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<p>[QUOTE=&quot;NPCoin, post: 4668470, member: 5629&quot;]Thank you.&nbsp; It is unfortunate that today&#039;s education system no longer seems to teach <i>Economics</i> anymore, but what in our school district here is termed as <i>Free Enterprise</i>.&nbsp; And, unfortunately, very little about actual economics was taught in that class (two of my six had already gone through it).&nbsp; When we had economics, we learned about every modern economic system and everything that drives economies including employment, taxes, inflation/deflation, investments and bonds, saving/lending/spending, interventions, etc.</p><p><br /></p><p>We received a pretty good wake-up call with regards to valuation of money, especially fiats.&nbsp; And there is a lot that can be said in utilizing some of these measurements in guiding when, what, and where we make some of our purchases.</p><p><br /></p><p><br /></p><p>Just to caution you, the Fed does not use the CPI.&nbsp; The CPI is the Consumer Price Index and has a basis in polling consumers on what they buy.&nbsp; The Fed utilizes the PCE (Personal Consumption Expenditures) which has its basis in polling business on what they are selling.&nbsp; In a way, I guess you can say it&#039;s likened to the difference between the <i>Red Book</i> and the <i>Blue Book</i>...but not quite.</p><p><br /></p><p>Other differences between the two include the fact that the CPI does not consider indirect payments such as insurance paid out on your behalf.&nbsp; The CPI only considers what you personally spend out of pocket.&nbsp; The PCE, on the other hand, takes these payments into consideration.&nbsp; The PCE also calculates substitutions whereas the CPI only takes into consideration actual buying activity.&nbsp; This is important because both give weight to the different &quot;items&quot; they calculate.</p><p><br /></p><p>So, if the price of tea goes up and people buy less tea, but the producers/sellers identify those same people now buying soda instead, the weight will change for the overall calculation for each of those items in the PCE measurement.&nbsp; This does not happen in the CPI measurement.&nbsp; This is a major oversimplification of the matter, but the premise is there.</p><p><br /></p><p>Now, I&#039;ll stop here because you would likely get the idea.&nbsp; The Fed determines future inflation policy based upon current PCE measurements.&nbsp; Their decisions to either inflate or deflate the dollar will have a direct affect on the price of consumer items.&nbsp; This in turn has an affect on the CPI used to calculate inflation which is further used in adjusting policies from other government agencies (such as Social Security and Department of Health).&nbsp; However, these changes in inflation policy are not connected to the CPI.&nbsp; It is the commercial entities that move the Fed&#039;s inflation policies.&nbsp; These policies then go on to affect such things as consumer lending and savings.</p><p><br /></p><p>However, as we all know, prices are not the same nationwide.&nbsp; Therefore, the CPI (what consumers are actually spending) is going to give a widely variant cost of living across the nation as well as different variant rates of inflation.&nbsp; However, the PCE would be less volatile by region because it polls the supply and not the consumption.&nbsp; At its core, the supply will have a less variant price.</p><p><br /></p><p>So, if you want to consider using inflation in your overall valuation considerations with your collections, I would suggest using the core PCE as your basis.[/QUOTE]</p><p><br /></p>

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