Your government in Washington lies to you about inflation

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Have you noticed how the government published inflation numbers (consumer prices index, CPI) shows very low inflation while your personal experience is a very different one – namely that prices go up and up all over the place? What is the reason?

The CPI is calculated excluding food and energy. Coincidentally these two things are driving up everything in my very own life. What would the real inflation rate be if you add back everything the government takes out?

This is the work of the Bureau of Labor Statistics (BLS). The BLS has been working to portray the U.S. economy as strong and inflation free. They manipulated the CPI inflation numbers in various ways.

By contrast, in European countries inflation is calculated including food and energy. Since energy has become more expensive worldwide, the USA’s CPI falsely shows a lower inflation rate than the Euro zone.

The BLS itself describes it as:
"Effective with the calculation of the seasonal factors for 1990, the Bureau of Labor Statistics has used an enhanced seasonal adjustment procedure called Intervention Analysis Seasonal Adjustment for some CPI series."

When and why did the government decide to change the formula for inflation?

In the early 90’s during the Clinton era the government in Washington realized it had a problem with rising costs for Social Security, Medicare, and government pensions. The amount of these payments was set up to match the annual inflation rate and they could not afford to have them rise with the rising cost of food and energy. Of course the government could’ve tried to bring the inflation rates down instead of rising social security payments. But instead of actually changing import tariffs, subsidies, taxation or interest rates they chose the way of statistical manipulation. By simply redefining the meaning of inflation they lowered the numbers and thus avoided high payments.

Besides the CPI there are other indexes to watch e.g. the chain-weighted price index for personal consumption expenditures (PCE) and the Wholesale Price Index (WPI).

Oh and finally, what is driving inflation? Oil prices are a big part of the story, but not all of it. Other commodity prices are also rising. For the USA, the Dollar’s loss of value against the Euro will show effects in the near future.

If you want to see the government's inflation, you may use their calculator:
http://data.bls.gov/cgi-bin/cpicalc.pl

Comments:

2007-08-31, 00:39:57

ghettodude@gmail.com from Colorado Springs, United States

Inflation is mainly caused by creating too much money. The Federal Reserve does this mainly in response to the demand for money from the government, which spends far more money than it has, and the banking industry, which demands new money to service new loans. The insidious 'fractional reserve banking system' then mulitplies the amount of newly created money by a factor of 100 once it filters through the banking system, creating even more demands for new money. The result is an exponentially increasing supply of money (lots of paper bills and magnitudes more in computer numbers) chasing after a relatively stable supply of goods, the effect of which continually pressures prices upwards. The only reason we don't have hyperinflation yet (it is coming) is that the dollars have been flowing out of the country much faster than they have been coming home for redemption in real assets. You see, our government has a clever scheme to encourage foreign banks to keep a large reserve of dollars on hand, which has allowed us to create lots of money without getting burned by massive inflation. The foreign banks act like a sponge, soaking up all that excess money (remember the crates of US money that Saddam stashed away that our troops found?). That con is almost up, as foreign banks are now saturated with dollar reserves, and as the dollar loses value, the foreign banks are going to dump their dollars back into the market while they still have some value, and those dollars will find their way home to the USA. That's when our economy collapses and the dollar becomes what it has been since 1971 -- a piece of paper backed only by consumer confidence. Except this time, the confidence will be gone, the con will be up, and the dollar will be a completely worthless piece of paper with no purchasing power in sight.

2007-10-31, 19:07:47

anonymous from Cincinnati, United States

Happy days are here again?? Will any economic strategy avert your scenario?

2008-01-10, 02:43:25

anonymous from Netherlands

There are not enough trees to make paper for printing dollars. Your inflation is skyhigh and the value of the dollar is less than the price of that piece of paper where it is print onn.Is the USA becoming a developing country? Martin

2008-01-10, 05:49:31

anonymous from United States

Is this some kind of news flash for you? Our Government lies about everything to the U.S.! Where have you been living, Nigeria?!

2008-02-14, 16:23:29

anonymous

our goverment sucks

2008-02-14, 19:43:20

anonymous from Netherlands

Ours too!!!

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