Ben Young

The Government Has Played Its Hand Nicely

Another way that gamed statistics cloud thinking is the "owners equivalent rent" line item in the Consumer Price Index. By pretending that mortgage payments don't exist, but only rents.

If mortgage payments during the bubble were reflected accurately in the CPI, it would have been reflected as hyperinflation during the runup, and would *definitely* have generated an outcry to STOP it. Instead, it was ciphered away, inflation was "low"! and the problem went unrecognized/unrepaired. Owner's equivalent rent is *still* being used, and this is now disguising the true shape of CPI which is in net deflation due to massive deflation in housing prices over the last 3 years.

Why in the world would owner's equivalent rent be used instead of a patently accurate figure? If this had not been used, the country would long ago have gone bankrupt from automatic CPI adjustments from Social Security and other contracts that give auto-raises based on CPI.

But, eventually facts, like gravity will have their say and their way