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Comment by mojoe | Hacker News Reader

~12 billion inflation-adjusted, but your point stands.

How do you work out 'inflation adjusted' numbers? I've always wondered.

The Fed provides estimates on the devaluation of the dollar over time. You'll find all sorts of other well known institutions and individuals that provide their own formulas however. The spectrum is pretty wide, from those that agree with the Fed's numbers, to people that think the Fed is intentionally significantly understating inflation.

Though it must be said that the latter are cranks who are impossible to take seriously if you look into their claims - basically an MBA who went off the rail with conspiracy theories...

Not just cranks. There are quite a lot of choices as to how you calculate a price index and politics can easily enter in to which choice is taken. I'm not so up on the US index but the UK one tends to weight everyday stuff like the price of a loaf of bread in the supermarket but try coming to London and going to a trendy restaurant and staying in a nice hotel and you'll find those have gone up well above the official rate of inflation.

It's actually (almost certainly for historical reasons) the U.S. Bureau of Labor Statistics (BLS) who compute inflation measures, particularly the CPI, but also PPI (consumer and producer price indices, respectively).

http://www.bls.gov/data/inflation_calculator.htm

It also probably makes sense for the Fed not to compute its own inflation index, as its mandate is to manage inflation (and unemployment). Managing a statistic you control might lead to unintended consequences.

Classic approach would be:

You have an inflation rate (measured through a time series of Consumer Price Indices) for a given timeframe and an initial amount of money. Multiply it.

It's just to compare purchasing power over time.

Expanding with an example... Really you just want to use the index itself. It represents (in theory) the amount you'd pay for a basket of goods.

So say, for example, the Index was at 240 in 1992, but today that same index is 360. So for £100 of 1992 money in today's terms you'd do:

360/240 * 100 = £150

Essentially you just want the ratio of prices for the basket of goods.

That's a great example, thank you. Where do I find the index numbers you refer to? I've googled, but stats are really not my strong point.

Assuming you're in the US, you could look here: http://www.bls.gov/data/#prices

More information here (https://en.wikipedia.org/wiki/Consumer_price_index), including info about the appropriate US index to use.

Here's a quick overview, along with a calculator:

https://www.measuringworth.com/calculators/uscompare/

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