A perfect illustration of why official inflation figures are simply not believable

 

I (and many others) have been saying for years that official inflation statistics are meaningless, bearing little or no resemblance to what you and I see every time we go shopping.  There are many reasons, but one of the contributing factors is that bureaucrats presume that consumers will substitute cheaper goods for more expensive ones if some prices rise.  (This may not always be possible, of course, but they don't care about that.  Their priorities are to portray the economy as their masters wish them to, not as it really is.)  They also use weasel techniques such as "chain pricing" to hide the reality of actual price increases.  According to Wisegeek:

A chain price index is a specific method of measuring changes in prices over time. It does not use a fixed reference point to express each figure as a percentage. Instead each period is expressed as a comparison to the previous period. A chain price index for easier at-a-glance reference and also allows for changes to the method used to calculate the prices.

. . .

Under this system, the price figure for each period is expressed as a percentage of the price figure from the previous period. In the $200/250/320 USD example, the first two year's index figures would remain as 100 and 125 but the third year would now be based on the second year, changing the index to 128. This makes it easy to see that the change from the second to third year is proportionally only very slightly above the change from the first to second year. The name chain price index comes from the fact that each comparison between consecutive periods can be chained together to make a consistent and comparable series of index figures.

There's more at the link.  Highly recommended reading if you've never encountered the concept before.  It's how the government pulls the wool over our eyes by not revealing the actual rate of inflation, as we'll see in just a moment.

In particular, a chain price index does not show actual price changes, but only proportional price changes.  It doesn't reflect the amount that comes out of your and my pockets when we buy something, but shows that as a proportion of what we paid the year before, or the decade before.  It's a neat way to hide actual dollars and cents.

Twitter user "Rudy Havenstein" points out (click any image to be taken to the Twitter thread):

The two Federal Reserve graphs shown in miniature above are reproduced below.  Click each one to be taken to its Web page.

That's the reality of "official" inflation figures.  As you and I know full well (from buying them), light truck and other vehicle prices have increased many times more than the Fed's graphs show . . . but they'll claim, with a straight face, that their graphs show reality better than our pocket-books, because they're "more accurately calculated" (or some such bull).

That's how the authorities are deceiving us, and that's why official figures about the economy are simply not trustworthy.

Peter