Fed Chairman Ben Bernanke even referred earlier this week to
inflation increases as “modest.”
Yet today we learned that, in fact, consumer inflation had risen
at the fastest pace in four years — at an annual rate of 3.6
percent.
Why the enormous disconnect?
The answer is that the government wants to decrease spending,
both in terms of Social Security payments and lower interest-rate
payments on Treasuries.
As we have often said on MoneyNews, we believe official U.S.
inflation figures are politically “cooked” to the downside. In our
sister publication, the Financial Intelligence Report, we have
described in detail how this is done.
[Editor's Note: Big
Government Lies Exposed.]
Let’s talk about the false, spin-doctored trail that we are being
led down by our government.
The first con is the so-called “core” inflation figure. A normal
person would think that “core” means basic staples. But our
government takes out key items, such as oil and food, which are
crucially important to consumers. Instead, these are included only
in the far less important sounding “headline” inflation figure.
The second disconnect between our government and us, the people,
is not just how the CPI inflation figures are calculated, but how
they are used in presentation.
We all know that items such as housing, autos, and certain
high-tech items such as flat screen TVs and computers are falling in
price.
But how many houses, autos, or flat screen TVs does the average
consumer buy in a year? Very few, right?
What most people miss, however, is that housing and autos added
together represent just under two-thirds of the total CPI number!
Is there any wonder then, that housing and autos, both in price
free-fall, are included in the “core” inflation rate and drag the
CPI down? (See chart.)
Meanwhile, key items like oil and food that are rising fast make
up very little of the CPI, a figure that increasingly bears very
little relationship to their actual content in the “shopping basket”
of most consumers. In addition, they are excluded from the
higher-profile “core” rate!
Just imagine, for a moment, if so-called “volatile” items such as
housing and autos, which we purchase only occasionally, were
excluded from the core CPI! And what if items which we buy
regularly, such as heating oil and food, were included?
[Editor's Note: Commodities
Are Still in a Bull Market. Get Our Top 6 Recos for the Coming
Year.]
The result would be a true inflation rate probably several times
higher than the fake figure now dished up to us by our government.
It may even reach the rate (as calculated before changes made under
the Clinton administration) of 7 percent — much more like the
present, effective rate of inflation, what ordinary people “feel”
buying everyday things now.
At that level, the Fed funds rate of 4.75 percent would be a
shocking negative 2.25 percent. As such, it would reflect the true
dimensions of the economic problems now facing us.
Talk about Houdini! The government statisticians who compile our
CPI and the politicians who spin it could go into the magic
business. If so, they would be enormously rich!
The fact that our U.S. dollar is plunging shows vividly that we
are not alone in our suspicion that our government is lying big time
about inflation. Our present interest rates are therefore falsely
low and inviting the dreaded “stagflation” effect of which we have
warned for many months.
Editor's Notes:
