www.shadowstats.com and the rule of 72

Enough with the stock market! How about a change of scenery - CPI!!! Known as inflation in some circles. The website, www.shadowstats.com, is obviously conspiracy theory-ish, but what fun would it be without?? Let me get to the point. In that website, the author is saying that CPI/inflation is really more around 9% per year. That leads to the following I got in an email:

"Wish you had a way to predict what homes will cost in the future?

  1. Take the inflation rate (for example 9 percent) then divide into 72 [72/9 = 8]. This means at the current rate of inflation prices will double in 8 years. Let’s say you want to know an approximate value of a property if you held it for 16 years instead…the entire amount would double again. For example, if you purchased a short sale property for 100k then it could double to 200k in 8 years and reach 400k in 16 years. Of course these are estimates since some years go up much faster than others…"

So, every 8 years, huh? There are lots of houses built 100 years ago. I happened to find a cost of a house in 1896:
Granted, it is from Quebec, but it will have to do unless someone can find a more accurate price for houses from the 1900’s. Anyways, that house cost $2,817.35.
With 112 years to work with, and doubling every 8 years, that’s 14 doublings until the year 2008:
$180,310.40 ← this is in 1944

If anybody here knows how to sell a house from the 1900’s for $46 million, please, I need to know your sales secrets because I know of hundreds of them that are currently being offered for less than $100,000.

Anyways, this exercise was kinda for my own self-awareness. I come across graph after graph being sales pitched by numerous people about the exponential qualities of house price increases over time. I deduced from common logic quite a while ago that house prices don’t continue to increase forever. I had just never put it onto “paper”. Enjoy!


Looks like the CPI is a dominating factor in the math. If you take a 3% CPI instead of the 9% the value will double every 24 years…

1896 2,817
1920 5,635
1944 11,269
1968 22,539
1992 45,078
2016 90,155

As for inflation, 6 months ago we bought a small microwave oven at Wal-Mart. It cost $34.00.

It broke 3 months ago and we bought a second identical one for $38.00.

We just replaced it again (it has to fit a very small shelf) and now it is $44.00! Fortunately under warranty again.

We are looking for a space-saving microwave/refrigerator combo. Or maybe a trash can/microwave combo. Just kidding…

Also the Tuesday night Kentucky Chicken special has gone from $1.99 to $2.29. Everything is going up here.


The problem with the math is that the CPI increases are not linear. There were years where the CPI went down. What was the CPI doing during the depression?