Following our reality check about inflation last week, Schiff Gold looks at inflation "on the street", as opposed to government statistics, and finds nothing to cheer about.
Inflation is dead!
At least that’s what you would think if you listen to government officials and talking heads in the financial media.
So, how is this victory over inflation working out for the average person?
Not so great.
Based on official CPI data, price inflation has cooled somewhat, although it remains far above the Federal Reserve’s 2% target. That hasn’t stopped President Biden and most of the mainstream financial media from declaring victory over rising prices. Biden even suggested that companies should start cutting prices since inflation is falling.
It’s important to remember that even if we believe the government numbers and price inflation is cooling, that doesn’t mean consumers are getting any relief.
Prices are not falling. They’re just going up slower than they were six months ago.
And those price increases are cumulative. Since January 2022, prices have risen 9.7% based on the CPI. And the CPI is designed to understate rising prices.
In other words, we’re all still coping with much higher prices no matter what the latest CPI report says. And the suffering is far worse than sterile BLS reports indicate.
This becomes clear when we go out in the real world and stop listening to news people spouting government numbers ... real-life price inflation is far worse than the official numbers indicate.
There's more at the link.
The article goes on to cite the well-known example of inflation from the movie "Home Alone" - read it at the link if you haven't already heard it. Because it relies on official inflation rates, it obviously underestimates cost increases; but the numbers for the period 2022-2023 are much closer to the truth. The article points out:
In 2022, that same basket of groceries would have cost around $44.40 based on a shopping trip by a West Virginia mother. That’s a 123.9% increase. (Keep in mind prices vary somewhat depending on the store and location.)
This year, Kevin would have to fork out a whopping $72.28 for his provisions at a Chicago store. That’s another 62.8% increase in just one year.
62.8% increase in a single year? What was I saying earlier about a "mere" 30% inflation? I may have to adjust my estimate . . . Obviously, part of that enormous rise is the difference in prices between West Virginia and Chicago, but that can't begin to account for all of it. One year, and almost a two-thirds increase in the cost of the goods in question. Doesn't that make you feel all warm and fuzzy?
Why does the "official" inflation rate differ so much from what you and I experience every day at the supermarket? For a start, remember that in calculating the core CPI, economists deliberately exclude the cost of fuel and food. They claim there are good reasons for this; that by excluding them, they get a better picture of the overall cost of living without the elements that most often exhibit major fluctuations. I'm sure that's very nice for them. On the other hand, we poor schlubs in suburbia have to spend our money on what we actually need to keep our families running. I have yet to encounter any family that doesn't need fuel and food on a daily basis.
As for overall (rather than just core) CPI, economists have a nasty habit of assuming the value of certain things, or assigning a weighting to them, in proportion to what they consider a fair and balanced calculation. Sadly, their weighting often bears little or no relationship to reality. You can see the Bureau of Labor Statistic's weighting at this Web page, in the first column headed "Relative importance Oct. 2023". A few examples:
- "Meats, poultry, fish, and eggs" are weighted at 1.794 out of a total of 100; in other words, rounding it up, 1.8%. I defy any non-vegetarian American family to spend only $1.79 on those products, out of every $100 they spend on food every month. If you're lucky, that will buy less than half a pound of ground beef, or two-thirds of a single chicken breast.
- Motor fuel is weighted at 3.531. Show me the family that spends only $3.53 out of every $100 of their monthly budget on gasoline for the family car.
- "Medical care services" is weighted at 6.339. If that's a percentage out of every $100 spent by a family every month . . . see how big a single bottle of aspirin you can buy with that much. Go on. We'll wait.
When one cites examples like this, people immediately object, claiming that a "weighting" isn't the same as spending that much in dollars and cents every month. I (dis)respectfully disagree. Go read the BLS's spreadsheet for yourselves, and make up your own mind on whether it's even remotely possible that it can produce an accurate reading of consumer inflation. Compare its numbers to your own monthly expenditure. It's not pretty.
In so many words, the "official" rate of inflation is a sham, a fake, and a public lie.
Peter
14 comments:
Listen to me, I will tell you truth only, those are not American tanks behind me. And Nikki, my identity is available on application.
I was noticing the prices for furnace filters.
Last year, they were about $15 for a pack of two.
Now, they are close to $30. Same size, same brand, same MERV.
Liner bags for shop vacuums are another one - over $30 for a pack of three of them. Used to be about $10 a year ago.
These increases are everywhere - not as much for the big ticket items but the little peripheral stuff is eating us alive.
Inflation is low, except for people who buy gasoline or food.
Those poor sods are looking at 60+% increases.
Before Covid I could get meat packages at my butcher @5 for $25. Each package of beef, pork or chicken was about a pound. The price went up Two years ago. You then got @ 4 packages for $25. I went last week and it is now @ 4 packages for $28.50.
I'll seriously be cutting back on my purchases if it goes up any higher.
"Pay no attention to those costs behind the curtain!"
The Fed Gov has blatantly lied about the true inflation rate as !ong as I can remember...and I'm no spring chicken.
Yup, that is the inflation that I am seeing. HEB is desperately trying to keep the prices down but Kroger has given in to them.
All government numbers are false and not just for inflation. Anything they report that will show that the country is bad because of what the government is doing they are changing how they report it.
For example the unemployment numbers they have changed "the length of people on unemployment" to cut down the numbers. For gasoline costs they are using from the STATEGIC OIL PRESERVE, which is not suppose to be used and it causes the costs to be lower.
I am reminded of Chico Marx:
Who ya gonna believe? Me or your own eyes?
There is another way they can understate inflation. "Quality Improvements". Take a look at the inflation rate for motor vehicles over the last 30 years. It is close to zero, as they have gotten 'better' at nearly the same rate as their price increases. Around 1990, you could get a Toyota Tercel EZ for under $5k
Well the CPI has also shifted what and how it measures things. Using their old methods from say 1980 the inflation is a lot higher. Additionally they are tracking the past every time they release their info. What the current reality is many months and in some cases years out down the road from being accounted for. However how can things that are tracking generally higher like fuel costs not translating over directly to the food prices as they should? One has to ask
Formulas used to compute the official inflation rate are designed similarly to those used to compute temperature rise when studying/reporting climate change-- enough bullshit to skew in the desired direction.
The federal government has been playing games with the CPI for ages.
I think it's related to keeping Social Security costs down -- to hide the decreasing purchasing power of Social Security money or to justify a lower increase in the check.
@Sentenza - You are right, it's related to Social Security. But that is because the SS COLA is indexed to the rate of inflation, so they have to keep the "official" inflation as low as possible. Otherwise the Ponzi scheme of SS will go bankrupt that much sooner.
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