Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

For most people, their greatest expense is housing. If you're a millennial, it's probably

avocado toast, but right after that housing. According to the Bureau of Labor Statistics, Americans spend

almost 40% of their take-home pay on shelter. This might lead you to ask, why aren't home

prices included in measures of inflation? And should they be? Inflation, as I'm sure you know,

is a measurement of changes in the overall price level of goods

and services throughout the economy. It's measured by comparing the current prices of a representative

basket of goods and services to their previous prices. That so far sounds pretty simple,

but it turns out to be a bit more complicated than you might

expect. The Consumer Price Index, or CPI, is the most widely used measure of inflation.

It's designed to measure price changes faced by urban consumers and is representative of the

inflation experienced by 93% of the US population.

It's an average though and doesn't necessarily reflect your specific experience.

We'll come back to this idea near the end of the podcast and we'll discuss how your experience of inflation might differ significantly

from the CPI.

Now we've seen huge government stimulus over the last year and a half relating to the global

pandemic, and this has brought about the broadest global house price boom in over 20 years

according to the financial times. It's also pushed up all sorts

of other asset prices, things like stocks, bonds, classic cars, cryptocurrencies, even

blue chip stocks like AMC and GameStop. A lot of commentators are arguing that there's way more

inflation occurring than shows up in the

CPI. You just need to take asset price inflation into account. They argue that if central

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