that.

***

I readily admit:

Health care costs have risen wildly.

College costs have risen wildly.

Concert ticket prices have risen wildly.

***

However,

Computer prices have been tumbling for decades.

Big screen TV prices are falling.

Smart phone prices are falling.

***

This dynamic of some prices rising due to government-driven market distortions, natural resource shortages, and rising prices of rare items like certain types of artwork (such as selected concert performances), while other prices are falling due to efficiency increases and technological breakthroughs, offshoring of production and collapsing profit margins in some industries is just a normal part of a capitalist economy constantly adjusting itself.

None of the factors above driving increases or decreases in the prices of selected items has anything to do with currency devaluation.

With t-bills paying 0%, aggregate wages not rising, and private sector credit not expanding, I'm surprised people are so worried about inflation.  It seems like there would be so many more things to worry about that have a higher probability of occurring here in the U.S.

That's funny -- whenever I travel anywhere I always check the price of cigarettes and gasoline.  Obviously both are heavily taxed and so probably not a "pure" indication of an economy, but they do seem to tell you a lot about a culture, the availability of widely consumed products (one discretionary, the other not so much) and how onerous the system of taxation is. 

When I was in England in 2000-2001, they didn't believe me when I told them we were paying 1/3 as much as they were for petrol (gas).  They were literally paying 3x more than we were (I think we were paying around $1.60/gal, and they were paying over $4).  Ah, the good old days...

[AgAuMoney]

Housing and healthcare are two of the biggest expenditures for households and generally dwarf food spending as a % of income.

Yes, but the cost of a big mac incorporates much of that thru labor and materials and location.

[AgAuMoney]

If nicer stuff with more features costs more than similar stuff in the past that wasn't as nice and didn't have as many features, I don't see how we can blame currency devaluation for that price differential.

The BLS adjusts the CPI for that.  Specifically for performance of computers, features/quality of automobiles, "nicer" electronics and appliances, etc.

[AgAuMoney]

And this entire discussion about inflation shows how difficult it is to agree on a number.

Even the BLS and the Fed will admit that the official CPI-U is unlikely to be experienced exactly by anyone.  They publish several other metrics which may fit certain people more closely such as the CPI-E for elderly.  They also publish other metrics not designed to match what people experience.

It is for this general lack of agreement that reporting "real" returns on anything is generally less useful than reporting time period and nominal return.  If someone lived that period they can adjust to their "real" base.  Or people can use whatever published reference for adjustment that makes them happy.

[sophie]

If I may...there's clearly a difference here between perception of inflation and its statistical measurement.  I think there's a reasonable way to explain why the perception is that inflation is so much higher.

The numbers that are cited for the price of any given item or service are averages.  They don't take into account that prices are a skewed Gaussian distribution, and what we're not seeing here are the standard deviation & skewness #s.  The skew is necessarily toward the positive, since there are hard limits to how low a price can drop but that's not so much the case for the high end.  For example, the price of a dozen eggs may be $2 on average, but here in NYC I've only rarely seen prices under $4 and I typically pay $5.  If one standard deviation is $0.25, then 97.5% of prices will be within $0.75 of the mean on either side, if the distribution weren't skewed positively.  But it's far less likely that you'll find a dozen eggs for sale at $1.25, than priced at $2.75 or higher.

The other effect is caused by the fact that a small number of big ticket items have an outsized effect on your experience of inflation.  Changes in the price of eggs probably doesn't make a big impact on your monthly budget, but that same change in the price of health insurance or your rent will make a very large impact.  If your particular insurance, heating fuel, or rent bill is higher than average (and statistically that's more than 50% likely to be the case, because of the skew), you'll perceive that your costs are skyrocketing.  Because each of us has several of these big ticket items, a large # of people will be exposed to big jumps in at least one item.  In my case, health insurance and mortgage costs have gone down thanks to refinancing and switching to a high deductible plan, but property taxes have doubled since 2007 and heating oil has gone up something like 5-7%/year in the past few years.  And note that the CPI doesn't include taxes!

So it's not necessarily a plot by BLS to understate inflation.  It's called Lies, Damn Lies, and Statistics.  I've had this very topic in mind for a while because I've recently had to spend a lot of time convincing a postdoctoral fellow that his results were getting destroyed because of this exact phenomenon.  It's not an easy concept to grasp, so I hope this explanation is clear.

[sophie]

For example, the price of a dozen eggs may be $2 on average, but here in NYC I've only rarely seen prices under $4 and I typically pay $5.  If one standard deviation is $0.25, then 97.5% of prices will be within $0.75 of the mean on either side, if the distribution weren't skewed positively.  But it's far less likely that you'll find a dozen eggs for sale at $1.25, than priced at $2.75 or higher.

Ok, I know the rent is WAY higher in NYC, but I have been paying between $0.99 [currently] and $1.39 for a dozen eggs at the local Aldi for the last 5 years. That price is the same throughout the Chicago suburbs.

Could someone explain the outsized disparity?

Rents have a lot to do with it, but it depends also on where the eggs come from - they tend to be locally sourced.  Eggs are priced at $2.79 - $4.99/doz at Fresh Direct depending on quality, but that is an online grocery with no stores, just a warehouse in Brooklyn and a fleet of delivery trucks.  I like buying eggs at farmers' markets so I guess I'm paying also for quality.

I made up that standard deviation by the way.  It could be higher than 25 cents.  But the point still stands:  prices will vary more toward the upside for all kinds of reasons.

[MachineGhost]

http://www.foodtimeline.org/foodfaq5.html#candybar

http://www.foodtimeline.org/foodfaq5.html#oreoprices

[Marc De Mesel]

Marc, your inflation numbers are just entirely made up. If you make up numbers you can get them to say anything. A 4% inflation rate for 2008 is so far removed from reality that it discredits your whole process.

My estimated inflation numbers are not just 'made up'. I put considerable amount of research into it. 

Yes, 4% true inflation in 2008 in the US is my best estimate.

A big mac is one item I have quoted here (5.9% in 2008).

Maybe you can give your estimate? As well as some empirical proof to support it, as I did?

I would like to counter your big mac anecdote with this: the cost per gigabyte of storage. 

In January of 1980, a gigabyte of storage cost $193,000.  By January 2008, the cost of a GB had fallen to $0.27. 
http://www.mkomo.com/cost-per-gigabyte

See how useless anecdotes are when trying to estimate average price inflation?  A lot of study and work has gone into the CPI-U, and it's generally accepted as an accurate measure of price inflation.

Agreed, the cost of gigabyte of storage has gone down.

Post below I give you 4 other items where the price has not gone down but UP.

[Marc De Mesel]

http://www.foodtimeline.org/foodfaq5.html#candybar

http://www.foodtimeline.org/foodfaq5.html#oreoprices

Thank you MachineGhost. Those are interesting price histories.

Hershey Bar Index
[2007] $0.84/1.55 oz (= converted from $0.79/1.45 oz)
[2008] $0.59/1.55 oz
[2009] $1.10/1.55 oz
[2010] $0.95/1.55 oz
[2011] $0.99/1.55 oz

From 2007 to 2011 the price of a Hershey chocolate bar has gone up on average 4.19% per year.


Nabisco's Oreo cookies
[2004] $3.36/18 oz (= converted from $2.99/lb)
[2008] $4.29/18 oz
[2012] $5.33/18 oz (= converted from $4.59/15.5 oz)
[2013] $5.77/18 oz (= converted from $4.59/14.3 oz)

From 2004 to 2013 the price of Nabisco's Oreo cookies has gone up on average 6.19% per year.


Kellogg's Corn Flakes
[2000] $1.99/12 oz (= converted from $2.99/18oz)
[2004] $2.99/12 oz
[2008] $2.99/12 oz
[2011] $3.79/12 oz
[2012] $3.79/12 oz
[2013] $3.79/12 oz

From 2000 to 2013 the price of Kellogg's Corn Flakes has gone up on average 5.08% per year.


Coca Cola and Pepsi
[2002] $0.99/2 litre bottle (67.6 oz)
[2005] $1.09/2 litre bottle (67.6 oz)
[2011] $1.89/2 litre bottle (67.6 oz)
[2012] $1.89/2 litre bottle (67.6 oz)
[2013] $1.99/2 litre bottle (67.6 oz)

From 2002 to 2013 the price of Coca Cola has gone up on average 6.55% per year.

This is more hard empirical proof that living expenses in the US have gone up - on average - around 5.5% per year.

[D1984]

These numbers confirm that my estimate of true inflation in US of 5.5% per year since 2000 is correct.

Perhaps inflation for someone has gone up f the only thing you ever buy with 100% of their paycheck is junk food. For the rest of us back in realityland (aka not in ShadowStatsland), we also have to purchase things like shelter, clothing, healthcare, automobiles, consumer electronics, make tax payments, etc. I have no doubt that ifnlation has gone up at 5% in greater ins some categories but you can't just pick one category (sugar and carb laden convenience foods) and pretend that that represents 100% of a person's expenditures and base the "inflation rate" on that.

[Marc De Mesel]

These numbers confirm that my estimate of true inflation in US of 5.5% per year since 2000 is correct.

Perhaps inflation for someone has gone up f the only thing you ever buy with 100% of their paycheck is junk food. For the rest of us back in realityland (aka not in ShadowStatsland), we also have to purchase things like shelter, clothing, healthcare, automobiles, consumer electronics, make tax payments, etc. I have no doubt that ifnlation has gone up at 5% in greater ins some categories but you can't just pick one category (sugar and carb laden convenience foods) and pretend that that represents 100% of a person's expenditures and base the "inflation rate" on that.

Sure, care to quote an item in price that has gone down? Or has gone up by just 2%?

All data is valuable.

[D1984]

These numbers confirm that my estimate of true inflation in US of 5.5% per year since 2000 is correct.

Perhaps inflation for someone has gone up f the only thing you ever buy with 100% of their paycheck is junk food. For the rest of us back in realityland (aka not in ShadowStatsland), we also have to purchase things like shelter, clothing, healthcare, automobiles, consumer electronics, make tax payments, etc. I have no doubt that ifnlation has gone up at 5% in greater ins some categories but you can't just pick one category (sugar and carb laden convenience foods) and pretend that that represents 100% of a person's expenditures and base the "inflation rate" on that.

Sure, care to quote an item in price that has gone down? Or has gone up by just 2%?

All data is valuable.

Gone down? Since 2006, housing prices have plummeted across the US (and indeed across much of the western world as the bubble burst), rents and OERs  have (since the bubble peak) gone down or stayed stable in many cities here, and mortgage rates have dropped so that even if someone had to refinance at their old mortgage's value they will still be paying a lot less than they would have been five years ago. Housing is one of the biggest expenses faced by most people.

Income taxes (at least at the Federal/national level) are another item that has gone down since 2000, at least as a percentage of GDP and as a percentage of the average income and with the Bush-Obama tax cuts being made permanent (for now) they look to stay that way, at least temporarily. The payroll tax cut being ended did increase the overall tax burden a bit from last year but compared to where we were in, say, 2000, the average non top 1% household has seen its Federal income tax burden as a percentage of its income go down (and income taxes are a big bite out of most people's income....one of the biggest items along with housing and healthcare).

Computers...compare how many MIPS/FLOPS of processing power (or GB of hard disk space) $1000 bought you even 5 years ago vs how much it buys now.

As far as 2 or 3% increases (rather than actual falling prices) go, the entire basket of goods tracked by the BPI (MIT's Billion Price Index) has gone up on average around that much annually and at nowhere near 5% plus. They keep track of prices completely independent of the people in the government who calculate the official CPI and CPI-U.

Finally (and I admit this is anecdotal but I include it as a comparison to the McDs Big Mac prices posted earlier to show that all fast food prices are not going up) I would like to add that Krystal's (a fast food hamburger restaurant that serves square "sliders" similar to White Castle...I'm not sure what its equivalent in Europe would be) now has a combo meal where you can get three small burgers, a small fries, and a small drink (what we call "small" in America would be what I think would be considered "medium" elsewhere in the world) for $2.99 (under three dollars US for a meal) and that a restaurant called Steak'N'Shake (a quasi-fast food restaurant that specializes in hamburgers made with actual ground up steak and in milkshakes actually made with ice cream and milk instead of some premixed slurry from a shake machine) sells a one-pound burger combo called the "7x7" for $7.77; granted, that doesn't include the drink price (although it does include fries) but it still means that you can get the meat equivalent of four McDonald's Quarter Pounders or a little over three of their Big Macs for $7.77. Obviously this does not mean that all fast food prices are falling in terms of how much food you get for a given amount of money but it does go to show that not all such prices are rising either (for instance, prices at the Wendy's closest to me have hardly moved in four years while prices at the Dairy Queen have easily risen at least 4 or 5% a year and maybe more....I'm not sure how much control local franchisees have over pricing vs how much the national chain has so this price inflation will probably differ for these restaurants in other cities) and that prices for one item--or even one whole category of item--are often somewhat unrepresentative of price trends as a whole.

[AgAuMoney]

From 2007 to 2011 the price of a Hershey chocolate bar has gone up on average 4.19% per year.
From 2004 to 2013 the price of Nabisco's Oreo cookies has gone up on average 6.19% per year.
From 2000 to 2013 the price of Kellogg's Corn Flakes has gone up on average 5.08% per year.
From 2002 to 2013 the price of Coca Cola has gone up on average 6.55% per year.

I own HSY, KO and PEP.  So all those who continue to purchase those products in spite of their price increases, my dividends thank you.

I own RAI which sold Nabisco for a good price, and Philip Morris (ne Altria) which owned it for a time before spinning it off as part of Kraft which I sold but may own again.  Since then it was spun/sold it off to Mondelez (MDLZ) which I may yet own.

I've considered K and if the price is right...

The only way to beat the incessant, creeping theft from inflation is to own growing companies with pricing power like the above set.

There is no way to beat hyperinflation.  But companies like that will help to cope and recover, and other tactics discussed in these forums will also help.