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It's Time To Ditch The Consumer Price Index (CPI)

Tyler Durden's picture


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

So why does the government maintain such a transparently inaccurate and misleading metric? For three reasons.

That the official rate of inflation doesn't reflect reality is obvious to anyone paying college tuition and healthcare out of pocket. The debate over the accuracy of the official consumer price index (CPI) and personal consumption expenditures (PCE--the so-called core rate of inflation) has raged for years, with no resolution in sight.

The CPI calculates inflation based on the prices of a basket of goods and services that are adjusted by hedonics, i.e. improvements that are not reflected in the price of the goods. Housing costs are largely calculated on equivalent rent, i.e. what homeowners reckon they would pay if they were renting their house.

The CPI attempts to measure the relative weight of each component:

Many argue that these weightings skew the CPI lower, as do hedonic adjustments. The motivation for this skew is transparent: since the government increases Social Security benefits and Federal employees' pay annually to keep up with inflation (the cost of living allowance or COLA), a low rate of inflation keeps these increases modest.

Over time, an artificially low CPI/COLA lowers government expenditures (and deficits, provided tax revenues rise at rates above official inflation).

Those claiming the weighting is accurate face a blizzard of legitimate questions. For example, if healthcare is 18% of the U.S. GDP, i.e. 18 cents of every dollar goes to healthcare, then how can a mere 7% wedge of the CPI devoted to healthcare be remotely accurate?

In my analysis, the debate over inflation is intrinsically flawed. What really matters is not the overall rate of inflation, which can be endlessly debated, but the purchasing power of earned income, i.e. wages and the exposure to real-world costs.

In other words, those households with zero exposure to college tuition and the full costs of daycare, medical care and healthcare insurance may well experience low inflation, while the household paying the full costs of daycare, college tuition and healthcare insurance will experience soaring inflation.

Here's one example of how CPI fails to capture real-world inflation/loss of purchasing power. Let's say an employee works for a company or agency that pays his/her healthcare insurance. The monthly cost has risen from $1,000/month to $1,500/month. The employee's wage has remained stagnant but the total compensation costs paid by the employer have gone up by $500/month.

Now the employer shifts that $500/month to the employee as their share of the healthcare insurance cost. Since the average full-time worker earns around $40,000 a year, and pays around 18% in taxes, their take-home pay is around $33,000 annually.

The employee's co-pay of $6,000 a year ($500/month) represents 18% of their take-home wage. This is an 18% reduction in earnings, or the equivalent of 18% inflation (i.e. a reduction in purchasing power).

This shifting of the skyrocketing burden of healthcare costs acts the same as 20% inflation, yet it doesn't even register in the current CPI.

The geography of inflation doesn't register, either. Soaring rents in Brooklyn, NY and the San Francisco Bay Area have a profound effect on those exposed to these rapidly rising costs, yet these impacts are massaged to zero by national CPI calculations.

So once again we have a bifurcated society: those protected by the state from rising costs and those exposed to real-world reductions in purchasing power.Households that receive government subsidies and direct payments have little exposure to real-world healthcare costs, since they are covered by Medicaid, and modest exposure to housing if they receive Section 8 benefits (Section 8 recipients pay 30% of their income for rent, regardless of the market price of the rental). Retirees on Medicare also have limited exposure to the real-world costs of their care paid by the government.

If we analyze inflation by these two metrics, we find the middle class is increasingly exposed to skyrocketing real-world prices. Pundits in the top 5% have the luxury of pontificating on the accuracy of the CPI while those protected by government subsidies and coverage have the luxury of wondering what all the fuss is about. Only those 100% exposed to the real costs experience the full fury of actual inflation.

So why does the government maintain such a transparently inaccurate and misleading metric? For three reasons: 1) it is useful propaganda; 2) it suppresses the state's cost-of-living increases and 3) it lowers the government's cost of borrowing. The benefits of reducing COLA adjustments are self-evident, as is the benefit of borrowing money at low rates of interest, but the propaganda benefits are more subtle.

The key to enabling the endless printing of money that enriches the banks and the top .1% is low inflation. Asset bubbles can be inflated, ballooning the wealth of the owners of the assets, as long as inflation is near-zero.

Indeed, the Federal Reserve claims it must print money to counter low inflation.
Meanwhile, in the real economy, those exposed to the real costs of college tuition, healthcare, childcare, etc. are seeing their purchasing power evaporate like a puddle of water in Death Valley. The Fed needs low inflation to justify its continuing enrichment of the financial elite, and the Federal government needs low inflation to keep its COLAs and borrowing costs low.

There are two ways to mask real-world reductions of purchasing power: 1) skew the CPI by distorting the component percentages, hedonics and how costs are measured, and 2) protect enough of the populace from real-world increases so they no longer care. Seniors, who famously vote in droves, have no idea what their Medicare benefits actually cost. As a result, they have no experience of healthcare inflation /reduction of purchasing power.

This works in all sorts of industries. As I have often mentioned here, the F-35 Lightning fighter aircraft costs in excess of $200 million each, roughly four times the cost of the F-18F it replaces. This extraordinary inflation is not experienced directly by the taxpayer who is paying for the boondoggle, as the Federal government borrows trillions of dollars to pay for such boondoggles, effectively passing the inflated costs on to future generations.

These costs are hidden by the low cost of borrowing trillions to pay for boondoggles. If real-world inflation is (say) 5%, then interest rates would typically adjust to a few points above that rate, to compensate capital for the erosion of purchasing power. If the Treasury had to pay 7% to borrow money, the interest cost would soon cripple Federal spending. People would be forced to focus on how all those trillions of dollars are being spent, and to whose benefit.

But with borrowing costs so low, nobody cares.

The solution? One, abolish the Fed and let the market discover interest rates, and two, abandon the simplistic notion that one number of inflation has any meaning in a complex economy with numerous subsets of exposure to market costs and the loss or gain of purchasing power.

Will we muster the will to look past failed models and metrics? Sadly, the answer is no. Why?

As I noted yesterday in What's the Difference Between Fascism, Communism and Crony-Capitalism? Nothinga system set up to enrich political and financial elites is incapable of reform. the only way the CPI will ever be replaced is when the Status Quo collapses in a heap of lies and insolvency. Until then, propaganda and gaming the system to protect vested interests will rule.


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Thu, 04/17/2014 - 17:13 | 4670894 drendebe10
drendebe10's picture

The sheeple love being lied to... why would they want to do that????

Thu, 04/17/2014 - 17:26 | 4670927 TeamDepends
TeamDepends's picture

4)  They think it's frickin' hilarious!

Thu, 04/17/2014 - 17:37 | 4670961 NotApplicable
NotApplicable's picture

Silly CHS. There is only one solution.


Thu, 04/17/2014 - 17:47 | 4670983 lordylord
lordylord's picture

Inflation is the most devious tax of all (paraphrasing from the great Ron Paul).  END THE FED.

Thu, 04/17/2014 - 18:00 | 4671020 Dark_Horse
Dark_Horse's picture

They need CPI because it's the lie to distract you, while they wring out the value of your dollars.


Thu, 04/17/2014 - 18:22 | 4671076 maskone909
maskone909's picture

EDUCATION makes up a pretty small chunk of the pie considering over a trillion in outstanding student loans.  i would say that education is about 40% higher than the chart is showing

Thu, 04/17/2014 - 19:06 | 4671206 mophead
mophead's picture

"What really matters is not the overall rate of inflation, which can be endlessly debated, but the purchasing power of earned income, i.e. wages and the exposure to real-world costs."

Some one finally FOCKING get's it.

Thu, 04/17/2014 - 20:32 | 4671495 cynicalskeptic
cynicalskeptic's picture


They've been getting it for some time - government stats calculated they were BEFORE all the politicized meddling.  This all started when St. Ronnie realized it was easier to lie about things than actually improve them.  EVERY administration since then and BOTH political parties are complicit in the lies understating inflation (currently closer to 5-6% looking at Shadowstats - though even that seems low) and minimizing unemployment (24% - WORSE than the 1932 peak of the Great Depression).

Understating inflation reduces government payouts and overstates real growth - what's not for government to love about that?

All I know is that a rib roast is now over $50, hot dogs are $4, fuel oil is well over $4 and my local property taxes have more than tripled in 25 years.  The car I would have paid $3500 for when I got out of college is now $30,000  and the house my grandparents paid $12,000 for in 1948 and that my parents paid $29,000 for in 1969 would now cost over $500,000 (even after the drop from 2007).  The salary that was best in my engineering degree in the late 70's wouldn't pay for a H.S. grad receptionist today. Speaking of which - ONE YEAR of college for my kids costs MORE than I paid for my engineering degree from a top private college.

Thu, 04/17/2014 - 23:31 | 4672019 Aussie V
Aussie V's picture

This is meant to be a serious question!

Can any of you tell me if I'm wrong here?? In Australia the housing market has gone through the roof. Young couples have NO WAY of buying a house on a double income. When I was 28 and earning a single wage with 3 young kids we could afford a modest house in the city, even a decent house in a regional area. SOme regional areas are like paradise here anyway, so that's not an issue.

But, now, 28 years later the price of homes has inflated SO MUCH that it's near impossible for 'normal couples'. The main reason is speculators. There are some who will go out and borrow for one house, rent it and borrow for a second house, rent it and so on until they may end up with 10-15 houses while borrowing 95% of the costs.

Because of guarranteed inflation of house prices they think they can make a fortune within 10-15 years. Some do, some don't.

But my question is this....I think that speculators should be limited to a small % because they drive the prices up and force the majority to be renters for their entire life. If houses were viewed as 'homes' and speculators were 'encouraged or forced' to invest in other areas the median home prices would become within reach of most families.

I realise there needs to be a % of speculators to provide enough homes for some people who can never afford a home but, when there are toooo many speculators it ruins it for every normal family.

I also realise that we live in a time where the term "family" is taboo and old fashioned and it's use even discouraged here. The reason for that as I see it, is to make the destruction of the traditional family unit as 'normal'. If you think the US is heading towards socialism, believe me we're soaking in it! The Communist Manifesto is alive and well here in Oz.

So, am I wrong? Should the Govt discourage people using houses as an investment or should banks demand a deposit of 10 - 15% as it used to be??

Thu, 04/17/2014 - 23:44 | 4672061 Parrotile
Parrotile's picture

In the distant past of "Responsible Lending" your deposit would be at least 20%. Responsible lending = effective price control.

Nowadays, "Investors" ae actively encouraged to use "equity" in their already overpriced homes as a "deposit" on the new acquisition.

The Aussie obsession with housing is still very much alive and kicking - I know at least a few colleagues who "buy" an extra home every year, to augment their "rental asset base".  They particularly like the ability to rent to the Armed Forces - good rent payers - but the property must be new (or almost new).

Malinvestment in an overpriced (enormously overpriced by any reasonable metric) and completely non-productive asset class. Winder how this is going to end (especially with China easing off on resource purchases!)

Fri, 04/18/2014 - 01:41 | 4672242 NidStyles
NidStyles's picture

I think you should just not worry about it and get ready for that system to collapse. 

Fri, 04/18/2014 - 02:03 | 4672266 CheapBastard
CheapBastard's picture

The CPI, Criminal Price Index, should be abandoned.

... or at least link people's COLA to something else, like Reality !

Fri, 04/18/2014 - 07:26 | 4672458 tonyw
tonyw's picture

The question is why do you think it is so important to buy? Is it because of "...Because of guarranteed inflation of house prices..." well they're not guaranteed, only death and taxes are guaranteed. If somebody buys a house to rent then the number of houses neither deccreases nor increases, in fact the number of houses available to rent increases - this should lead to a decrease in rents based on supply and demand.

The population is increasing so there needs to be an increase in the housing stock to maintain equilibrium. If this is not happening then you should ask why not, are housebuilding "speculators"/developers being prevented from building these very attractive investments by planning laws, have you run out of suitable land?

Fri, 04/18/2014 - 15:17 | 4673669 Aussie V
Aussie V's picture

That's a confusing and convoluted post. Hard to get my point across with that.

If a renatal house is rented you say that is 1 extra house for rent whereas I see it as 1 less available for rent.

You say house prices increasing are not guarranteed. In th etrue sense they're not however, a house that sold for 80,000 in 1988 is selling for 1.1 million today with no improvements. Also, if th epopulation increases the price of homes will increase as well. So, what is your arguement??

One tidbit I DID pick up was "Why is it important to buy?"

1. I want to live in a house not be inspected every 3 months!

2. I don't want to pay off someone else's Mortgage and hate paying dead money

3. I hate having to move every 6 months on the whim of the owner deciding to sell.

I actually own my own home but this was my experience 25 years back. Renting has it's place but, generally with a family, is a very poor existence and one is made to feel as a lesser class of person for the above reasons.

Thu, 04/17/2014 - 17:30 | 4670937 Greenskeeper_Carl
Greenskeeper_Carl's picture

The sheeple have no idea what CPI means. And if they hear about it, it will be from some tenured academic or .gov apparatchik that explains it in a way favorable to the establishment. And they take the facial with a big smile and ask for seconds. There is no way that they will change anything, when it would destroy the financial status quo. The gov and fed couldn't get away with printing all that money if the average perso realized inflation was running at 6-8% a year, while their wages were stagnant. Gold would finally re recognized, the dollar would be dumped, and the gov would have to massively increase the amounts they pay out for social security each year, hastening the collapse. Meanwhile, all military and gov workers would demand the same. So no, the CPI is hear to stay, unless we start demanding change. The status quo will continue doing everything in its power to keep people dumb, and so far it's working for the most part

Thu, 04/17/2014 - 17:32 | 4670947 Four chan
Four chan's picture

perfectly stated.


food and fuel are the true cpi, 

Thu, 04/17/2014 - 18:48 | 4671156 MisterMousePotato
MisterMousePotato's picture

Personally, I would put housing even before fuel, and insist that property taxes are included when evaluating housing.

Thu, 04/17/2014 - 17:46 | 4670974 lordylord
lordylord's picture

Let's be honest.  Even the target inflation rate of 2% is criminal and will drain your wealth over the course of your life. END THE FED.

Thu, 04/17/2014 - 17:48 | 4670986 Bryan
Bryan's picture

That reminds me of a Bible verse:


"For the time will come when people will not put up with sound doctrine. Instead, to suit their own desires, they will gather around them a great number of teachers to say what their itching ears want to hear."

Thu, 04/17/2014 - 18:04 | 4671039 lordylord
lordylord's picture

Here is another for you:  "Render therefore unto Caesar the things which are Caesar's; and unto God the things that are God's".

Stop using dollars.  Use God given gold and silver.

Fri, 04/18/2014 - 07:30 | 4672468 tonyw
tonyw's picture

it shows ther have always been people who can see through the bread and circuses whilst teh sheeple want maor!

Thu, 04/17/2014 - 19:33 | 4671320 Reaper
Reaper's picture

When you chose to believe the lie, you don't have to think or act. Hope and trust in your shepherds is the easy way to sleep well tonight. Baa.

Thu, 04/17/2014 - 17:15 | 4670900 DoChenRollingBearing
DoChenRollingBearing's picture

Only someone schooled in .gov statistics (John Williams) could make sense of what we have now.

And what would we get if .gov makes a new index?  Mmm?  

It would likely be at least as distorted as what we have now.

Thu, 04/17/2014 - 17:35 | 4670956 shovelhead
shovelhead's picture


We prefer the term hedonically adjusted.

Thu, 04/17/2014 - 17:17 | 4670905 NoDebt
NoDebt's picture

CPI also doesn't take into account rising TAXES.  

Wages aren't just flat, they're DOWN, in terms of what you take home.  Then with what's left you can pay for those increasingly costly goods and services.

Thu, 04/17/2014 - 17:42 | 4670967 NotApplicable
NotApplicable's picture

Thanks for reminding me that I gotta pay the RE taxes on 'my' property. The fun part is walking through their new million dollar courtyard to get there (which was for a renovation of the last screwed up multi-million dollar renovation a few years back).

At least now, they've got a nice place to hold the tax lien auctions.


Thu, 04/17/2014 - 17:18 | 4670906 sixsigma cygnus...
sixsigma cygnusatratus's picture

CPI: Another barbarous relic shot to hell!

Thu, 04/17/2014 - 17:18 | 4670909 oklaboy
oklaboy's picture

the same 1910 mercury dime buys the same amount of gas today.

Thu, 04/17/2014 - 17:34 | 4670933 Tall Tom
Tall Tom's picture

"Mercury" Dimes were not minted until 1916, the 1916-D being a Key Date and amongst the most valuable.

The Barber Dime was in use in 1910.


And just where are you getting 43 Times Face Value??? (A gallon of Gas costs $4.30 in San Diego, CA, USA)


Do not tell me that Gasoline was selling for $0.43/Gallon in 1910 because it was NOT. It was about a Dime per Gallon. It was the Volatile Garbage off of the Barrel of Oil. That is why the Internal Combustion Engine was burn off the Garbage from Cracking.


Junk Silver right now is at 12.75 times Face Value.


Gasoline is much more expensive due to restricted supply and associated Transportation Taxes than it was in 1910.


Thu, 04/17/2014 - 17:34 | 4670952 NOTaREALmerican
NOTaREALmerican's picture

1910 prices,  no gas but you can get knee pants.



Thu, 04/17/2014 - 17:56 | 4671012 lordylord
lordylord's picture

Junk silver is ~16x face. 

Thu, 04/17/2014 - 18:55 | 4671178 MrBoompi
MrBoompi's picture

There is no restricted supply of gasoline.

Thu, 04/17/2014 - 17:31 | 4670946 hairball48
hairball48's picture

Not really. Mercury dimes weren't minted until 1916, but we take your point :)

Thu, 04/17/2014 - 17:24 | 4670924 pods
pods's picture

CPI is working exactly how they want it to.

Just wish anytime someone equated low CPI to "no inflation" their head would explode.

World would be a much nicer place.


Thu, 04/17/2014 - 17:27 | 4670929 hairball48
hairball48's picture

An honest CPI would require government to be "honest".

Pardon me if I don't hold my breath on that happening.

Thu, 04/17/2014 - 17:27 | 4670930 AdvancingTime
AdvancingTime's picture

 The modern economy that has evolved over the last several decades is loaded with interwoven contracts reeking of contagion. If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar. Never before has mankind diverted such a large percentage of wealth into intangible products or goods.  I contend this is the primary reason that inflation has not become a major economic issue. Like many people I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.

The timetable on which events unfold is often quite uneven and this supports the possibility of an inflation scenario. A key issue being one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment or stop driving the twenty miles to work? Answer, it could be months before your car is repossessed so you buy gas. It is important to remember that debts can go unpaid and promises be left unfilled. More on how we have sowed the seeds for inflation to suddenly strike in the article below.

Thu, 04/17/2014 - 17:30 | 4670939 kchrisc
kchrisc's picture

It's time to ditch the CPI's creators and manipulators and the thieving banksters that make a CPI necessary in the first place.


"My guillotine will do it."

Thu, 04/17/2014 - 17:31 | 4670944 Strider52
Strider52's picture

Last year, Top Sirloin used to go on sale for $2.49 a pound. This year? On Sale at $6.99 a pound.

Thu, 04/17/2014 - 18:03 | 4671033 kchrisc
kchrisc's picture

According to the propaganda media you are:

1) A liar


2) Should be happy that the economy is back and booming.

Fri, 04/18/2014 - 01:18 | 4672217 Quantum Nucleonics
Quantum Nucleonics's picture

Beyond the price difference is a steep decline in quality.  To borrow your example, beef of the same quality at the $2.49 price point now goes for $15.99.  The 6.99 stuff you're buying used to go to Mickey D's and dog food.

Thu, 04/17/2014 - 17:35 | 4670957 hairball48
hairball48's picture

I can remember that when I got out of the USN in mid 70's "hamburger" being 3 pounds/dollar. Around here it's $4.99/pound give/take.

Thu, 04/17/2014 - 17:48 | 4670984 Jam Akin
Jam Akin's picture

The pink slime content might be somewhat higher today as well....

Fri, 04/18/2014 - 08:06 | 4672526 Agstacker
Agstacker's picture

Pink slime with a side of soylent green, making my mouth water :)

Thu, 04/17/2014 - 17:35 | 4670958 CHX
CHX's picture

Clown Pricing Index

Thu, 04/17/2014 - 17:36 | 4670959 TalkToLind
TalkToLind's picture

Respect the CPI, bitchez.  There is no inflation!

Pay no attention to the bearded woman behind the printing press.

Thu, 04/17/2014 - 17:39 | 4670963 abatis
abatis's picture

Sure it is all screwed up, but I think in some areas the author overstates the real inflation. For instance on the $6000 medical deductible that is only a hit if you have medical expenses for that amount. I would guess the majority of healthy insured Americans rarely would hit the $6K in a normal year and thus loose that purchasing power. It is some % of the $6K but not all of it for everyone.

Thu, 04/17/2014 - 21:43 | 4671759 BeanusCountus
BeanusCountus's picture

You are right, not every year will someone reach that co-insurance maximum out of pocket. But nowadays, it is more often than you would believe. Its only a matter of time until it happens to all. No one can avoid medical expenses long term. Everyone gets sick, whether you lead a healthy lifestyle or not. And chronic conditions hit the number every year.

We will be raising employee max out of pockets this year from effectively zero to around $1,750 per family member. And I expect many will feel the direct impact.

Thu, 04/17/2014 - 17:39 | 4670964 ebworthen
ebworthen's picture

If Brian Williams on the Nightly News says that inflation is low - it is.

People will go to the store, pay 25% more for something, pay increased insurance premiums and deductibles, but "there is no inflation problem".

The official government lies and MSM propaganda are designed to persuade and control; to make people complacent and obedient and to keep them from talking about real problems amongst each other.

Thu, 04/17/2014 - 17:43 | 4670970 NotApplicable
NotApplicable's picture

Why inflation is so low, I can fit $100 worth of groceries in a single bag!

Thu, 04/17/2014 - 18:04 | 4671037 Uncle Remus
Uncle Remus's picture

Do you even need a bag?

Thu, 04/17/2014 - 18:16 | 4671050 TalkToLind
TalkToLind's picture

I'm amazed at how loyal the presstitutes are...if it's on the script, those bitchez will read it no matter how absurd or destructive it might be.

Thu, 04/17/2014 - 21:08 | 4671628 cynicalskeptic
cynicalskeptic's picture

If you were old enough you saw Cronkite's op ed on Vietnam


That expresion of truth/opinion did make a difference.  LBJ was to have stated, if he lost Walter Cronkite, he had lost most of America.

Gone are the days when people like Cronkite or Murrow provided a conscience for America. 

Thu, 04/17/2014 - 17:43 | 4670969 buzzsaw99
buzzsaw99's picture

if they do away with the cpi then what else would they use to fuck me on my tips yield?

Thu, 04/17/2014 - 17:51 | 4670999 ebworthen
ebworthen's picture

Exactly.  And Social Security COLA increases.

Thu, 04/17/2014 - 17:45 | 4670977 Bryan
Bryan's picture

"abandon the simplistic notion that one number of inflation has any meaning in a complex economy with numerous subsets of exposure to market costs and the loss or gain of purchasing power."


That's the money line, right there.

Thu, 04/17/2014 - 17:50 | 4670987 Hal n back
Hal n back's picture

Just adding to this all, look at the last 4 bls cpi reports for health insurance. That nominal when we all know its much more. The must have surveyed new york where they have epo's where you are effectively covered in your own neighborhood.

That why ny state experienced only small inflation in insurance premium.

Does not make a difference.

We have 18 trillion of funded debt and growing.

6 tril is held by foreign entities. Close to 5 trillion held by medicare and social security. Almost 4trillion held by Fed paid for by printing.

Thats 15 of the 18.

Fed would like to exit but first it has to taper while facilitating a recovery.

Medicare and social security are going to start redeeming to pay for benefits.

Foreign entities would like a way out without bringing everything down on them selves including the remaining wrath of the US which is being withheld for when its needed.

Pension fund will have to run for exits if the dollar or treasuries crack,

Leaving money markets.

We are finished. We need to create a pool with dates this whole thing fails.

Watch Japan. We will have a no bid treasury market sans the Fed. Then we have a no ask gold market: for physical.

Thu, 04/17/2014 - 17:57 | 4671016 Save_America1st
Save_America1st's picture

you meant the time to ditch it was 30 years ago, right?

Thu, 04/17/2014 - 18:03 | 4671034 Uncle Remus
Uncle Remus's picture

Loooong past time to ditch the consumer mentality.

Thu, 04/17/2014 - 18:06 | 4671042 I Write Code
I Write Code's picture

gasoline (or oil if you prefer) is proxy for energy, energy is proxy for inflation since almost everything has a significant energy component.  gasoline has gone from $1.86 ten years ago to $3.62 today (more like $4.20 in Los Angeles), but by the historical chart that's 100% over 10 years is about 7% compound, when official inflation over that time has been under 4%.  surprize, surprize.

Thu, 04/17/2014 - 18:13 | 4671058 Goldilocks
Goldilocks's picture

"The solution? One, abolish the Fed and let the market discover interest rates, and two, abandon the simplistic notion that one number of inflation has any meaning in a complex economy with numerous subsets of exposure to market costs and the loss or gain of purchasing power."


Rome: Terrorista [OFFICIAL VIDEO] (3:04)

Thu, 04/17/2014 - 18:17 | 4671066 Seasmoke
Seasmoke's picture

People better demand a Jubilee. There is no other possible way !!! 

Thu, 04/17/2014 - 18:21 | 4671075 smacker
smacker's picture

Charles, in addition to all those reasons you list about CPI, there is another factor why government loves to keep CPI at low levels: it's because nominal GDP is adjusted downwards by CPI to get the official GDP that gets published. This is the figure that politicians love to crow about when it's positive.

But if you were to calculate "real", "genuine" GDP it would be far lower than nominal GDP that's currently collected because all sorts of garbage have been included in GDP calcs to beef them up. If you then adjusted it down by "real", "genuine" CPI, you would almost certainly end up with a negative GDP figure. The political elites who mis-manage our economies would have nothing to crow about.

As I've said many times: "real", "genuine" GDP in most western nations has been flatlining or negative for a generation or more.

Thu, 04/17/2014 - 21:11 | 4671641 cynicalskeptic
cynicalskeptic's picture

Under reported inflation makes the GDP look HIGHER.   Most of the Bush43 years were NEGATIVE GDP if you adjusted for the REAL rate of inflation.

Since Carter the pols have realized it's easier to LIE than have people see the truth and hold them accountable.

Fri, 04/18/2014 - 07:08 | 4672448 smacker
smacker's picture

I agree. I thought I'd explained that.

"Fixing" GDP is achieved by a) stuffing the GDP measurement with countless garbage elements and b) under reporting inflation.

Correct both of those deliberate manipulations and we are where I've said for some time: GDP has flatlined or been negative for a generation.

The ruling elites don't know what to do, so they lie.

Thu, 04/17/2014 - 18:26 | 4671084 surf0766
surf0766's picture

When will the hedge begin presenting its'own CPI?

Thu, 04/17/2014 - 18:29 | 4671094 Rising Sun
Rising Sun's picture

The CPI is top quality goobermint bullshit/propaganda.


You can't cancel such professional lying - it serves a purpose:  to deceive the muppets into believing one thing when the opposite is true.


We can break up such tradition.


Oh and fuck you Barry you cocksucker!!!!!

Thu, 04/17/2014 - 18:43 | 4671143 22winmag
22winmag's picture

You can ditch GDP too. It's mostly a measure of industrial inefficiency and pointless consumerism, plus it's calculated by... well, whatever the flavor of the day is.

Thu, 04/17/2014 - 18:36 | 4671123 SweetDoug
SweetDoug's picture




It is becoming more and more difficult for the $?φ?@†$ to hide the real inflation. You can only walk into a grocery store and watch prices going up 60% over the last few years for so long, until even the dullest of the dullards, starts to figure out that we're being lied to by the govy.


And when this finally breaks, and they can't hide it anymore, they won't bother. They'll just find something to blame it on.


And then you watch inflation sky-rocket.



Thu, 04/17/2014 - 18:48 | 4671157 Never_Put_Down
Never_Put_Down's picture

Time to end it? no, now is the time when it becomes very obvious to everyone the fraud involved with fixing the CPI. There's no where to hide real inflation anymore, ending the CPI would let the fraudsters off the hook


Thu, 04/17/2014 - 18:49 | 4671162 Colonel Klink
Colonel Klink's picture

Time to ditch the Federal Reserve!  AND all their BS indicators.

Thu, 04/17/2014 - 18:59 | 4671184 MrBoompi
MrBoompi's picture

The CPI has been manipulated to screw retirees out of COLA adjustments.

Thu, 04/17/2014 - 20:39 | 4671192 Seize Mars
Seize Mars's picture

Why does the government promulgate this lie?
The same reason for the immigration act of 1965 and the gun control act of 1968.

Thu, 04/17/2014 - 19:42 | 4671356 kurt
kurt's picture

How about this:

Fix the fuckin' CPI to reflect reality!

Thu, 04/17/2014 - 20:05 | 4671433 hairball48
hairball48's picture


What reality?

Thu, 04/17/2014 - 20:54 | 4671581 Shizzmoney
Shizzmoney's picture

Most folks think CPI is a cop show on CBS

Thu, 04/17/2014 - 21:48 | 4671771 AndrewJacksonsGhost
AndrewJacksonsGhost's picture

Pffft, since Obama the annointed one has been preezy, just about every metric measured has been recalculated, including but not limited to......GDP, inflation, unemployment, illegals thrown out, etc et al


I measure the GDP this way, take what they give us for the GDP growth rate and then minus 50% of the annual deficit as compared to GDP. So, if we have a GDP growth rate of say 3% and the annual deficit is 10% of GDP, we actually have a GDP growth rate of a -2%.


Remember when Krugman arse stated we would have to wait for historians to tell us if we are in a Depression? Yeah, he agrees with me but would not come out and say it, being the sycophantic arse he is.


Imagine what the inflation rate would be if we used the same metrics as we used in the first Depression?

Thu, 04/17/2014 - 22:17 | 4671870 the0ther
the0ther's picture

Wish in one hand and shit in the other

Thu, 04/17/2014 - 23:42 | 4672057 hooligan2009
hooligan2009's picture

truth is stranger than fiction... a politburo should stop writing novels

Thu, 04/17/2014 - 23:43 | 4672059 DOGGONE
DOGGONE's picture

Here is what using CPI-U gives:
Real Homes 1958-1998 was NO change -- even though both CPI-U and nominal home price increased by the factor 5.6!
Occam's razor gives the choice that BOTH metrics are correct! This likely choice is widely ignored.
I do wonder if attacking CPI-U is a brainwashing method -- to undermine the compelling look of
I note that Real Homes and Real Dow are NEARLY NEVER shown to the people -- in our free, pluralistic America. Consistent with collusive brainwashing! Consistent with 'education' as a four letter word!

Fri, 04/18/2014 - 00:45 | 4672151 PrawnStar
PrawnStar's picture

Oh, your premise about CPI is right, but your argument is so so wrong. College tuition and healthcare are a footnote for the average family. Top five budget items for the average family in order of importance: Housing, food, mobility, utilities, and the GI Joe with the Kung Fu Grip. What squeezes all of America right now is the tripling of protein and produce prices at Walmart in the last decade, the doubling of utility prices (if you include internet/phone/tv in utilities), and the long slow upward pressure on fuel (obviously affecting mobility), with all its cascading effects on fad product prices. College loan payments can always be skipped. Healthcare for those who sought/seek it has always been a paycheck deduction and factored into the budget. True, that cost has increased for some. But you need shelter, you gotta give your kids real food, your wife needs Oprah or Pinterest, and your kids need a birthday party at the Bouncy House.

I'm in an extended crowd where healthcare costs haven't changed much, and college loans aren't a factor, and we're all squeezed by the unpublished reality of inflation. I don't know anyone in New York, DC, San Fran, or the Gulf Coast who isn't stretched thin right now.

Fri, 04/18/2014 - 03:25 | 4672327 lucyvp
lucyvp's picture

I can't believe shadow stats either.  Their numbers are too high.  If they were right we would all be eating dirt, but I do believe the gvt's numbers are purposely set low. 

Some ideas are one the billion price program shows a dramatic split between cpi and the bpp in 2012.

Just my health insurance which I estimate at 15% of my wages went up 20% last year.  It has pretty much been going up 5% per year, year in and year out.

A very balanced and analytical article on CPI can be found here.


Fri, 04/18/2014 - 08:30 | 4672571 optimator
optimator's picture

You're all wrong.  Inflation is healthy.  Two percent a year is a requirement for a healthy economy.  The Federal Reserve is working very hard to reach their goal of 2%.  During the old Soviet Union I once asked a friend living in one of the satellites why the Soviet said they built the Berlin Wall to keep the West out.  His simple answer was, "What else can they say".

Fri, 04/18/2014 - 10:20 | 4672883 Enectus
Enectus's picture

About the last paragraph; the question should rather be "what's the difference between Crony-Communism and Crony-Capitalism? Nothing.". In that respect, look at this; "What's the difference in outcome between Communism and Capitalism, provided there is no abuse? Nothing.". HA

Fri, 04/18/2014 - 13:51 | 4673426 Duck077
Duck077's picture

Your general thesis is correct.  The CPI is a lie, but the majority of Americans are too stupid to understand this.  The Feds are going to inflate their way out of the current mess that we're in.  Or at least, they will try.


There are two options with our current financial mess.  Inflate, or write off bad debt.  The Gutless Feds and the stupid Yellen are picking the easy way, for now at least.  It will end in a mess.  Shore up your assets and good luck.

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