Lies, damned lies, and inflation fudgery

 

Two years ago I postulated:

We've seen in the past how reliable private sources such as Shadowstats and the Chapwood Index have consistently estimated the true inflation rate to be between three and four times higher than the official numbers.  I believe them.

Therefore, here's a suggestion, based solidly upon historical economic reality.

To know the true rate of consumer inflation in the USA, take the official rate declared by the government and multiply it by 3½.  The result will be much closer to reality.

There's more at the link.

I've done that since then, and found nothing to make me think my 3½x adjustment factor was out of line.  Now, courtesy of a link at the 357 Magnum blog, we note that a German report has found that inflation in that country is running at 5.6x the official figure!  Here's a Google Translate transcription.

Official inflation figures are around 10 percent. But many citizens notice in their everyday life: Prices are rising - in the supermarket, at the gas station - much faster!

The true inflation is much higher: That's why there is now the inflation radar from Pleiticker.de - you can find this updated daily on our homepage. We have calculated price developments in the areas that really matter: housing, energy and basic foodstuffs. With the latest figures, inflation there was a whopping 56.3 percent over the past year - and 11.6 percent over the past week alone. For the average net income of a German household (€3,600), this means a loss in value of €1,296. This is mainly driven by the increase in energy costs. The price of electricity has risen by an unbelievable 344 percent in the past year.

The official figures, on the other hand, are hardly meaningful: The figures from the Federal Statistical Office are significantly lower and not very meaningful for the reality of people's lives for two reasons: On the one hand, it includes hundreds of products in its "shopping basket" that are not at all decisive for the everyday life of most people - such as the price development of home cinema systems, surfboards, services from domestic staff or a visit to the opera. 

On the other hand, the price shock for electricity and gas only becomes visible in the Federal Statistical Office's inflation calculator with a long delay - because instead of the market price, the current consumer price is used, which reflects even more favorable market prices from the past. The real market price only reaches the end consumer with a delay.

Again, more at the link.

Friends, no matter where you live, do not trust official figures about inflation and the economy.  Most particularly, do not base your current and future economic decisions and actions solely on official figures, because they are lying to you.  They're tweaked and fudged and massaged to produce the result that politicians want you to believe, not what's actually happening on the ground.  They're a sham, and a fake, and a public lie from beginning to end.

I don't know a single country whose official inflation statistics are fully trustworthy in the current economic climate.  I can't put it any more clearly than that.

I think that, for the USA in general, my 3½x adjustment factor still holds good.  However, by this time next year, the way things are going, it may be woefully out of date.  I won't be surprised if I have to increase it soon.

Peter