Thursday, March 14, 2024

Inflation: A better measure, but still too low


I've been saying for years (as have many informed commenters) that the "official" rate of inflation has about as much relation to the facts as I do to Mata Hari.  It's massaged, manipulated and mangled until it bears little or no resemblance to the actual costs all of us are paying "on the street".  A year and a half ago, I said that the effective rate of inflation for our family (based on actual sales receipts, what we were paying for goods and services) was now over 30%.  Late last year, Karl Denninger said much the same thing about what he was experiencing.

Tipp Insights has just prepared its own measure of inflation, based on the official figures, but removing much of the manipulation from them.  It's still not high enough, IMHO, but it's more reliable than the government numbers.

The government's Consumer Price Index (CPI), released on Tuesday, showed a 3.2% year-over-year price increase from February 2023 to February 2024.

. . .

We developed the TIPP CPI, a metric that uses February 2021, the month after President Biden's inauguration, as its base to measure the rate of change. All TIPP CPI measures are anchored to the base month of February 2021, making it exclusive to the economy under President Biden's watch.

What is the motivation behind the TIPP CPI?

The BLS CPI rate doesn't accurately capture Americans’ inflation struggles. The official BLS CPI year-over-year increases will compare prices to already inflated bases in the coming months, and these statistics could mask the full impact. Further, the media and some economists frequently use the low CPI rate to present a rosy economic outlook supporting Biden’s policies.

In contrast, the TIPP CPI rate offers a clearer understanding of Americans’ economic challenges under President Biden. We use the relevant data from the Bureau of Labor Statistics (BLS) to calculate the TIPP CPI, but we adjust the period to Biden's tenure. When discussing the TIPP CPI and the BLS CPI, we convert the index numbers into percentage changes to better understand and compare them. CPIs are like index numbers that show how prices affect people's lives, similar to how the Dow Jones Industrial Average reflects the stock market.

Bidenflation, measured by the TIPP CPI using the same underlying data, increased to 18.0% in February. It was 17.3% in January, 16.6% in December, and 16.7% in November.

There's more at the link, including useful charts to make it easier to understand the situation.  Recommended reading.

So, there you have it:

  • The "official" rate of inflation is 3.2%;
  • Shadowstats estimates it as plus-or-minus 12%, based on 1980's statistical norms;
  • The Chapwood Index measures city-by-city rather than nationally, but is pretty close to Shadowstats;
  • TIPP CPI measures it as 18.0% as of last month;
  • Karl Denninger and myself are experiencing it, based on our own specific purchases, at 30%+ every year.
Decide for yourself who you want to believe - but check your own shopping lists and receipts first, to see what the reality is according to your wallet and bank account.  The numbers might surprise you.

(Oh - and note that the non-official figures range from 4x to about 10x higher than the official rate of inflation.  If every one of them is that much higher than the bureaucratic figure, I think the reality is clear.)



Paul Chappell said...

Weird, giving unelected bureaucrats who have a vested interest in what a number ends up being calculated the ability to determine how that number is calculated and the ability to secretly change this determination and then "adjust" it later has caused "issues"... Who could have foreseen this?

lynn said...

Yup, that is about what I am seeing. I am expecting inflation to be a minimum of 15% per year for the next ten years. Hold on, it is going to get rough.

tweell said...

Who are you going to believe, the government or your lying wallet?

Paul said...

Too bad we can’t get the guy the Argentines elected to come up here and run the USA. Sound like he is doing good stuff down there.

JustPeachy said...

3% my arse.

We are scrambling to get out of our lease and into something permanent before the lease comes up for renewal again. The way rents are heading in our area, there is no possible way we don't get the rent hiked on us, and we can barely afford it already. There is nothing cheaper unless we lie about having kids, and try to sneak everybody into a 1br duplex.

4 months. In this real estate market. God help us.

If we can't find something, it's gonna be either living out of our car, or moving our family of 5 into my parents' garage. Can't buy a decrepit trailer around here for less than $150k right now.

Anonymous said...


"A $22 burrito? San Francisco restaurant owner says he's keeping up with inflation

"The only problem is, the price of nearly everything he uses to make his food has gone up. Like onions for example.

“Before COVID, they were like $9 a sack at Restaurant Depot, I used to pick them up. During COVID, and after, it was $40 dollars. Right now, it’s $80,” said Lopez."

Old NFO said...

It's sure as hell NOT 3.2... 18-20% is much more accurate.

Eaton Rapids Joe said...

An understanding of The Rule of 72 is fundamental to being economically literate.

To estimate how long it will take for your dollar's buying power to be reduced by 50%, take the actual rate of inflation and divide it into the number 72.

At 3% inflation it takes approximately 24 years of a dollar to lose half of its buying power. At 7% it takes 10 years. At 10% it takes 7 years. At 20% inflation it takes 3.5 years.

At 20% inflation, the dollar bill in your pocket loses 3/4 of its buying power in seven years and almost 90% of its buying power in ten years.

Compound interest can be a cold, hard bitch.

Beans said...

One of the main reasons the Government isn't reporting the actual inflation is that Social Security increases are tied to the reported rate of inflation.

Of course, the other main reason is that even idiots and leftists (Venn diagram, big overlap) would realize how badly the nation is doing.

Mike Hendrix said...

There are lies, damned lies, and (government) statistics, yet again.

Aesop said...

Two restaurants I frequent (neither one with a drive-thru) both raised their prices this week 10% across the board.
That's obviously a combination of food price increases, and labor increases in Califrutopia. Packed in there somewhere are also increased taxes and energy costs, both for power and gasoline/diesel as transport costs.

We've seen this before.
Jimmy Carter called it a "malaise".

You can call it anything you like, even a "potato", but it's double-digit inflation.

My guesstimate is it's still running 20% year-over-year, and no end in sight.

As a direct function of the increasing worthlessness of fiatbux, and the skyrocketing printing to cover the deficit when interest on it goes from 0% to 6% in three years.

"The problem with socialism is that eventually, you run out of other people's money." - Margaret Thatcher

"The problem with fiatbux is that eventually, you run out of zeroes." - Weimar/Zimbabwe/Venezuela, three-way tie

Xoph said...

If you own a home, buy ahead for repair items, especially those not made in the USA. Product of USA does not mean made in USA, only packaged here. Buy ahead if you can on consumables, like shoes. You can't get 15% in the bank, better to buy ahead if you can.

Inflation won't end until the gov't quits printing money like a demon AND credit must tighten, interest rates need to go up by a lot. Loans are another way of printing money. Since there is no end in sight stock up on consumables.

Anonymous said...

I talk to people who say "When prices get back to normal". They can't grasp that the prices are not going to drop. They get confused by the concept that inflation is going to drop. That $15 big mac will still be $15 plus whatever the inflation is. It's another way of describing a form of compound interest.