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Is Inflation Understated?

Tyler Durden's picture


Submitted by Shane Obata-Marusic (@sobata416),

It’s ironic that in a day and age where Keynesian economics is the “accepted view” we still don’t pay enough attention to what Keynes said about inflation.

"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some... Those to whom the system brings windfalls,...become "profiteers," who are the object of the hatred... the process of wealth-getting degenerates into a gamble and a lottery... Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

Keynes On Inflation

The problem today is that some people believe inflation is lower than it actually is.

The Consumer Price Index CPI is used to measure the cost of maintaining a certain standard of living. Now it measures the cost of maintaining a certain level of satisfaction.


In reality, the purchasing power of the consumer dollar is tanking and the prices of many goods, services, and assets are increasing in price. The end result is that the consumer is suffering. By creating incredible amounts of money, the central banks of the world are debasing the currencies that they issue. In other words, the value of all of existing dollars is reduced when new dollars are supplied.

This is translating to a lower quality of life for more Americans. When one examines real median household income – which was down to $51 ,000 in 201 2 from $56,000 in the year 2000 – this becomes evident.

Before we continue, let’s make something clear. The year over year rate of increase in inflation has been in a downtrend for some time. Therefore, it’s reasonable to conclude that disinflation is a real risk.

That said, because of the presence of the central banks, it’s unlikely that deflation will become a real problem.

The CPI affects the economy because cost of living adjustments to social security, federal civilian and military retirement, and supplemental security income are tied to it. It’s also used to index income tax parameters, TIPS, and some federal contracts.

If the CPI is so important then why does it understate inflation?

That question brings us to the government’s “inflation dilemma”. The US government has 1 of 2 choices: either it can 1 ) mislead its citizens by understating inflation or 2) release accurate inflation data thereby increasing social benefit obligations. This is a lose-lose situation because, unfortunately, both choices only serve to perpetuate an already insurmountable debt problem.

So why is it important to know that inflation is understated? Because, as Keynes said in the opening quote, inflation is essentially a means by which wealth – in the form of real assets such as real estate, businesses, stocks, and bonds - is transferred from the poor and the middle class to the rich. As asset prices inflate, the rich get richer. This allows them to purchase even more assets. At the same time, the poor and middle class become worse off because they have fewer assets and more debt.

Due to the fact that the CPI understates actual inflation, low and middle income individuals are struggling to keep up with the rising costs of living. As a result, more and more people are relying on the government for support.

Inflation is only “low” because of how it’s calculated. Since the 1980s, the US government has made many changes to how the CPI is calculated. These changes have resulted in an index that no longer accurately represents how expensive it is for people to live.

The Way The Politicians Wanted It


In the early-1990’s, political Washington moved to change the nature of the CPI. The contention was that the CPI overstated inflation (it did not allow substitution of less-expensive hamburger for more-expensive steak). Both sides of the aisle and the financial media touted the benefits of a “more-accurate” CPI, one that would allow the substitution of goods and services.


The plan was to reduce the cost of living adjustments for government payments to Social Security recipients, etc. The cuts in reported inflation were an effort to reduce the federal deficit without anyone in Congress having to do the politically impossible: to vote against Social Security. The inflation-calculation changes had the further benefit to government fiscal conditions of pushing taxpayers artificially in to the higher tax brackets, thus increasing tax revenues. The changes afoot were publicized, albeit under the cover of academic theories. Few in the public paid any attention.


Federal Reserve Chairman Alan Greenspan and Michael Boskin, then chairman of the Council of Economic Advisors, were very clear as to how changing or “correcting” the CPI calculations would help to reduce the deficit. As described at the time by Robert Hershey of the New York Times, “Speaker Newt Gringrich, Republican of Georgia, suggested this week that fixing the [CPI] index, with its implications for lower spending [Social Security, etc.] and higher revenue [tax bracket adjustments], would provide maneuvering room for budget negotiators...”


John Williams'
Shadow Governement Statistics

The Boskin Commission estimates that the cumulative effects of a 1% bias (to the upside) would have added 1 trillion dollars to national debt in between 1997-2008; clearly, this was an incentive to lower the reported state of inflation.


If the CPI understates inflation then why is it so widely used and referred to? Probably because it’s accepted as “the best measure of inflation that exists”.

In terms of measurement, the CPI has 3 main problems: 1 ) hedonics, 2) substitution, and 3) understated costs.

1 ) Hedonic Adjustments are meant to account for changes in the quality of goods and services. The concept of adjusting prices for changes in quality makes sense. That said, the process is too subjective and is far from perfect.

Some examples:

New computer features were deemed quality improvements, with downside price adjustments made in the CPI for the changes, even though a consumer may not have wanted or used the features


The consumer still had to buy those features and pay full cost out-of-pocket, irrespective of what the government determined those products were generating in purported hedonic quality benefits that the consumer was not considering or using.


John Williams'
Shadow Governement Statistics

More issues related to subjectivity:

  • where does a good stop being a variety of a given product class and become a product on its own? – ex: Toyota corollas and Toyota camrys.
  • when it comes to a good or service’s characteristics, who’s judging their utility? The consumer or the producer or both?
  • how can someone accurately determine the “quality” of novel or intangible items?
  • what if the ratio of prices does not = the ratio of qualities?


  1. if an old product is discounted and a new product is introduced at an unusually high price
  2. if an item is introduced into the market at an unreasonably low price in order to induce demand and then subsequently increases in price during a return to normal market conditions
  3. when a new item is not comparable to an old item

and one final comment on inflation:

The take away point here is not that hedonics is a bad concept but that a lot of subjectivity is involved in calculating hedonic adjustments. I t’s a conflict of interest for the Bureau of Labor Statistics (BLS) to calculate the CPI because it’s in the government’s interest to lower social benefit payments. As a result, the BLS’s inflation data are questionable.

2) Substitution may reflect changes in consumption patterns. That said, the concept of substitution invalidates the CPI as a measure of the cost to maintain a certain standard of living. Ex: if Bob eats steak every day for a year but is then forced to switch to chicken because of rising beef costs then it’s plausible to think he’s maintained the same level of utility. That said, one cannot argue that he’s maintained the same standard of living if he’s forced to substitute steak for a lesser alternative.

BLS introduced: More frequent re-weightings of the CPI index from every ten years to every two years, which moved the CPI closer to a substitution-based index, but the change was not considered a change in methodology.


BLS introduced: On-going re-weightings of sales outlets (discount/mass-merchandisers versus Main Street shops), also moving closer to a substitution-based index and creating other constant-standard-of-living issues.

3) If the BLS was actually trying to measure the cost of home ownership then their measure of housing inflation – the Owner’s Equivalent Rent (OER) – would include property taxes, maintenance costs, and insurance. The next best option would be to use the actual price of home. The OER is even less realistic as it measures “how much someone’s house would rent for monthly, unfurnished and without utilities.

“the problem with this hypothetical approach to measuring a significant portion ofCPI is obvious at best. At worst, it’s somewhat disturbing in today’s information age where actual home price data are readily-available at the mere stroke of a key. The “corrected” CPI measure clearly failed to predict an incredible amount of home price inflation which ultimately led to the biggest housing bubble in the history of the world.”

A lower OER leads to a lower CPI . This in turn leads to lower rates which lead to an even lower rate of growth in OER; it’s a negative feedback loop. What’s more is that the OER is the single largest component of the CPI"

The CPI also fails to reflect higher costs in other areas such as energy, tuition, medical care, and food and beverages. Here is a chart that demonstrates how the CPI underestimates inflation:

Lastly, it’s important to the note that the CPI doesn’t include taxes - which have grown from 5% in 1 91 3 to over 30% in 201 3. I t doesn’t make sense that the CPI doesn’t include such a significant expense. Thus, the CPI is flawed as a measure of maintaining a certain standard of living.


The following section will examine multiple alternative measures of inflation. I t is not that any or all of these measures are perfect, it’s that the actual rate of inflation is higher than the CPI says it is. As a reminder, at its current levels, the CPI indicates that inflation is running at around 1% year over year.

1 ) Shadow Stats:

According to Shadow Stats, the CPI understates inflation by around 3% and 7% for the 1990s and 1980s based shadow stats alternatives respectively.

CPI Year-to-Year Growth The CPI -U (consumer price index) is the broadest measure of consumer price inflation for goods and services published by the Bureau of Labor Statistics (BLS).

While the headline number usually is the seasonally-adjusted month-to-month change, the formal CPI is reported on a not seasonally-adjusted basis, with annual inflation measured in terms of year-to-year percent change in the price index.

In the charts above we show two SGS-Alternate CPI estimates: One based on the pre-1990 official methodology for computing the CPI -U, and the other based on the methodology which was employed prior to 1980.

2) Chapwood index:

In 2012, the average inflation rate for the top 30 cities – ranked by population – was approximately 11% - or more than 3x higher than what the CPI was.

3) The EPI (Every day Price Index):

As you can see in the following chart, the CPI and EPI tracked relatively closely until the early 2000s. At that point in time, the 2 measures began to diverge. Since 1 987, the EPI and CPI have increased by approximately 1 40 and 1 1 0 percent respectively. In other words, the EPI suggests that cumulative inflation from 1 987 to the present is 30% higher than the CPI would suggest.


Inflation is higher than the CPI says that it is and most people are aware of that. I f you ask your friends and family whether or not they’ve noticed a general increase in prices then they’ll say yes. As noted above, both food and beverages and energy costs have risen in price dramatically. Why is that important? Because the majority of people are exposed to one or both of those costs on a regular basis.

You can argue the magnitude of the inflation understatement but you can’t argue that the official numbers are accurate.

Under reporting inflation has led to many predictable outcomes.

Americans are accumulating debt, reducing their spending, relying on government transfers, and searching for yield because the cost of living is going up.

A repressed CPI also has many effects on the financial markets.
1) It provides justification for artificially low interest rates and QE
2) It leads to the perception that the USD is holding its value and
3) It leads to overstated real returns in stocks and especially bonds

In conclusion, inflation is the means and a wealth transfer from poor and the middle class
to the rich is the end.

Don’t be fooled by people who claim that there’s no inflation.

Although disinflation is – at present – a real risk, cumulative inflation is still drastically reducing the consumer’s purchasing power.


Source: Triggers (via @sobata416)


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Mon, 01/06/2014 - 17:34 | 4305574 DavidPierre
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Economist John Williams thinks 2014 will mark the beginning of hyperinflation.

“You are going to see, early on, a crisis in the dollar that will start to trigger the inflation . . . as the inflation picks up, that’s going to savage the economy, which is already in a depression.  It never recovered.” 

Forget what you have heard about the so-called recovery. 

“The consumer is in trouble.  There is nothing happening to turn the economy around.”  The weak economy is bad news for the dollar. 

“Anything that would suggest deficit deterioration here, and a weak economy would do that, will have a devastating impact on the dollar.”  And if foreigners start selling some of the 12 trillion U.S. dollar based assets, such as bonds and currency, things will turn ugly fast. 

“We’re dependent on the rest of the world continuing to go along with us and continue to support the dollar.  That’s not going to happen.”  So, the big question everyone is asking is when will the buck take a hit in value? 

The dollar will likely begin selling off before the middle of this year, and he adds, “It’s really going to be a currency panic . . . when the fundamental selling pressure really starts to pick up, when the selling gets heavy . . . in turn, the weakness will be seen in a spike in oil prices and a spike in gasoline prices.” 

There will be a panic out of the dollar and he predicts,

“Once you see a massive sell-off here, I see the game as being over.”

Mon, 01/06/2014 - 17:40 | 4305587 DaddyO
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SO does disinflation = deflation? Inquiring minds want to know...

Here is a link to John Williams and his inflation warnings(I posted in response to DP in another thread)


Mon, 01/06/2014 - 18:03 | 4305647 gmrpeabody
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Do you seriously expect us to believe that the government would be misleading us with tampered data, Tyler?

Oh, wait...

Mon, 01/06/2014 - 18:22 | 4305680 BigJim
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I think that once you take into account the massive and ongoing increase in the price of living, there's very little inflation.

Maybe even none!

Mon, 01/06/2014 - 20:18 | 4306059 akak
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As ZH poster JimmyJames has repeatedly reminded us, constant inflation-adjusted prices prove that there is no inflation.


(And if JimmyJames does NOT work for the BLS, then I would suggest that he is a perfect candidate for the position of official BLS spokesman.)

Mon, 01/06/2014 - 20:31 | 4306107 A Nanny Moose
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Mon, 01/06/2014 - 21:20 | 4306249 Musashi Miyamoto
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Miniplent, add choco rat 20g. - me doubleplusluv. Big Brother doubleplusgoodperson. BB feed minis, party, proles. Oceania undie.

Mon, 01/06/2014 - 21:28 | 4306284 Caviar Emptor
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You cannot get hyperinflation in an essentially deflationary construct. Hate to contradict J. Williams. We'll have biflation at every twist and turn, with demand destruction and overcapcity keeping inflation in check. 

Mon, 01/06/2014 - 22:16 | 4306454 Boris Alatovkrap
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Boris is like this word, "bifurcate"!

Mon, 01/06/2014 - 20:17 | 4306061 boogerbently
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"Understated" ????

I love it !

Is that like obama "misspoke" on obamacare ?

All the data is there....everything but the admission of guilt.


It's for the "Greater Good".

Mon, 01/06/2014 - 22:18 | 4306460 Boris Alatovkrap
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"Is inflation understate?"

Does Ursus Americanus defecate in boreal forest?

Mon, 01/06/2014 - 21:16 | 4306236 rubiconsolutions
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About 20% more than last year -

Mon, 01/06/2014 - 17:44 | 4305599 Buckaroo Banzai
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Yeah, I'm a big fan of John Williams but I'm not sure I see this dollar hyperinflation thing happening anytime soon. As terrible as the dollar is, everyone needs them, everyone uses them, and there is nothing to replace them given how horrible every other currency is. King Dollar is still the best looking horse at the glue factory.

Mon, 01/06/2014 - 17:49 | 4305609 Spungo
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"As terrible as the dollar is, everyone needs them"

This is no longer true. Lots of countries have worked out trade agreements so their currencies are directly convertible without using US dollars. The rest of the world no longer needs to have US dollars for international trade. Even the petrodollar is dying because China and Russia have Iran's back, assuring that any US lead invasion of Iran would result in global warfare.

Mon, 01/06/2014 - 18:37 | 4305724 OutLookingIn
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The "Golden Rule"

They who have the gold, make the rules.

As soon as China has all the gold it can lay it's hands on at this cheap price, then we kiss the US dollar global hedgemony goodbye. All those bucks in worldwide circulation will come flooding back home. Guess what happens when that happens? Can you say hyperinflation? I knew you could!

Whats that you say? China would not let that happen because it would make their dollar holdings worthless? News flash; China will put it down to the 'cost' of having their yuan take the place of the USD. Simple.

Mon, 01/06/2014 - 21:43 | 4306293 Dewey Cheatum Howe
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Yeah or we could kill the FED and have the Treasury start issuing silver backed notes. That would throw a serious monkey wrench in everyone's plans.... It might buy the US another couple of years of world dominance as far as being the currency of choice.

Silver always worked better as a currency than gold anyways....

Mon, 01/06/2014 - 21:45 | 4306352 akak
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Good idea.

Just one problem --- where are they going to get the silver?

Mon, 01/06/2014 - 21:56 | 4306391 Dewey Cheatum Howe
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Buy it on the open market, mine it, recycled silver etc. There is a lot more silver than gold out there. It may not be worth as much but that is the point is an accepted monetary metal and plentiful enough to float a USD backed by it to restore confidence in the currency.

Mon, 01/06/2014 - 22:31 | 4306504 akak
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But if the government is already not only bankrupt, but deep in the debt hole, where and how are they going to buy thousands or millions of tonnes of silver?  And you do realize that ALL the silver mined annually in the world only amounts to around 15 billion dollars at current prices, less than 1/5 of what is currently being printed/created by the US Federal Reserve per MONTH in their QE program alone?

I am not trying to be gratuitously argumentative or contrary here, as I would LOVE to see the scenario you outline be implemented.  I just think that we are far, far past the point where it could be done.

Tue, 01/07/2014 - 09:50 | 4307636 Dewey Cheatum Howe
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Old fashioned government decree of confiscation with the promise to pay it back later on. There are a lot of old I-phones out there. Think of the economic stimulus that goes along with it when people have to replace all them electronics for example. You'd have to phase it in concurrently with the FED still being alive and printing but at the same they are neutered from doing any more damage with monetary policy.

What debt can't be paid, won't be paid. The only question is there a major war over it with the losers being forced into servitude for another 100 years or do we try something different this time and repudiate the onerous portions, hit the reset button to avoid a world of Greeces.

Mon, 01/06/2014 - 21:14 | 4306230 falconflight
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Last figure I read was 58% of the trade transactions were in dollars.  That's down from 67% five years ago.  Bi-lateral currency swaps are being announced worldwide involving the Yuan.  Russia and China just signed a huge gas/oil agreement denominated in their currencies.  Saudi Arabia is the wild card in terms of how long they'll con't to back the PetroDollar.  The US Gov'ts foreign policy, i.e. Syria and Iran, seem to be pushing the Saudis to fundamentally reassess their relationship w/ the US.  They have announced this publicly on more than one occasion.  Let the Kingdom fall, and watch how fast the PetroDollar flames out.

Mon, 01/06/2014 - 21:24 | 4306261 akak
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Uh oh, don't tell it to Jon Nadler or anyone on CNBC!

Oh no, in their eyes, "the US dollar is forever!".


(Of course, nowadays, for most of the lemmings out there, "forever" equates to approximately " sometime next year".)

Mon, 01/06/2014 - 21:33 | 4306305 Spanky
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Lots of countries have worked out trade agreements so their currencies are directly convertible without using US dollars. -- Spungo

Note the recently announced (2013) Chinese / Euro currency swap... Not to mention a Chinese / Russian agreement to price oil and gas independently of the dollar. Those are cracks in the dam... and leaks are springing up all over.

Mon, 01/06/2014 - 18:24 | 4305698 BigJim
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 Yeah, I'm a big fan of John Williams but I'm not sure I see...

Yeah, I agree with most of these more 'doomer' pundits (Rogers, Faber, Williams, etc) on everything except timing.

At least Rogers admits he's a 'terrible' market timer... I seem to recall Williams has been talking about the USD's 'imminent' collapse for quite the while now.

Mon, 01/06/2014 - 20:19 | 4306071 dick cheneys ghost
Mon, 01/06/2014 - 21:44 | 4306332 caShOnlY
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As terrible as the dollar is, everyone needs them, everyone uses them, and there is nothing to replace them given how horrible every other currency is

Once that dollar becomes toxic to the holder it is game over.   Although many have made side currency agreements in trade most of the CBs hold dollars as "collateral" in reserves.  When that collateral begins to deoriate it must be exchanged for a more stable collateral.   See China and gold buying? who holds the most USDs? .........  

Most think that they cannot leave the dollar quickly, I beg to differ.  History shows that inside the nations whose currency collapsed there was turmoil but black markets and alternative exchanges took place.  This can happen on on a global scale, without a doubt.  In the ghettos of the US the laundry detergent TIDE is being used and a currency exchage for drugs. 

The FED has gotten off easy in creating 4 trillion (*cough*) in "air money".  When Canada, the biggest benefactor of trade with the US, starts complaining you know it's bad.  I don't think this game can continue for another decade, let alone another 2 years.

Mon, 01/06/2014 - 17:54 | 4305620 Sudden Debt
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well, that would mean a hyperbollic stockmarket so it won't hurt to buy some call on the indexes just to make sure!

Mon, 01/06/2014 - 18:26 | 4305700 DOT
DOT's picture

Have a beer on me, SD, and let us know when to sell.  BATMFH!

Mon, 01/06/2014 - 21:20 | 4306252 BeanusCountus
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First, thanks for the beer. Second, like any of this is a surprise? That beer i drank, unless i am now swilling PeeWater Blue Ribbon (not a reflection on Pabst, just a metaphor) it has gone up more than the stated inflation rate. A lot more. We will be left to an index that has us all eating franks and beans, bark, rabbit you raise in your basement and drinking fukishima bottled water. Cause its product replacement and FDA approved.

Mon, 01/06/2014 - 18:19 | 4305683 yogibear
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The Fed seems bent on triggering massive inflation rather than having deflation.

The fed will get much more inflation than they bargined for.

The government will just hide it. A game that goes on until people can no longer afford to live the lie and there is mass protests in the streets.

Good reason for the Fed to have their own bankster goon squad with fire power. So  the banksters can mow down the masses when the masses have had enough of the BS.

Mon, 01/06/2014 - 18:39 | 4305731 DaddyO
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Central Bankers fear deflation like the plague!

In Bernanke's writings on Depression 1.0, he specifically outlines deflation as the major culprit in fomenting the collapse.

The FED has a 100 year history of inflation, why would they stop now and why would they allow deflation to spoil an otherwise perfect record?


Mon, 01/06/2014 - 20:30 | 4306103 centerline
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The question here is "can" they stop it - and without crashing anyhow.  Realistically - no.  They can't.

My guess... EU pops.  Perhaps Japan goes with them.  USD spikes - kicking all the "dollar is dead" folks in the nuts just like the goldbugs.  Foreign investment here will be nuts and it will seem like a real recovery (except for food and energy prices continuing to suck).  Heck, that trend is already happening.

Anyhow, we get a couple of years at most and then the capital reverses.  It will be our turn.  The USD tanks.

You can bet on more bank issues along the way too.

Watch for an engineered bail in, and takedown of the TBTF banks BY THE FED.  Sheeple will be cheering.  Justice is served, right?  We are at ZH will know better though.  The maniacs in Washington will have even greater powers by then and will be unhindered by Wall Street after the takedown.

At some point shortly thereafter, pensions, muni's, etc. really start rolling over as the public sector goes into freefall.  What Washington does from there is where your hyperinflation starts.


Mon, 01/06/2014 - 21:24 | 4306262 skeeterpi
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I agree with you completely.



Mon, 01/06/2014 - 23:48 | 4306802 DaddyO
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Plausible scenario, however where does the social unrest play into your outline. At some point in the not too distant future, either the FSA goes haywire or the FSA benefactors say enough is enough and bam, it blows up.


Mon, 01/06/2014 - 18:38 | 4305730 AbelCatalyst
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Until debt is significantly lowered, deflation will lead the way because any new dollars go towards paying down debt...  and every dollar of debt destroyed means less dollars (and the dollar rises in value which is deflationary)...

I don't doubt we'll get to higher inflation (and the complete destruction of the $), but it's not until we have a healthy, uncontollable bout of deflation (which will begin to destroy debt via default).  It is then that the printing goes into overdrive which leads first to even more debt being destroyed (and the velocity of money dropping even more), which THEN leads to inflation (which will show up very quickly as the abundant supply of dollars will have no where else to go)... As long as dollars have a place to R.I.P. (debt destruction), then they will not significantly manifest themselves in the economy (hyper-inflation)...   

Mon, 01/06/2014 - 18:46 | 4305751 OutLookingIn
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Rates will spell the doom.

The new debt created will go to service the old debt via higher interest rates.

Vicious circle. Dancing around with NO chars. When the music stops? You get the picture.

Mon, 01/06/2014 - 19:46 | 4305963 AbelCatalyst
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Agreed. As the deflationary pressures begin to assert themselves and asset prices begin to drop people will flee to treasuries... Rates will get down near 1%... Then the tide will turn and your prediction will be acurate... Rates rising uncontrollably after the deflationary shock will mark the end...

Mon, 01/06/2014 - 17:38 | 4305583 Shizzmoney
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The CPI also fails to reflect higher costs in other areas such as energy, tuition, medical care, and food and beverages.

So they just don't account for, life, essentially.

In that case, then yes, no inflation.  iPads for all!

Mon, 01/06/2014 - 20:38 | 4306120 A Nanny Moose
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Prices dropping for iPads, Laptops, Bewb Jawbz, (and housing ca. 2008-2010), etc., while prices increasing for food, energy, medical, and edewjayshun.


Viola...2% inflation.

Mon, 01/06/2014 - 21:18 | 4306243 gherman
gherman's picture

Ready to take on the plutocrats...


Mon, 01/06/2014 - 17:38 | 4305584 Umh
Umh's picture

Financial repression is a tried and true method to reduce government debt. You can try to play along and hope to do the same, but it's risky.

Mon, 01/06/2014 - 18:06 | 4305656 LMAOLORI
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We have a winner with that statement.  What amuses me about this article below is financial repression for the masses has been going on since the Fed started QE


1930s-style debt defaults likely, says IMF research


"The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists."

Ernest Hemingway, Notes on the Next War: A Serious Topical Letter

from a pretty good letter to the editor...

Another Voice - Inflation and the Federal Reserve



Mon, 01/06/2014 - 17:46 | 4305595 Ms. Erable
Ms. Erable's picture


1lb. Ribeye (2010) $4.25; (2014) $7.99.

1/2 gal. Ice Cream (2010) $3.79; (2014) 1.75 quart: 3.99

1lb. coffe beans (2010) ~$6; (2014) .75lb $6.50.

This isn't the inflation you're looking for. You can go about your business. Move along, move along!

Mon, 01/06/2014 - 18:16 | 4305673 gmrpeabody
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Face piles of trials with smiles...

It riles them to believe that you perceive the web they weave...

Moody Blues, well college anyway.

Mon, 01/06/2014 - 17:45 | 4305600 LawsofPhysics
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"In other words, the value of all of existing dollars is reduced when new dollars are supplied." - 


If, in fact, those "new dollars" were actually being supplied to the middle and lower classes, I would agree.  In this case, they are not, which will only make this a revolutionary-style inflation as the average american will run out of cash/money extremely fast when the levy does finally break...

"Those who make peaceful revolution impossible will make violent revolution inevitable.

John F. Kennedy

Mon, 01/06/2014 - 17:45 | 4305602 JustObserving
JustObserving's picture
Is Inflation Understated?

Yes, by at least 4%.  Than means the US economy has been shrinking every quarter since 2008.  US GDP growth of 3.6% in the 3rd quarter was actually a dip of 0.4%.  But since when did truth matter in US economic statistics? Remember, they enhanced the employment numbers to get Obama reelected?

Mon, 01/06/2014 - 20:42 | 4306135 A Nanny Moose
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Accounting for unbacked currency emmission (debt), the economy has be shrinking since about 1950.

Sure the nominal amounts were smaller relative to today, but that's the way exponents work.

Tue, 01/07/2014 - 01:24 | 4307011 jerry_theking_lawler
jerry_theking_lawler's picture

ahha....but what about all of the .gov growth as compared to GDP? The GDP is what really matters isn't it? If you fake a good GDP number then you can SPEND away in the .gov.....

Mon, 01/06/2014 - 17:45 | 4305603 A Lunatic
A Lunatic's picture

Simple fix. Outlaw food and beverages..........

Mon, 01/06/2014 - 18:16 | 4305678 LMAOLORI
LMAOLORI's picture

Let them eat cake :)


or some fake meat like they put in taco bell since the theory is you will substitute lol


Pricey Beef Is Set to Test Appetites


"U.S. cattle prices jumped to a record Friday, setting up a fresh hit of sticker shock for consumers at the grocer's meat counter.

Meatpackers this past week paid the highest cash prices on record for live, slaughter-ready cattle in the major producing states of Kansas, Nebraska and Texas. That led traders to bid up futures prices, which already had been rising as retailers increased beef purchases for the holidays and the meat industry grappled with tight cattle supplies after prolonged drought in parts of the U.S. Great Plains.

Analysts said the higher cattle prices likely will be passed along to U.S. consumers in the next few months. That would boost fresh-beef prices at retail that surged to a record $5.014 a pound in November, according to the U.S. Department of Agriculture, a 26% increase over five years ago."

Mon, 01/06/2014 - 18:35 | 4305713 DOT
DOT's picture

If only McDonald's would switch to the new i-meat they could hide a wage increase for all their workers.

Although the price of a quarter pounder would go to $8, the dis-inflationary adjustment would benefit all Americans.

Mon, 01/06/2014 - 20:44 | 4306082 akak
akak's picture

McDonald's just needs to switch to virtual meat ... and we can all pay for it with virtual money, like bitcoins.

Mon, 01/06/2014 - 20:42 | 4306139 A Nanny Moose
A Nanny Moose's picture

Let them eat 0'Bamacare.

Mon, 01/06/2014 - 17:48 | 4305604 surf0766
surf0766's picture

The only why they were able to keep printing in the late 90's was by instituting the recommendations of the comission.

The GOP congress and Dem president were responsible for this.

Mon, 01/06/2014 - 17:51 | 4305608 max2205
max2205's picture

Or is interest rates under stated?

Mon, 01/06/2014 - 21:45 | 4305733 Crash N. Burn
Crash N. Burn's picture

"Or is interest rates under stated?"

 Interest rates, at this point, are simply another fraud.


"The interest rates set by these central banks are nothing less than obvious acts of fraud, themselves, when viewed through the prism of Time. For the last forty years, there has been zero correlation between the credit ratings of the most-esteemed credit rating agencies in the Western financial system and the interest rates set by these central banks.

For those not statistically inclined, “zero correlation” means no causal connection of any kind. The same credit ratings which cause automatic, knee-jerk reactions in nearly every other Western market, have had no impact at all on Western interest rates for forty years. With these credit ratings derived from the economic fundamentals of the economies themselves; the interest rates set by these (corrupt) central banks have had no connection to actual economic fundamentals for (at least) the last forty years.

The endemic, systemic interest-rate fraud of these central banks has never been more blatant than it is today. With all Western economies objectively less-solvent than at any time in our histories; these central bank fraud-factories have permanently fixed interest rates at the lowest rates in history.....


...The epicenter of central bank interest rate fraud is the United States, and the Federal Reserve – which recently celebrated a Century of Shame. Here we have maximum interest rate fraud: an interest rate permanently frozen at 0%. This is, by definition, an act of fraud: giving away money, by the $trillions – but only to the Big Bank tentacles of the One Bank.

Compounding this fraud; these Big Banks are then allowed to “deposit” large chunks of the free money electronically-transferred to them by the Federal Reserve, and be paid interest on it, on $100’s of billions of this fraudulently “loaned” money....


...But while at the top Big Banks are “loaned” money for free, and then paid interest on the gifts; interest-rate fraud works in exactly the opposite manner for all the Little People on the bottom. For them; they are paid (virtually) zero interest on their savings – but charged relatively usurious rates of interest on their debts.

Fundamentally bankrupt governments (offering zero “collateral” for their debts) can borrow money by the $trillions, in 10-year bonds, at roughly 2 – 3%. So why do securely employed individuals borrowing money to buy secured assets like homes and automobiles have to pay much higher rates?"

Interest Rate Fraud

Free money for them and debt slavery for everyone else.

Mon, 01/06/2014 - 17:52 | 4305614 Atomizer
Atomizer's picture

Is Inflation Understated?

Why not give ‘quant king’ James Simon a run for his money? Let’s bet he will lose all his money after we expose the code being used to manipulate the present Global markets?

James Simons – MIT Mathematics

If we felt as a joke, we could use this technology against the very XXXXXXXX firms using it to steal money today. Re-read that last sentence.

Mon, 01/06/2014 - 18:00 | 4305632 Hulk
Hulk's picture

Does my mother in law smell like mothballs ???

Mon, 01/06/2014 - 18:02 | 4305653 AGAU
AGAU's picture

Does a one legged duck swim in circles?

Mon, 01/06/2014 - 18:06 | 4305659 Hulk
Hulk's picture

Is a one legged woman named Ilene ???

Mon, 01/06/2014 - 18:12 | 4305663 AGAU
AGAU's picture

Does Janet Yellen have a pair of balls?

Mon, 01/06/2014 - 18:16 | 4305675 Ying-Yang
Ying-Yang's picture

Is a frog's ass watertight?

Mon, 01/06/2014 - 18:21 | 4305690 BigJim
BigJim's picture

I've got some friends who were born in France... I'll ask them.

Mon, 01/06/2014 - 18:51 | 4305769 OutLookingIn
OutLookingIn's picture

Is a one legged man named Peg?

Mon, 01/06/2014 - 19:00 | 4305793 Temporalist
Temporalist's picture

Is the NSA spying on Congress? -Bernie Sanders

Mon, 01/06/2014 - 20:55 | 4306151 akak
akak's picture

Does AnAnonymous shit on the roadside?

Mon, 01/06/2014 - 21:48 | 4306211 akak
akak's picture

I might have suspected so, but clearly AnAnonymous never takes a dump without doing so on a US 'american' flag, a US 'american' citizen, or some other US 'american' object.

Alas, alas, three swipes of the dunghand alas, just have to bear with it.


PS: Is it just a coincidence that this video is posted on "LiveLeak"?

Mon, 01/06/2014 - 22:08 | 4306426 TheFourthStooge-ing
TheFourthStooge-ing's picture


Is it a coincidence that such a video is posted on "LiveLeak"?

Does the presence of numerous videos on liveleak displaying the quaint charms of AnAnonymystical Chinese citizenism, and the dearth of such videos on youtube, indicate that google is trying to cover up something?

AnAnonymous at the ATM

AnAnonymous in Beijing

Lo Po Po (wife of AnAnonymous)

If your human nature leans toward flush toiletry, sanitation, you are penalized in Chinese citizenism.

If your human nature leans toward roadside crapping, fishing for river pigs, you are favored in Chinese citizenism.

I possess hopes with extravagant sincerenesty that all can bear with it, because the way it is is that.

Mon, 01/06/2014 - 22:35 | 4306524 akak
akak's picture

"Lo Po Po"

LOL with extreme blobbing-up forcefulness in the shaking dangdang of the US 'american' fundament!


PS: Your other commentalizings were extraanius.

Mon, 01/06/2014 - 21:32 | 4306300 edb5s
edb5s's picture

Does Dolly Parton sleep on her back?

Mon, 01/06/2014 - 19:15 | 4305847 AGAU
AGAU's picture

Sorry Janet

Mon, 01/06/2014 - 21:34 | 4306307 logicalman
logicalman's picture

Is a woman with only a single tooth called Juanita?

Mon, 01/06/2014 - 18:00 | 4305636 adr
adr's picture

Inflation is everywhere, just not counted. Even though you can buy a 60" TV for $700, which the government counts as deflation, the components inside keep going further down in quality. The new video processors in current cheap TVs are garbage, so what you watch on TV looks worse. Like substituting horse meat for USDA Prime beef.

The best gauge of inflation is the cost of fast food. Average prices at McDonalds, Wendy's, Burger King, Taco Bell, etc are up 30% from a few years ago. In the case of some menu items the price has increased 45% in a year.

Big Mac meal is over $6 many places. The McDouble was $.99 now it's $1.35. Single hard taco at Taco Bell is $1.45, the things used to be $.50 a decade ago. Wendy's and Burger King kept some burgers at $1 but there is almost no meat inside. Wendy's dollar burger looks like the one from their old Where's the beef? ad campaign.

One of my favorite brewed iced tea with real sugar is up $1 per gallon. I could buy the crap one with HFCS for $2, but I'd rather not.

Cars are insane. A frickin mid level Civic costs more than a fully loaded Accord did ten years ago.

Mon, 01/06/2014 - 18:01 | 4305649 negative rates
negative rates's picture

Cheesesburgers are still cheap though, so it all evens out.

Mon, 01/06/2014 - 18:23 | 4305685 NIHILIST CIPHER

ADR       Know how much a gallon of unleaded gas was when Obozo took office?  $1.69   That's inflation in my book. They don't count energy prices or food prices in the CPI.....majick 101.

Mon, 01/06/2014 - 19:50 | 4305965 DaveyJones
DaveyJones's picture

another "food" way to measure inflation is nonfast food 

watch the rapidly decreasing food units for the same price. 

and of course the food is not really food anymore, mostly poison:

"The U.S. Department of Agriculture has begun to fast-track the approval of genetically modified crops under a new policy aimed at cutting the time it takes on reviews from an average of 3 years down to 13 to 16 months.

To jump-start the process, they've opened a 60-day comment period on nine new GMOs. This list includes a new Dow Chemical soybean that tolerates three herbicides, including 2,4-D. 2,4-D is the herbicide that was half the formula of the infamous chemical weapon Agent Orange, used to decimate Vietnamese agriculture during the U.S. war on Vietnam.

As Tom Philpott points out in his recent article, "USDA Prepares to Green-Light Gnarliest GMO Soy Yet," USDA approval of Agent Orange Soy will expose us to a much heavier dose of this toxic pesticide through our food, drinking water and the environment.

2,4-D is already the third-most-used US herbicide, after glyphosate and atrazine, and as a leading source of dioxin pollution, it's one of the most deadly.  As of yet, however, it's hardly used on soy at all. Just 3 percent of total US soybean acres were treated with 2,4-D in 2006. Not only will this percentage skyrocket once Agent Orange Soy hits the market, the amount used per acre may triple according to the USDA."


Mon, 01/06/2014 - 21:24 | 4306264 vulcanraven
vulcanraven's picture


Just ask yourself, whatever happened to the Taco Bell ".59 .79 .99" menu?

Mon, 01/06/2014 - 18:06 | 4305661 Caviar Emptor
Caviar Emptor's picture

Look it's pretty simple.
The plan is just to lower the standard of living to make inflation look under control!
If we go back to living in the Stone Age, then the cost of Filet mignon will be tame for the 0.0001%.
This Monetarist thing is so easy even a caveman can do it

Mon, 01/06/2014 - 18:23 | 4305686 Ying-Yang
Ying-Yang's picture

"If we go back to living in the Stone Age, then the cost of Filet mignon will be tame for the 0.0001%."

Think of how many bacon slices it would take to go around a wooly mammoth filet?

Mon, 01/06/2014 - 19:10 | 4305830 gmrpeabody
gmrpeabody's picture

Not to mention toothpicks..., it would look like a cactus.

Mon, 01/06/2014 - 20:52 | 4306167 logicalman
logicalman's picture

At least it wouldn't be full of antibiotics and growth hormones.

Mon, 01/06/2014 - 22:00 | 4306376 FredFlintstone
FredFlintstone's picture

I take offense to that. Contrary to popular opinion, it's not easy being a caveman.

Mon, 01/06/2014 - 18:15 | 4305666 PrecipiceWatching
PrecipiceWatching's picture



Mon, 01/06/2014 - 18:12 | 4305667 PrecipiceWatching
PrecipiceWatching's picture

A question about the bar charts; specifically the one showing the breakdown of assets held by the "rich".

Their largest asset holding is in "business equity".

Does this mean they hold direct ownership in privately held companies?  If it were just STOCK held in publicly traded companies, I asssume this would fall under "investments".




Mon, 01/06/2014 - 21:50 | 4306363 FredFlintstone
FredFlintstone's picture

Yes. It is what their ex-wives attorneys are trying to figure the value of.

Mon, 01/06/2014 - 18:12 | 4305668 moneybots
moneybots's picture

"That said, because of the presence of the central banks, it’s unlikely that deflation will become a real problem."


I keep hearing that.  Didn't work out that way in 1930.

Mon, 01/06/2014 - 18:15 | 4305676 realWhiteNight123129
realWhiteNight123129's picture

Here are few charts for you fellow ZHedgers. You Decide!

1. The CPI and Tobacco relationship breaks down post hedonic adjustments. I just divided CPI by Tobacco prices. The ratio is flat for decades before hedonics, meaning computed inflation and tobacco rise at the same pace. Post hedonics tobacco continues to race higher, while inflation lags.

2. If the rates post 1982 were real, or in other words not repressed, credit could not have expanded that much. Hard real rates always prevent debt expansion (Henry Thornton 1801). How do you repress rates? By repressing inflation data. Result is debt boom. Just like with Strong giving a "whiskey shot" to the stock market with too low rates. Actually the 1921 crisis was due to bond vigilante revolt against post 1919 inflation regime or rates repression (Kemmerer), what ensued was a campaign to repress rates and there you go, you have a debt boom. The debt boom starts right with hedonics.

3. The understatement of inflation makes the difference between nominal GDP and inflation too high. I.e. the real GDP is overstated.

4. The result is that the productivity gains derived from overstated real GDP are overstated themselves.

How do we know that the story of low inflation and high productivity in late 80s , 90s and until 2007 are overstated?

If the prices were low and productivity gains high, that would mean that the US would be able to have high quality products at low prices flood overseas markets with their goods (a bit like Briatain with the Bessemer steel process post 1855), except that the exact opposite happen even against Europe which supposedly had less productivity gains. That is pluging trade balance and plunging currency. If US had higher productivity gains and low inflation, its terms of trade would improve and currency strengthen.


The currency strengthen temporarily in 2000 due to finanical bubble...


5. How can you expect the productivity gains with plunging capex?

However if inflation was higher, real GDP growth would show a lower number and the extracted computation of productivity gains lower. This would be consistent with:

1. Low capex

2. Deterioration of terms of trade and trade deficit (like Latin America ex Mexico -- which is investing in manufacturing actually --. The other latam have poor productivity gains, increase in internal prices which result in

3. chronic trade deficits and sliding currencies. (If US was so much ahead in productivity gains with low prices, its trade balance with Europe would have increased in the period)



Tue, 01/07/2014 - 01:57 | 4307077 combatsnoopy
combatsnoopy's picture

I just use a Cost of Living Index vs. real wages to measure inflation.  We're dealing with PURCHASING POWER, not nominal pieces of paper.  Purchasing power parity is traded insanely on the currency exchanges, I believe $4 TRILLION is traded EACH DAY.

Los Angeles, California altogether is a complete disaster.  Not only are they raising fines and taxes to meet interest rate swap requirements to JP Morgan; the job market is disgusting and the rents have gone up.  The property managers/realtors hoard apartment complexes and rentals for a tax break for some 1035. Then they monopolized that market to rent ONE unit out at an extremely insantely high price, ie. $2000/month for a one bedroom- to finance the entire cost of upkeeping that complex.   They say they "own" it (cash) but I've worked for a few money managers who do "own" these things with a teaser rate. 

IF rates go up, we find out who really owns these things.  BTW, they're horrible landlords.  Terrible!

On the other end, employers can get away with so much because people are too insecure to admit that they don't make or have as much money as they want you to think.   I've processed invoices from staffing agencies where several temps were hired for a few days, if that.  Under the guise that their assignment would go for at least a few weeks.  How do you cover rent and the cost of living index with such a shaky salary?  And of course, they do this to EVERYBODY.  "They're not getting it".  If you stick around longer than a week, you'll see the instant replay of the excuse.  And SoCal, not just LA pulls this stunt.

That way, they can say, "Well Unemployment numbers went down!  Look at how well the job market has improved!"  

The going wage for anyone with a bachelors' and some experience remains at a healthy $12/hour unless you were able to stay at an employer's to gain substantial experience.  MBAs are being offered I believe $20 and up.  They're getting CHEAP! 

After Sag/Aftra merged, work for background actors dried up a bit and they take home $8/hour.

Truth be told, people are renting bedrooms out illegally, then kicking people out to hide it from their landlords because it's against the rules on the lease.  It's not college students (I've seen a few sleeping in their cars on a clean street that's heavily patroled by cops).   But those who are sharing a very crowded one bedroom are seasoned older professionals, many who are too embarrassed to admit that they can't afford a dignified place at the going rate because only dot com execs and rock stars are bringing home billions.  ??? 

The "logic' as it pertains to realtors/property managers is HORRIBLE.
AND!  Soem banks won't let you refi unless you have a full time job.  This is where I believe that the lack of jobs is a conspiracy to enable the banks to keep robbing people and keeping us all poor.  

However some landlord/propertymanager/bank sponsored astroturf in San Francisco has a bunch of "protestors" throwing bricks at the bus tha takes tech workers to the Penninsula for work because they're blaming the workers for the "rise in demand" to justify the insane rents there.  Me personally, I tried SF and seriously, it's not worth that kind of money to have a zipcode there.   This is why I strongly believe that liberals are completely vehemently stupid.  For a lack of better words on my part.  Their math is right (rents priced too high), their reasoning is pitiful and "resolve" is a joke.  

It's intersting that you use a tobacco index.  Tobacco is one of America's few exports to Asia.  The tax on tobacco (an addictive substance for people with niacin deficiency) is a PRICE INELASTIC tax. 
Like the gas tax.   Just another way to prevent people from having purchasing power.  I strongly believe both taxes violate the 8th Amendment, I see it as excessive.  Especially in this economy. 

We're definately dealing with STAGFLATION in the midst of a DEPRESSION.  A "Depression" lasts for longer than 6 months.  I'm happy for the home flippers and a few people who are lucky to have jobs but it's going to end very badly without a healthy correction.   

Tue, 01/07/2014 - 19:23 | 4309630 realWhiteNight123129
realWhiteNight123129's picture

I am sorry to read that account story. I did not know people with niacin deficiency had this addiction tendency.



Mon, 01/06/2014 - 18:21 | 4305692 moneybots
moneybots's picture

"Is Inflation Understated?"


No problem.  Just sell stocks and spend your wealth effect.

Mon, 01/06/2014 - 18:29 | 4305706 yogibear
yogibear's picture

The Fed will continue to print until the US dollar free-falls. The Fed will be fearfull only when their game doesn't work anymore.

The Fed is playing the game that's been going on throughout history. Print insanely until your currency is worthless. 

Same game, different name. 

Mon, 01/06/2014 - 18:35 | 4305719 muleskinner
muleskinner's picture

What day is this?

Is there any refuge from the madness?

I'd like to know.

I had a job that paid 3.27 an hour in 1970. Another job in 1976 paid minimum wage of 2.35 per hour. I had another job that paid 1 dollar per hour in 1972.

I could have collected 43 weeks of unemployment compensation that would have paid more than the minimum wage job, but it was better to have a job than to live on unemployment when I could be working and suffer the disdain from those I knew who were working, so unemployment compensation was frowned upon if you could hold a job.

What the hell do I know? Cowshit I know? Another bozo on the bus, that's all.

If you can hold a job and there is a job available, go to work and don't collect unemployment.

Back then, those wages could pay the bills. Today, in 2014, you're shit out of luck. Got suckered big time by the debauching to the currency. That's the way it goes moving west.

Musings and then some; some free association.

Pensive bullshit.

Inflation isn't a problem and the earth is flat. I Googled it and there were 89 million results.

Lost in Space in the Twilight Zone.

The road to excess leads to the palace of wisdom -William Blake

Truth is Lies

You can lead a bull to the whatchamacallit, but you can't make him stampede.

1960 was the future and now it's gone for good.

It would be like going back to the stone age.

Mon, 01/06/2014 - 20:58 | 4306182 logicalman
logicalman's picture

The problem with all the concentration on 'JOBS'

There are lots of things that need to be done on planet earth that don't happen because money can't be made and hence taxed (stolen) in the process. These things don't get done.

There are things that should not be done that create 'jobs' which enable the psychopaths of the world to steal a huge chunk of the fruits of people's labour to benefit themselves.

I don't understand this concentration on jobs' at the cost of humanity.


Mon, 01/06/2014 - 21:47 | 4306360 FredFlintstone
FredFlintstone's picture

The future ain't what it used to be. Yogi

Mon, 01/06/2014 - 22:57 | 4306614 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

Predictions are difficult, especially about the future- Yogi

Mon, 01/06/2014 - 19:01 | 4305794 yrbmegr
yrbmegr's picture

The answer is, "Duh!"

Mon, 01/06/2014 - 19:02 | 4305797 q99x2
q99x2's picture

As I understand it, inflation is a measure of how much I can afford not to eat.

Tue, 01/07/2014 - 19:28 | 4309654 realWhiteNight123129
realWhiteNight123129's picture

This is very witty, I will reuse that one.

Mon, 01/06/2014 - 19:20 | 4305862 JR
JR's picture

It is established that government figures on inflation are incorrect.

But, the crime here is that they are intentionally incorrect; the global oligarchs operating in secret use inflation as their primary tool in their burglary kit. It could have all been explained a hundred years ago when a private organization of international bankers was given the authority to create money, determine its value and in secret give it to their friends and deny its use to their enemies.

Inflation is the banker tool for economic dictatorship.

Through their larceny of Americans’ assets they now have achieved such power that they are telling Americans at what level they will be satisfied – i.e., a 250 square foot micro-box apartment advocated by multi-billionaire Bloomberg for the masses, a tofu CPI meat substitute instead of turkey for giving thanks to the State, and, instead of the comfort of heat, padded Chinese-style clothing to stay warm by walking around in your home in hat, gloves and multiple layers of clothes.

And they will keep decreasing Americans’ standard of living through the ruse of the CPI, lowering the basic standard of living  for America’s middle class as long as the people refuse to fight and accept the criminality of this injustice.

It is a simple frame-up to steal America’s assets.

Here is what they have stolen—born from a spirit and way of life depicted in this quote from Luke Short in “Savage Range” of those who helped build this country in the days of the early West.

“They’ve married wives and raised children. They’ve built places on the land. They’ve sweated and ridden in rain and snow and gone hungry and watched their herds die in drought! They’ve buried their wives on that land! They’ve saved and sacrificed to buy ten more cows in the spring… you know them by their name. You’ve lived with them, sold them liquor to cheer them up in those black times that every cowman knows…”

And now, the bankers have put a gun to the descendants of those Americans and pulled the trigger. It’s armed robbery. They call it inflation.

Mon, 01/06/2014 - 23:02 | 4306636 Spanky
Spanky's picture


Well said JR.

Mon, 01/06/2014 - 19:19 | 4305867 thewayitis
thewayitis's picture



  Inflation.....Why the hell does the average family need 2 incomes today VS when 40 years ago 1 income was enough? Any moron

can see this nations economy is fucked up. As a kid 40 years ago I could pick a few soda bottles and get a candy bar for 5 cents. A

game of pool for 10 cents...........I could pick up 13  soda bottles and get a loaf of bread for 25 cents. And that wa Very easy to do.

No one  cared about bottles hanging around..........Now ou need 80 bottles.  And need to fight to find them......No, theres no frigin

Inflation. Hahhaha The world economy is going to SHIT............



Mon, 01/06/2014 - 20:36 | 4306108 ebworthen
ebworthen's picture

I remember doing that.

My friends and I would get on our bikes with some bags and scavenge the neighborhood.

There were usually a lot of bottles and cans around the grocery/convenience stores, parks, and along the road sides.  We'd load up on returnable bottles, turn them in at the store, and buy some candy/pop.

The aluminum we'd hoard and get our parents to drive us to the recycling center on Saturday and they'd weigh it and "cha-ching!" cash money.

We and the other kids in town kept things pretty clean.

Mon, 01/06/2014 - 21:05 | 4306197 gherman
gherman's picture

Because 40 years ago you didn't compete with women (their acccess to the labour market basically cuts a man's -- i.e. a traditional family where man is the provider -- income in half), with minorities supported by AA, and with millions and millions of immigrants.

Mon, 01/06/2014 - 21:36 | 4306316 FredFlintstone
FredFlintstone's picture

My old man drank so much damned Coke, every few months I would load up the back of the 75 Caprice station wagon with the empties and have enough cash to go out with my buddies.

Mon, 01/06/2014 - 20:00 | 4306012 evernewecon
evernewecon's picture

For a boomer hedonics readily looks corny.

Supposedly inflation's adjusted down for
increased content, such as in cars.

My mom's 1972 Dodge Dart was a tank-like
clad rocket compared to today's cars,
even though at the time it was the
Dodge equivalent to Al Bundy's wieniemobile.

(Actually, she knew what she was doing.
Her's wasn't Bundy's version. Red, taupe
roof, 250 hp for what was then a light
car--only to not get caught short of
power, of course.)

But now what about when wholesome food, air
and water are replaced with crap?

Diminished content in GMO's should reflect
as inflation just as should diminished
quantity in a box of tissues.

The U.S. at least has a retail price index.

Mon, 01/06/2014 - 20:13 | 4306050 MathWins
MathWins's picture

"The problem today is that some people believe inflation is lower than it actually is."

Ummmmmmm, NO ONE* in the real world believes inflation is low, except maybe the idiots in the MSM.

*the people that have to buy groceries and gas and other necessities of life

Mon, 01/06/2014 - 20:41 | 4306133 akak
akak's picture

Actually, the parrots in the corporate-controlled ("mainstream") media don't believe it either --- but that is not going to ever stop them from repeating their self-serving lies.

Mon, 01/06/2014 - 20:24 | 4306091 ebworthen
ebworthen's picture

My "cost of a pound of bacon" index says inflation is real.

Mon, 01/06/2014 - 20:42 | 4306136 falconflight
falconflight's picture

$4 a pound in Walmart this week.  I wouldn't even let the wife buy it.  Unbelievable

Mon, 01/06/2014 - 23:22 | 4306711 ebworthen
ebworthen's picture

I know, right?

Local store had Oscar Mayer (best IMHO) for $3.99/pound when it is usually $6.99/pound; I bought six and put five in the freezer.

The girlfriend loves bacon so I wasn't just buying it for myself (ulterior motives).

But sheesh, when the cheap crap is $4.99/pound I buy breakfast sausage.


Mon, 01/06/2014 - 21:00 | 4306190 logicalman
logicalman's picture

Long pigs.

Mon, 01/06/2014 - 23:10 | 4306668 Spanky
Spanky's picture

Long pig? Soylent Green.

Mon, 01/06/2014 - 20:40 | 4306113 Musashi Miyamoto
Musashi Miyamoto's picture

EBT benifits in Illinois are $189 for a single person amounting to $2.10 per meal. Stay hungry my friends.

Edit: For a family of 4 it works out to $1.58 per meal.

Mon, 01/06/2014 - 20:41 | 4306131 ebworthen
ebworthen's picture

Hamburger Helper.

Chicken Helper is just O.K.

Avoid Tuna Helper at all costs, trust me.

Mon, 01/06/2014 - 21:01 | 4306195 logicalman
logicalman's picture

Avoid packaged food.

Trust me.

Mon, 01/06/2014 - 21:08 | 4306213 JR
JR's picture

Daily Kos complained that the $36 cut to the monthly food stamp “supplemental” benefits for a family of four, which was $668 monthly October 2012 through September 2013, was going to hurt those “struggling to put healthy food on their tables” this past Christmas.

A Senate Budget Committee report shows that households below the poverty line now receive welfare payments the equivalent of $61,320, tax free, while the median household wage for non-welfare recipients is $50,054, or $43,680 after taxes.

This wealth transfer is creating tremendous anger among people who are not receiving welfare but who are working on the edge to supply food and shelter for their own families. This anger is unfortunate because it can lead to anger against people who really are hurting. had the story:

Mon, 01/06/2014 - 23:12 | 4306674 Spanky
Spanky's picture

Looks like the next great American political divide...

Mon, 01/06/2014 - 20:39 | 4306126 falconflight
falconflight's picture

Most appreciated article. 

Mon, 01/06/2014 - 20:40 | 4306129 Colonel Klink
Colonel Klink's picture

NO WAY government and the Federal Reserve would ever lie and misrepresent the facts to us!!

Mon, 01/06/2014 - 20:44 | 4306144 itstippy
itstippy's picture

When my parents bought an appliance it was built to last 20-30 years.  Mom still has and uses the same stuff she had and used when we boys were little tykes: West Bend waffle maker, GE box fan, Electrolux vacuum cleaner, Kitchenaid mixer, etc.  I'm in my 50's!

Visiting my Mom's house is like going through a time warp.  The same doorbell chimes; Hell, the same doorbell button!  The same indoor/outdoor thermometer.  The same table lamp, with the original switch, turned on and off at least one million times over the years.

Stuff used to last.  You saved up and bought something; then you had it and didn't have to buy another one for decades.

How many of those $2 Wal-Mart waffle irons people were fighting over last Christmas are still turning out delicious golden waffles a year later?  Mom's waffle iron is still performing after 50 years.

Hedonically adjust that, you fucktard BLS statisticians.

Mon, 01/06/2014 - 21:05 | 4306203 logicalman
logicalman's picture

I have a cheese grater and a hand mincer that were wedding gifts to my dad's great grandmother.

My dad died at 88 just last year.

They will likely last at least one more generation.

Mon, 01/06/2014 - 21:13 | 4306227 dick cheneys ghost
dick cheneys ghost's picture


all that stuff was made in USA as well............

Mon, 01/06/2014 - 21:19 | 4306247 Caviar Emptor
Caviar Emptor's picture

Built to last became anti-American somewhere along the foggy way, right around the time of shop-till-ya-drop. 

Mon, 01/06/2014 - 21:32 | 4306299 FredFlintstone
FredFlintstone's picture

We buy a dishwasher every 4 to 5 years. My inlaws had theirs for 30+.

Mon, 01/06/2014 - 22:11 | 4306438 DaveyJones
DaveyJones's picture

from built to last

to built too fast

Mon, 01/06/2014 - 21:02 | 4306198 Johnny Cocknballs
Johnny Cocknballs's picture

I love reading ZH because, even if I don't agree with an article, or a comment, I'm generally forced to wonder "hmm... okay, let me go back and think about this some more."

But I also read The Economist and The New York Times and in surveying the comments on the latter regarding, for example, the Yellen confimation, I'm not sure even basic criticism or questioning of the status quo will ever reach the mainstream.

All kidding aside, I simply fail to understand how people can make comments lauding what a wise choice this establishment pick is, or how they can blindly claim that the real problem is the lack of government spending.  And of course, if one criticizes the notion of more stimulus, one is merely a "tea partier" or some such term of opprobrium.

Well, what do you call someone who sees something fail to work over and over, while trade deficits and unemployment grows, and calls for more of the same?


I try not to be a pessimist, but nothing is going to change.  We're riding this clusterfuck all the way to the bottom.


Mon, 01/06/2014 - 21:17 | 4306239 Caviar Emptor
Caviar Emptor's picture

Ahh yes, Johnny, we're going to hell in a handbasket. And all the while telling ourselves that at least we're enjoying the ride. 

It's a well-troden path: the road to decline. Once the jaded cynicism reaches deep enough, then nothing can stop it. 

But the side-shows will provide much entertainment: the Kardashians, Jersey Shore, public hangings . 


Mon, 01/06/2014 - 23:24 | 4306717 Spanky
Spanky's picture



"...David J. Stockton of the Peter G. Peterson Institute for International Economics..." NY Times

Stockton is the former director of the Division of Research and Statistics at the Board of Governors of the Federal Reserve System. -- from

And Pete Peterson took over chairmanship of the Counsel on Foreign Relations when David Rockefeller stepped down.

Mon, 01/06/2014 - 21:12 | 4306223 Last of the Mid...
Last of the Middle Class's picture

inflation is related to the severity of the polar vortex. Everyone knows that. 

Mon, 01/06/2014 - 21:12 | 4306224 cheetahbaby
cheetahbaby's picture

Strange, this price of bacon shit. Here in N. Virginia, Oscar Mayer bacon is 9.49 a lb, but it is hard to find. Then the other day at the Giant, I saw about a half dozen people gathered around the butcher's assistant, who was opening a box of Giant-brand bacon, which sells for 6.49. The assistant was merey handing the bacon packages directly to customers, with some taking 4-5 packages.  It struck me as hoarding behavior. Welcome to Obummer-land...

Mon, 01/06/2014 - 21:14 | 4306226 Constitutional ...
Constitutional Republic's picture

Anyone who pays their own bills knows that inflation is under-reported. The others, not so much.

They'll find out with a rolling program of Detroit style bankruptcy for 'unsecured creditors of insolvent entities'. That's my new favorite succinct phrase for the State the world is in. Cheers, Tylers, for that gem of brevity.

Mon, 01/06/2014 - 21:27 | 4306283 Last of the Mid...
Last of the Middle Class's picture

Now let me get this right. $85 Billion a month to cover the loses of those too greedy to live and die by the rules of market forces such as supply and demand without sucking the government teat to cover their losses on a massive scale. There is even some $$ left over to prop up the stock market so that el dumbo can sit and ride on his stocks without having to look at fundamentals and can make money. Who will pay for this and how will it happen?  INFLATION!!! for the next 3 generations, that's how. First rule of investing, make your stuff worth more and dilute the hell out of his stuff. His stuff is the purchasing power of the consumer as they boil in a vat of hidden inflation. Enjoy the ride, it's going to get real.

Mon, 01/06/2014 - 21:29 | 4306292 FredFlintstone
FredFlintstone's picture

The Chapwood index? Sounds like a male stripper or porn stars name.

Tue, 01/07/2014 - 08:28 | 4307448 secured_party-c...
secured_party-creditor's picture

If people don't think inflation is under reported now wait until 1) tapering begins taking effect in few month; 2) watered down USD reacts after "correction" of market; pricing on assets and commodities have already seen illusionary inflation rates ... Inflation different today than Reagon ... Reagon and company let you know where you stand with accurate rates, this admin waters down currency for 6+ years, never increase wages, so USD is so devalued you get same effect as inflation.

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