Ron Paul Exposes The Fed-Driven Erosion Of US Living Standards

Tyler Durden's picture

Submitted by Ron Paul via The Free Foundation,

One of the least discussed, but potentially most significant, provisions in President Obama’s budget is the use of the “chained consumer price index” (chained CPI), to measure the effect of inflation on people’s standard of living. Chained CPI is an effort to alter the perceived impact of inflation via the gimmick of “full substitution." This is the assumption that when the price of one consumer product increases, consumers will simply substitute a similar, lower-cost product with no adverse effect. Thus, the government decides your standard of living is not affected if you can no longer afford to eat steak, as long as you can afford to eat hamburger.

The problem with “full substitution” should be obvious to anyone not on the government payroll. Since consumers did not choose to buy lower-priced beef before inflation raised the price of steak, they obviously preferred steak. So if the Federal Reserve’s policies create inflation that forces you to purchase hamburger instead of steak, your standard of living is lowered. CPI already uses this sort of substitution to mask the costs of inflation, but chained CPI uses those substitutions more frequently, thereby lowering the reported rate of inflation.

Supporters of chained CPI also argue that the government should take into account technology and other advances that enhance the quality of the products we buy. By this theory, increasing prices signal an increase in our standard of living! While it is certainly true that advances in technology improve our standard of living, it is also true that, left undisturbed, market processes tend to lower the prices of goods. Remember the mobile phones from the 1980s? They had limited service, constantly needed charging, and were extremely expensive. Today, almost all Americans can easily afford a mobile device to make and receive calls, texts, and e-mails, as well as use the Internet, watch movies, read books, and more.

The same process occurred with personal computers, cars, and numerous other products. If left alone, the operations of the market place will deliver higher quality and lower prices. It is only when the government interferes with the operation of the market, especially via fiat money, that consumers must contend with constant price increases.

The goal of chained CPI is to decrease the government's obligation to meet its promise to keep up with the cost of living in programs like Social Security. But it does not prevent individuals who have a nominal increase in income from being pushed into a higher income bracket. Both are achieved without a vote of Congress.

Noted financial analyst Peter Schiff correctly calls chained CPI a measurement of the cost of survival. Instead of using inflation statistics as a political ploy to raise taxes and artificially cut spending, the President and Congress should use a measurement that actually captures the eroding standard of living caused by the Federal Reserve’s inflationary policies. Changing government statistics to exploit the decline in the American way of life and benefit big spending politicians and their cronies in the big banks does nothing but harm the American people.


And here is Ron Paul addressing - among other things - the counter-factual supporting the "but what would we do without them" argument for the Fed...


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USS Bernanke's picture

"Chained" consumer price index.  One can't help but notice the subtle subconsious/freudian associations these academics are formulating.

DaddyO's picture

Great comment coming from a ship, the USS Bernanke, that has run aground and is leaking fiat all over the shores of Liberty.


James_Cole's picture

The same process occurred with personal computers, cars, and numerous other products. If left alone, the operations of the market place will deliver higher quality and lower prices. 

The fact that the examples Paul cites are all heavily subsidized aside, there aren't indicators that the 'market place' will automatically deliver higher quality at lower costs. Take a couple of America's most famous brands, Wal-Mart & McDonalds, they're really delivering higher quality at lower prices? It's all a race to the bottom. 

Beam Me Up Scotty's picture

Its lower quality at lower prices.  Walmart is chock full of JUNK made from china.  Used to be you could buy a toaster for $20 and it would probably last 20 years.  Now you get the toaster today for $20 but it only lasts 2 years.  Same price right?  No inflation right?  But it lasts 1/10th as long.   So in reality that $20 toaster is really a $200 toaster because you need to buy 10 of them instead of 1.  Thats how they hide inflation too, in addition to that chained CPI bullshit.  Everything is built like shit to fail, so you have to buy more often.  Its a Paul Krugman/Keynesian wet dream!!

Bay of Pigs's picture

Funny you mention that Scotty. Just threw away a Black & Decker coffee maker that lasted 22 years. I will probably never see another one like it in my lifetime.

James Cole seems to be a gov't shill/troll on many subjects around here.

Ness.'s picture

Don't buy a keurig single cup coffee maker - they suck balls.  Work great for about 3 months - then it's done.  



akak's picture

I bought a $50 Bodum (about the only brand on the market) french press (a kind of coffee brewer) which broke on THE SECOND USE!  Looking more closely at it, I realized that the idiots who made the utterly and abominably cheap piece of shit had a threaded metal rod on the pressing part screwed into a threaded PLASTIC piece!  Threaded metal into threaded (thin) plastic?  I'm not an engineer, but even I would know that that is a recipe for short-term failure.

MillionDollarBonus_'s picture

Today’s article at the Accredited Times exposes the hypocrisy of radicals like Ron Paul and how libertarians are not only wrong, but dangerous:

willpoi's picture

MDB, Are you really as dumb as you sound?

akak's picture

As dumb, and even dumber.

Bay of Pigs's picture

He used to be kind of funny. Now, not so much.

Sadly, many Americans would consider that post to be taken seriously.

gmrpeabody's picture

So..., until the masses start starving to death, there is no food inflation.

Got it...

RSloane's picture

Oh dear, you have offended someone. +1 because I can.

Tapeworm's picture

Trav777 posted something with this in it and I busted a gut:

" We are ALL the same and from this sameness comes diversity that is our strength."

astroloungers's picture

It is satire......I saw trav777 was listed as a writer. I like how he trashes the first amendment while exercising it(make bad mouthing the fed a crime!). I'm thinking Onion or a frustrated Mad wannabe writer. Obamcare is making us a civil society ....really?

akak's picture

Today’s article at the Encrapulated Times exposes the hypocrisy of statists and sociopaths like, well, EVERY politician, and how parastical statists are not only wrong, but dangerous:'S-bullshit-exposed/

USS Bernanke's picture

Disinfo specialist designed to tear intellectual communities apart by creating fake paradigms and distractions from the real news stories?

monoloco's picture

This has got to be satire.

From MDB's link:


""What Can We Do About It


Libertarianism isn’t just another political view that can coexist with other political ideas. Libertarianism seeks to destroy other political ideologies entirely by attacking the foundations of our liberal democracy: our government. Without a state or central bank, other political ideologies have no tools with which to build a prosperous and equal society. Libertarianism simply has to be eliminated because it fundamentally cannot coexist with legitimate political ideologies.

There are a number of things that we can do to rid the world of libertarianism. The first thing we can do is to introduce laws against criticizing the Federal Reserve Bank of the United States of America. This is clearly an act of terrorism and cannot be tolerated in a modern democracy. Next, we can encourage the NSA to start profiling and monitoring the most influential libertarians. It’s important to make sure that libertarian views to do not get out of hand because before we know it, it might be too late. Lastly, something we as progressives can all do is continue to expose the underlying corporate interests such as the Koch Brothers that lurk behind almost every libertarian initiative. When the American people find out the corporateinterests are behind the many libertarian policy initiatives that were sold to them as selfless attempts to save the economy, libertarians will lose all credibility overnight.

We as progressives need to join together in a crusade against this bigoted and nihilistic ideology before it consumes our society. It is up to those with the vision and courage to eliminate libertarianism to do so now, so that our children have the opportunity to enjoy the fruits of our equal society just as we have."

J. Edgar Hoover, is that you? Joe McCarthy?

Jesus fucking christ, don't let those clowns see this or they'll start getting ideas in their heads. "introduce laws against criticizing  the Federal Reserve"? I bet they'd be all for that.


Beam Me Up Scotty's picture

MDB's posts aren't satire.  We all have thought that, but I think he's genuinely passionate about what he says.  This guy is a KOOK.

g'kar's picture

Another great TIC article MDB.

AurorusBorealus's picture

Your website is indeed very funny... Well done.

jomama's picture

what's hilarious is how monedas is running roughshod over the comments section there.

cramers_tears's picture

MDB, you went for a swim.          

We were really worried.

I was up all night pacing.

We're so glad you're back

kito's picture

akak, you dont need a coffee brewer. brew your coffee in a large pyrex glass measuring cup (4 cup one), cover it, sit for 4 minutes and pour into a small tea strainer. done. 

akak's picture

Thanks Kito, and you know, that very thought had occurred to me --- AFTER buying an all stainless steel, heavy-duty German-made french press.  At least this latest one hasn't broken yet.

Oldballplayer's picture

I got a nice 48 oz press at a little cafe in upstate New York.  I am going on four years with it now.  Takes five minutes to make the coffee and its the best I've ever had.  French press really is the best cofee. 


Those frenchies know about putting stuff in your belly.

Miffed Microbiologist's picture

Something make me think your wonderful press was constructed in China. But I tend to be a bit cynical. Hot water, metal and plastic together is not a good combination. At least you didn't scald yourself. Then AnAnonomous and others would get the last laugh.


akak's picture

Alas, alas, three scalding burns alas, just have to bear with the scars.

RSloane's picture

I had to finally dispose of an electric fry pan that I inherited from my mother. It was Farberware and had sixteen heat control settings. It was so beautifully balanced not only with heat but also in weight. I will miss it and doubt I can get an equal replacement for it. The name of the game now is designed obsolescence.

RafterManFMJ's picture

I shop Ebay for old well built stuff like that.

Bought some incredible cast iron pans off craigslist - they are older than I am.

spiral galaxy's picture

Ditto for an old Fridgedare refrigerator we inherited from my wife's mom.  Still humming along keeping the beers ice cold after some 40 - 50 years.  Meanwhile, the piece of shit GE super duper computer-brain-every-compartment-temp-and-climate controlled has cost us some $600 to replace electronics only after 6 years!

Other 'inflation' factors are the add-ons to new purchases.  E.g., you can add another $100 to your cell for shell covers, chargers, warranties, services, etc., etc.

Arthur's picture

I am on my third hamilton beech made, third party branded, coffee maker this year.  Sucker makes good coffee when it works but the 1st time a heating element failed and the 2nd time an electirc clock.   Easy return policy, clip the cord email thme a photo and you are done.

But what the @#$%  good design but lousy execution/build quality.

I live in an eight year old house, I just replaced six toliet flush mechanism as all were failing and have had multiple light switches start to fail.  Such junk.

 My foks have lived in the same house since 1970 and never had a light switch fail and maybe one one flush mechanism in all the years.   So much of todays manufacture is crap.  The one major exception seems to be the auto industry were quaility does seem to be a priority.

Don't get me started on chinese made light bulbs.

Trucker Glock's picture

You have six toilets?  I have two, unless you count pissing off the deck.  I only do that at night - I'm not a hillbilly.

youngman's picture

I have two decks..but sometimes I will piss in the day off of one if the wind is blowing the right way...singing in my best Jerry Jeff Walker voice

akak's picture

I would never want to live anywhere where I could not (discreetly) take a piss in my own backyard.

Quisat_Sadarak's picture
We ought never to do wrong when people are looking.

--Mark Twain


rpboxster's picture

Same here.  My n'hood is 7-9 years old.  The fix of the day?  Garage door coil springs.  I'm pretty sure the house I grew up in has the originals.  I'm waiting for mine to snap.  .... In a prior new n'hood, like clockwork, everyone's GE ranges started experiencing heating element problems--about 6 months to one year after the warranty.  I'm with you on the light bulbs, too.  I've never got close the 1000s of advertised hours out of any bulb in the last 10 years.

Intoxicologist's picture

"What's a toilet?"


akak's picture



I can remember reading a history of World War II, in which the author recalled an episode during or immediately after the Russian capture of Berlin.  A group of Russian soldiers was standing in the bathroom of an abandoned German house, puzzling over a strange, circular, water-filled porcelain contraption sitting on the floor.  After some experimentation and further discussion, they decided that it must be a device for washing potatoes.

Intoxicologist's picture

I perc my coffee on the stove.  I got sick of coffeemakers breaking every other year.

Nick Jihad's picture

For one cup, all you need is one of those plastic cones that sits on the cup and holds a paper filter. For two cups, buy two cones.

cowdiddly's picture

cowboy coffee:

One old blue granite coffee pot from the camping section at the local wally world to set on the campfire(cant find that damn strainer basket and tube). Place three or four heaping tablespoons of coffee in an old tube sock. Preferably one that you have not been deer hunting in for the last 12 hours, but, a man has to do what a man has to do. Fill the pot up with water, place on the campfire. As that rich coffee aroma hits your nose and mouth, think about about all the poor saps drinking boiled sawdust from the local convience store or worse yet 5 dollar a cup, taste like crap coffee from starbucks with whipped cream and cupcake sprinkles.

Stuck on Zero's picture

Example of chained substitution demonstrating zero inflation:

Year 1: BMW M6

Year 2: Ford Focus

Year 3: 1983 Accord

Year 4: Vespa

Year 5: Schwinn

Year 6: Used Adidas

Year 7: Bare feet


RafterManFMJ's picture

Year 9: You're giving a Chinese man a tour of LA; you're pulling him in your rickshaw.

A Nanny Moose's picture

In the snow. Uphill.....both ways.