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Why Lie About Inflation? Because It Covers Up Other Bigger Lies
More and more analysts are catching on to the fact that Government measures of inflation are phony. The US Government tells us that inflation, as measured by the CPI, is 0.8%. This is largely a work of fiction however as the actual cost of goods purchased by consumers has increased.
The US Government hides this fact by changing the CPI regularly to underplay the threat of inflation. One of the most famous examples is the decision to drop food and energy prices from directly impacting the CPI via a gimmick called “hedonic adjustments.” In simple terms, if food or gas prices jump 100%, the CPI won’t rise anywhere near that much.
The CPI rigging goes much further than this. The CPI also adjusts how it measures the price of homes and rents. So if home prices or rent prices jump substantially, the jump won’t show up in the CPI.
By way of example, think back to the summer of 2008. At that time, the price of gasoline was at an all time high with Oil priced at nearly $150 per barrel. Food prices were approaching records. And home prices were only 10% off their all-time highs.
At that time, the official reading for CPI was 4%. The US Government claimed that with gas, food and housing prices (the most basic essentials) all at or near all time highs, that inflation was just 4%.
Why do this?
Because by downplaying inflation you can overstate growth. All economic growth in the US accounts for inflation via a “deflator” measure. If GDP grows 3% and inflation was 2%, then real growth was 1% in very very simple terms.
By using a low CPI deflator, the Government can overstate growth dramatically. A great example is the fourth quarter GDP growth measure for 2012 which, if using an accurate inflation measure, would have registered over NEGATIVE 1%.
However, by using a phony deflator measure, the US got away with a 0.4% growth rate. And the media could proclaim that things are still positive, albeit not as positive as they were in the third quarter.
This is yet another reason why Governments and Central bankers will always downplay inflation. It’s also why you’ll never hear a Central banker warn that inflation is a problem.
However, by any reasonable measure, real inflation today is closer to 6%. Stocks love inflation at first, until their costs start to increase dramatically. At that point inflation is a REAL KILLER for the markets.
With that in mind, now is the time to be preparing for inflationary disaster.
We’ve just released a Special Investment Report outlining the threat of inflation to your financial well-being. It’s titled, The Inflation Secrets Your Broker Won’t Tell You and it outlines three HUGE secrets that 99% of the investment community don’t know about inflation.
These include
- The surprising industry that suffers as prices soar, despite being considered "inflation proof" by many investors...
- Which investment Warren Buffett loves even more than gold...
- Why U.S. Treasury Inflation-Protected Securities (or TIPS) don't work — and what investment could be your best alternative.
This Report is a $79 value, but we’re giving it away for free to investors today. To pick up your free copy, swing by:
http://gainspainscapital.com/the-inflation-secrets-your-broker-wont-tell-you/
Best Regards,
Graham Summers
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Back in 1973 my slalary was 12,000.00 per year. using the ShadowStats CPI calculator (subscription required) my salary today would need to be 267,774.12 to have the same purchasing power that we had back then. Dream on...LOL
ANYTHING & EVERYTHING that comes from the government is a total bullshit fucking lie.
Pretty much ALL the 'growth' claimed under W was inflation. BOTH parties have been complicit in manioulating statistics since Carter when it became clear that lying was a lot safer and easier than telling the truth.
Benefits the banks immensely as well. They're paying near 0 % in interest when they should be paying 7 or 8% (given that inflation measured by 1980 standards is just under 10%)
One step GDP creation mechanism: understate CPI
I don't disagree with this view...having said that equity markets are up 130% in just four years...and treasuries have been compounding 7% per year for about thirty years now. Simply put "where is the inflation relative to that?" and of course the answer is "no where." in Japan prices are DEflating...again...and in Europe real estate is now starting to buckle Continent wide. "short this thing at your own risk." if I've Gat a trillion in...ahem..."reserves"...with the Fed and they're paying me .25% "just for the pleasure of doing nothing with that money" then that's a LOT of firepower "to goose the exchanges withou creating even the whiff of inflation." and indeed "look at those suckers fly baby!" if you are going to create a bearish ARGUMENT then as far as I'm concerned "we need to pick up our game." this is not to say a correction isn't imminent. But to quote Darth Vader "the Emperor's patience is wearing thin."
Fortunately there is "shadowstats", where one can get data that are a bit more trustworthy.