Monday, June 23, 2008

Inflation for Dummies

The Federal government is claiming an inflationary rate of between 2 and 3 percent. This is a manipulated number whose sole purpose is to keep the stock market stable and not cause a panic in the general population. Everyday items such as food and gas are considered volatile and not included in the math even though they are by far the most impacting expenses on the average household.

Let’s propose a new way, an honest way of looking at inflation. The Survival Inflationary Index will be based on two items every family must have to survive, gasoline and food. A family can exist living in a tent in the woods but you still must eat and get to work. We will pick a handful of grocery items and track the cost from May of one year to May of the next, average it and come up with a number. Factor in gas increases and you have it. Real Simple, Real Honest.

Here are a few examples of inflation that have directly affected me.

My youngest boy Conway loves green beans so I usually pick up a few small easy open cans on the trips to WalMart. Over the past year they have gone from $.45 a can last summer to $.58 currently. This represents a jump of 28 percent in one year.

Driving that giant truck is costing me a fortune. Last summer I was taking weekly trips to the cabin, yes it was costly but affordable. This year is a different story, gas has gone from $3.02 per gallon to $3.94, a one year increase of 30 percent. Needless to say I have greatly cut back on my trips this summer.

Cream Cheese Jalapeno Taquitos at 7-11 are one of my favorite junk foods. (yes I know they are bad for me) The past year has seen the price go from $1.79 to $2.22 for two of the delicious cream filled tubes. This is a 24 percent jump.

I am no economist but it appears to me that inflation is closer to 27 percent on the items necessary for survival. My grocery bills have increased at least 27 percent over last year so I feel that this is an honest and reasonable number.


Mayberry said...

I concur with your "real" inflation figures. The bastards in the media, who are in bed with their corporate sponsors, will never tell the real truth. I've seen groceries go up by 20 to 30 percent in the last year, and we all know where gas is. Electricity too, at least around here. These are the big 3 for most families, besides the mortgage or rent, and are conveniently excluded from reported inflation figures. And the sheeple lap it up.... Disgusting.

The Other Mike S. said...

With regards to food inflation, the major "smoke and mirrors" technique was actually devised during the Reagan administration by then-Fed Chairman Greenspan.

It was called Substitution Index or something like that. The food inflation index was made up of the typical "basket" of food purchased by Americans. If/when one of the items began to spike in price, good old Alan surmised that Americans would substitute that item with a less expensive one.

The famous example was steak. It was a part of the basket. For some reason, it spiked in price, and the Fed substituted it with less expensive hamburger, thus keeping the inflation index in check.

Every administration since then has followed suit. It's a bunch of crap. For all intents and purposes, the numbers are fabricated. They are like those novels that tout themselves as, "Fiction based upon fact". said...

Mmm 7-11 cream cheese taquitos.

Anonymous said...

There are a whole host of smoke and mirror manipulations used on the government's inflation measuring indexes, enacted over period of some 30 years to deliberately overstate the health of US economic activity and hide bad news/rampant credit expansion/inflation (to keep foreign investment flowing in, pay less on COLA and SS adjustments, keep the sheeple playing along, etc).
These are well documented in Kevin Phillip's new book, 'Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism', Harper's Magazine (May 2008), economist John Williams of fame, various goldbug websites, and a host of others including Nobel laureate economist Joseph Stieglitz. "Lies, damn lies, and statistics", as it were.

One of my personal favorites is hedonic adjustments, that is, to say that a car made today is better than a car made 5 years ago (it is), and hence is a better value for the money, which has the sinister effect of making the new car, which costs more, actually cost less for the same 'value' in terms of the government's numbers.
You pay more, but they computer it as if you actually paid significantly less!