Why is it called "Chained" CPI, anyway? I understand the idea behind it, just not the word.

[reformist2]

[Recursion]

1. It treats purchases as a Markov chain (nt)

[Jim__]

2. Because values are chained from one period to the next; rather than based on a fixed reference.

More specifically, ( http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Glossary:Chain_index ):

A chain index is an index number in which the value of any given period is related to the value of its immediately preceding period (resulting in an index for the given period expressed against the preceding period = 100); this is distinct from the fixed-base index, where the value of every period in a time series is directly related to the same value of one fixed base period.

This index type is called a chain index because individual indices with previous period = 100 can be chained together by multiplying (and dividing by 100) all consecutive indices, thus converting them into a series of indices with the first reference period = 100. This way, the consecutive values of the index numbers form a chain, as it were, from the first (reference) to the last period.

[OLDMDDEM]

3. ok

Did anyone else understand that?

[HiPointDem]

4. it means instead of using a constant basket of goods (baloney, milk and wheat bread) they can

substitute goods (cat food, powdered milk, and hard tack).

Chained dollars is a method of adjusting real dollar amounts for inflation over time, so as to allow comparison of figures from different years.[1] The U.S. Department of Commerce introduced the chained-dollar measure in 1996. Chained dollars generally reflect dollar figures computed with 2005 as the base year.

The difference between chained dollars and the previous measure, constant dollars, is that while the latter is weighted by a constant basket of goods and services, chained dollars are weighted by a basket that changes from year to year so as to more accurately reflect spending. The basket is an average of the basket for successive pairs of years.

The technique is so named because the second number in a pair of successive years becomes the first in the next pair. The result is a "chain" of weights and averages. [2] The advantage of using the chained-dollar measure is that it is more closely related to any given period covered and is therefore subject to less distortion over time.[3]

http://en.wikipedia.org/wiki/Chained_dollars

[Jim__]

6. You didn't understand that?

A chained index that is chained monthly always takes the previous month's price as 100% and computes this month's change based on that. So, February bases it's index on January's prices, March on February's prices, April on March's prices, etc.

An unchained index bases the rate , say the rate of inflation, on a fixed point in time, say January 2000.

So, say the price of a bushel of wheat was $10 in January 2000. Then, say in January 2012, the price of a bushel of wheat was $12. Let the price in February of 2012 rise to $13. The unchained index will give the inflation rate for wheat for that month as 10% - a $1 rise over a $10 base. The chained index will give the inflation rate for that month as 8.3%, a $1 increase over a $12 base.

[OLDMDDEM]

8. Got it.

I have never been one to criticize all that much what the Dems do in congress. But, if they allow the chained cpi to be used in calculating social security raises, then they are not worthy of their seat in office. Calculations should be made on the same scale as the "cpi" only. If, at the end of the year, the cpi says its 2.3%, then raises should be that. We have 535 reasons to be worried about what happens in congress. There are a handful of those 535 that you can honestly believe, i.e. Bernie Sanders is one. We are at a juncture where the Dems may win the house in 2014, but I think we need to take a look at our own representatives and make a decision if they best represent our interests or their interests.

[uponit7771]

7. CCPI = Speculate on the way consumers shop...if they're wrong....o f**kin well

[kelliekat44]

9. Because it "links" to other economic factors. nt