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DOWDALL LAW OFFICES A PROFESSIONAL CORPORATION ATTO R N EYS AT LAW City Council of the City of Santa Ana City of Santa Ana September 16, 2021 Page 8 1. John Williams, a U.S. economist, described his view of this manipulation when interviewed. Williams prefers a CPI, or inflation measure, calculated using the original methodology based on a basket of goods having quantities and qualities fixed.; 2. David Ranson, another U.S. economist, questions the official CPI's viability as an indicator of inflation. Unlike Williams, Ranson doesn't espouse the viewpoint that the CPI is being manipulated. Instead, his view is that the CPI is a lagging indicator of inflation and is not a good indicator of current inflation. According to Ranson, increases in the price of commodities are a better indicator of current inflation because inflation initially affects commodity prices, and it may take several years for this commodity inflation to work its way through an economy and be reflected in the CPI. Ranson's preferred inflation measure is based on a commodity basket of precious metals. (http://www.investopedia.com/articles/07/consumerpriceindex.asp) What is immediately apparent is that three different definitions of the CPI are being used. Since these definitions are not operationally equivalent, each method of measuring inflation would lead to different results. Why CPI is not enough to approximate the changes in rent to maintain a fair return and the avoidance of a confiscatory effect: The CPI excludes from consideration, "real estate."' ... it excludes investment items, such as stocks, bonds, real estate, and business expenses... The CPI therefore excludes the most relevant items of concern to the operation of investment real estate. If that number is parsed to some fraction, then, the allowance is not for inflation, it is an arbitrary number having no basis to the facts as between one decision is better than another. It is inherently arbitrary if the entire CPI, as denuded as it is, is not awarded. - a lower inflation rate makes the economy look better than it really is. In other words, if the true rate of inflation is higher than the CPI as the government calculates it, then an investor's real rate of return will be less than originally expected, as the unplanned amount of inflation eats away at gains." a Bureau of Labor Statistics, Handbook of Methods, 6/2015 at page 2: "Excluded goods and services. The CPI covers the consumption sector of the U.S. economy. Consequently, it excludes investment items, such as stocks, bonds, real estate, and business expenses. Life insurance also is excluded for this reason, although health, household, and vehicle insurance are in scope. Employer provided in -kind benefits are viewed as part of income. Purchases of houses, antiques, and collectibles are viewed as investment expenditures and therefore excluded. Gambling losses, fines, cash gifts to individuals or charities, and child support and alimony payments also are out of scope. Changes in interest costs or interest rates are now excluded from the CPI scope, although some were in the CPI for many years. And, for practical reasons, the CPI excludes illegal goods and services and the value of home -produced items other than owners' equivalent rent."