A key assumption being, of course, that the inflation measure used (CPI?) represents the reality of inflation in some meaningful way.

A major BW article on the measurement of inflation, and the accuracy or lack thereof of the current measurements, would be a good thing.

Oy. I've been writing about the measurement and mismeasurement of inflation forever. I had a cover story back in November, 1994 entitled "The Real Truth About the Economy"
(http://www.businessweek.com/1998/35/z3397011.htm)
which talked about the bad CPI numbers.

Thanks. So what inflation indicator did you use for the chart above?

what's the real muni bond chart look like?

I believe the CPI is UNDERestimated. The argument that it doesn't take into account "improvement of goods" is sort of a red herring. If I need a car to get from point A to point B, then I have to pay what a car costs today regardless of how much nicer a 2007 Subaru is than a 1973 Chrysler. It isn't as though I can buy a car of 1973-quality and pay what it is currently worth; I have to pay $25,000 for a "transportation unit". Maybe that 2007 Subaru improves my quality-of-life - go ahead and adjust for improvements in a QOL index - but as far as inflation goes, the price has gone up 1,250% ($2000 to $25000) for a "unit of transportation".

My problem with this sort of chart is that it doesn't take into account taxes on dividends, which over the course of this chart have had some punitively high rates, especially for the higher tax brackets.

David--Just the straight CPI.

Brandon--The real issue comes with the introduction of new goods and services, i.e. the iPod or a minivan.

happyjuggler--no disagreement there. If you have your money in a 401K, though, you do get the full benefit of these gains.

That was really helpful, thanks!

An interesting article on inflation:
http://mises.org/story/2525

sure TODAY it looks OK; but for any of the nearly 8 years after Dec '06 it looked, in real terms, worthless. . . kind of a problem when those 8 years represent 10% of an entire avg life expectancy. . . maybe too difficult an interpretation for an Econ PhD? or was it an ideological propaganda PhD? :)

by the way, thanks for the chart---don't see this layout nearly enough

Here we are in January, 2009.
It's time to see an updated version of this chart!

Does my 10 year return still look "pretty good"?