Inflation Actually Near 10% Using Older Measure

[Winehole23]

After former Federal Reserve Chairman Paul Volcker was appointed in 1979, the consumer price index surged into the double digits, causing the now revered Fed Chief to double the benchmark interest rate in order to break the back of inflation. Using the methodology in place at that time puts the CPI back near those levels.

Inflation, using the reporting methodologies in place before 1980, hit an annual rate of 9.6 percent in February, according to the Shadow Government Statistics newsletter.



Since 1980, the Bureau of Labor Statistics has changed the way it calculates the CPI in order to account for the substitution of products, improvements in quality (i.e. iPad 2 costing the same as original iPad) and other things. Backing out more methods implemented in 1990 by the BLS still puts inflation at a 5.5 percent rate and getting worse, according to the calculations by the newsletter’s web site, Shadowstats.com.


“Near-term circumstances generally have continued to deteriorate,” said John Williams, creator of the site, in a new note out Tuesday. “Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem. Until such time as financial-market expectations catch up with underlying reality, reporting generally will continue to show higher-than-expected inflation and weaker-than-expected economic results in the month and months ahead.”
http://www.cnbc.com/id/42551209

[Wild Cobra]

Don't most people already know this? Probably not the figure, but the fact...

[Winehole23]

I knew inflation calculations have been tweaked a few times since the 1980s. What I didn't know was how high inflation is now using the old calculations.

[coyotes_geek]

So was there merit behind changing the formula? Or is this just a case of fixing the formula because we didn't like the result?

[RandomGuy]

So was there merit behind changing the formula? Or is this just a case of fixing the formula because we didn't like the result?


To be sure, the BLS argues that the changes it has made over the last three decades more accurately reflect a true change in the cost of living. For example, in response to its hedonic adjustments, the BLS web site states, “to measure price change accurately, the CPI must be able to distinguish the portion of price change due to this quality change.

Still, going by recent strong comments from Federal Reserve officials, even members of the central bank must believe inflation is being underreported. Dallas Federal Reserve President Richard Fisher said in a speech last week that the central bank was reaching a “tipping point” as far as changing its policy so it can react to inflation. Maybe Fisher stumbled across Shadowstats.com. The voting member did, after all, mention Volcker in the same speech.

“The need to break the back of that (budgetary debt) spiral is as dire now as was the need for Paul Volcker to break the back of inflation in the 1980s,” said Fisher on April 8th. “As a result of his steadfast determination to press on with exorcising inflation, Mr. Volcker is today among the most respected living Americans and widely considered an exemplar for public servants worldwide.”

I would guess so.

Based on the quick search I did, there is no dearth of information on the subject, yikes.

[Winehole23]

More the latter I would think, but I'd like to hear the rationale.

[Parker2112]

I would guess so.

Based on the quick search I did, there is no dearth of information on the subject, yikes.

Your face looks great in eggyolk yellow, RG :toast

[Cant_Be_Faded]

They have been tweaking the formula to sugar coat the numbers from the start. One only needs to be a human being that spends money in america to realize inflation is far higher than any of the bull shit numbers from the government.

[CosmicCowboy]

If all your money is going for fuel, energy, and food, it's totally irrelevant that that new 65" LCD TV now sells for what a 42" did last year keeping the CPI low.

[Cant_Be_Faded]

If ten bucks bought ten pounds of high quality steak one year, and the next year ten bucks buys ten pounds of low grade ground beef, they do not consider that i price increase by some of their measures. Even if it costs twenty bucks to buy that high quality steak now. They substitute lower goods at a same price level.

[CosmicCowboy]

If ten bucks bought ten pounds of high quality steak one year, and the next year ten bucks buys ten pounds of low grade ground beef, they do not consider that i price increase by some of their measures. Even if it costs twenty bucks to buy that high quality steak now. They substitute lower goods at a same price level.

Actually, as I understand it, cost of food is completely excluded from the calculation.

[Cant_Be_Faded]

If all your money is going for fuel, energy, and food, it's totally irrelevant that that new 65" LCD TV now sells for what a 42" did last year keeping the CPI low.

That's a good point. In regards to electronics, a classic bull shit comment is how prices have gone down as technology improves. One thousand dollars buys a hundred times more computing power today than twenty years ago, for example. Its complete bull, because we have no ability to spend thirty bucks on a brand new lower computing device. We still have to spend that thousand. Yet they tell us the devices are cheaper.

[Winehole23]

Last time inflation was this high, Volcker ratcheted interest rates up to 20% to kill it. No one's got the guts for that now. They ain't about make Fisher or Hoenig Fed Chairman.

[Winehole23]

Actually, as I understand it, cost of food is completely excluded from the calculation.I've heard that too. Too volatile.

[Wild Cobra]

If all your money is going for fuel, energy, and food, it's totally irrelevant that that new 65" LCD TV now sells for what a 42" did last year keeping the CPI low.

That's just one of several problems with the CPI used. I see some mention food. Food is significant. I've said it before, and I'll say it again.

Why do people get all worked up with fuel price increases when food increases are more over the long term?

Is it because they get food stamps, but not fuel stamps?

[Cant_Be_Faded]

Actually, as I understand it, cost of food is completely excluded from the calculation.

from CPI and other measures like that, yes. But what i said applies to the separate numbers tracking food for consumers. Can't remember their proper names. The point is, every measure of price increase the government tracks is designed to mask that price increase. Inflation numbers, and specific goods numbers.