Inflation Fabrication

Is there inflation in the US? It seems that the price of everything has gone up over the years, especially the essentials. Many homes have more than doubled in price, the price of gasoline is going through the roof, and even the price of groceries seem to be going up.

What does it cost for a person to go to the movies? Is that the cable bill or a car payment?

Well, speaking of movies, the media, and make believe, the big disconnect for quite a while has been the official inflation rate (CPI). It is always announced by the media, with the full authority of the business reporter, and based on official government statistics. We certainly feel better when we hear that the inflation rate is somewhere between 0 and 3 percent. But somehow, it doesn’t make sense.

Of course if we take into account that many of the government’s costs are adjusted based on the inflation rate, there is no doubt that there is an incentive for the official government inflation rate to stay as low as possible. The cost of entitlements such as social security and government borrowing in the form of inflation–indexed bonds would go up if the official inflation rate goes up. It’s not in the government’s interest to let that number go up.

So on the surface, if it keeps government costs down, this artificial inflation number seems like a good thing. The problem arises when that number is passed on and used for other purposes, such as reality.

On this topic, here’s an article that goes into far more detail. It’s worth a read:

THE CORE RATE