“To derive pleasure from” is the basic concept by hedonic adjustments and someone decided this should alter the official numbers put out by the government and Federal Reserve on economic data. For Example: Inflation: Let’s say a washing machine cost $100 last year, and today it is $120. You would look at the price increase and assume an increase by 20%. According to the government you would assume wrong because what you, the number crunching citizen who doesn’t have another $20 in your wallet because wages keep spiraling down, would FAIL to understand is you receive an extra $20 dollars of enjoyment out of the new washing machine and that $20 needs to be subtracted from the “Official” price of the washing machine. And WAHLAA, the washing machine is still only $100 and there has been NO inflation. Gross Domestic Product: If Dell sells one computer for $100 and it has a processor which runs at 100Mhz lets assume for discussion the GDP contribution from Dell is 1. Dell gets credit for selling one computer. How are hedonics applied to our GDP? The next year, Dell sells one computer for $100, but now the computer is twice as fast with a processor of 200Mhz. According to the government, the GDP of Dell went from 1 to 2. Now I don’t know about you, but I can’t type twice as fast because my computer can work twice as fast, but according to the “Official” GDP number it has doubled and they report a more robust number for the unsuspecting public to latch on to and feel good that the economy is growing. Long story short. Hedonic adjustments are some back room manipulation to further paint the rosy picture about how good everything is and to keep people from knowing the reality of what is really going on. It is based on pure Creative accounting and can be used to adjust virtually any economic number put out. I can’t wait until next year when the washing maching is now $200 and it has a new internal processor which is 4 times faster. Even though my clothes will still take an hour to wash and even though I am out an extra $100 to buy the machine. The “OFFICIAL” numbers coming out on our economy will show GDP growing by leaps and bounds and no inflation. CommentsLeave a Reply | FREE SUBSCRIPTION!Receive Emailed Articles as they are Posted. Click Below on RSS Feed!Jason's Thoughts!My goal is to use this format to bring important and timely ideas to the surface on recent events which I feel will affect all of us financially. ArchivesFebruary 2012 Categories |
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