Cover stories - Well, just when it could no longer keep blaming 9/11 for the sorry state of our economy, the Bush administration got a new excuse: the hurricane. More war, less taxes, crushing debt, have nothing to do with our problems. It's... [Jack Bog]

The holy grail of measures -- the CPI -- has failed to reflect the full impact of the Reagan revolution. The US, in the past twenty years, has experienced one huge currency devaluation. But it was called an increase in wealth, as measured by the speculative appreciation in the valuations of assets. The wealth holders were spared the consequences of this devaluation by the adjustment of capital gains taxation. The masses, via a focus on the CPI, were spared the realization that their real wages relative to a more inclusive measure of the money supply (so as to include all the assets that are treated equivalent to currency, that is, whatever gets called "wealth") had comparatively declined; and dramatically so.

A house that once was used to justify a 80k mortgage now can justify a mortgage of 200k or 300k or more, without a commensurate increase in income to cover the debt.

[But see this too (the UPDATE): PDXNAG BlogNote on: RoguePundit: Runaway Government Spending on Employees]

UPDATE

A Core Rate? - Nuts!
Yesterday I posted the question Is the CPI Nuts? in which I questioned the advisability of excluding food and energy from the CPI, leaving the "core" rate.
[ Mover Mike A Core Rate? - Nuts! ]

Where I offer the comment:

Isn't the CPI supposed to be just a passively measured thing that correlates money supply to the exchange of goods? (Classic stuff predating Keynes.)

I think the CPI is nuts because management of the money supply has been used to stimulate asset inflation in a mutually reinforcing spiral while affirmatively holding back the things that might allow wages to force a matching increase in the CPI.

The net result is the fear of asset price deflation (and the almost certain evaporation of all things dollar-denominated-savings related, including pensions) and a systemic effective reduction in the ratio of wage income to a more complete measure of money supply.

Measure the ratio between wage income against the money supply (inclusive of asset prices, as it has become a de facto component of the money supply).

I am of course just The Wild Economist so what would I know anyway.

Greenspan's use of low interest rates to spur debt induced home price valuations so as to stimulate consumption via debt was like using a hammer (asset price wise) to smash a gnat. If we printed cash and dropped it from helicopters or tall buildings we would have had an increase in the CPI, but at least it [would] not have further distorted the asset prices nor resulted in the increase in unsustainable debt levels.