What’s the real inflation rate? Does anyone really believe 5.6%?

What’s the real inflation rate? What’s your guess… 25% … 20% … 15%?

Are you as shocked as I am about the high cost of living … double digit increases in everything but your salary?

I saw a gallon of laundry detergent in the grocery store yesterday that was $15.99 … Unbelievable! . Does your car and house insurance go up over 10% every year? Has your electric bill doubled even while using 25% less electricity. Does gasoline to get to work takes 15% of your take home pay every week?

How come the Cost of Living Adjustment in 2007 was only 2.3 % ????

According to the International Fund for Agricultural Development (IFAD) “In virtually all countries, food prices have increased in 2007 and early 2008. The extent to which they have increased varies considerably country by country, and indeed within countries, from 10-20 per cent to 200 per cent. Consumer prices have typically increased to a greater degree than producer prices.

Here are a selection of various food price increases over the past year from the Cattle Network. Source:  USDA/NASS

Percentage increased:

Turkey 9.77%
Eggs   28.32%
Milk   15.37%
Cheese 10.59%
Barley     52.56%
Beans   64.29%
Corn     46.70%
Cotton     37.95%
Flaxseed 134.46%
Hay     20.29%
Lentils 147.73%
Oats     38.96%
Peanuts 12.29%
Peas    62.38%
Potatoes 15.85%
Rice    50.00%
Sorghum 41.45%
Soybeans 72.75%
Sunflower 65.06%
Wheat      80.33%
Apples  26.02%
Grapefruit 14.03%
Lemons  155.16%
Peaches 15.61%
Asparagus 8.60%
Cauliflower 50.20%
Celery    106.01%
Lettuce 23.53%
Onions     30.99%
Sweet Corn 7.94%
Tomatoes 13.48%

According to the US Dept. of Labor Statistics the Consumer Price Index  from July 2007 to July 2008 rose 5.6% .

Only 5.6% ???? How can that be? Have your costs risen by only 5.6%? Is anyone getting a 5.6% pay raise?

Quoted from a World Net Daily News article talking about why these government figures are artificially low.

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“Telling the truth about inflation would require the Federal Reserve to raise interest rates and that would be bad for economic growth.

Besides, hundreds of billions of dollars in government entitlement payment outflows depend on the inflation number.

For instance, federal law mandates that Social Security checks increase thanks to “cost-of-living adjustments,” or COLAs, that are supposed to compensate for inflation.

So, higher inflation numbers cost the federal government millions more in increased Social Security payments.

But when the Bureau of Labor Statistics intentionally rigs the Consumer Price Index calculations to low-ball the inflation rate, Social Security entitlement payments are kept level.

As a result, retirees quietly lose billions of dollars that should have been paid out, had the cost of living numbers been reported honestly. But the government saves the expense.

How does the federal government manipulate inflation numbers?

The Consumer Price Index, or CPI, is the central statistic the federal government uses to calculate inflation.

The CPI is a complex government statistic that was introduced in the 1920s to track the market cost of a “basket of goods and services.”

Beginning during the Carter administration, federal economists cleverly redefined the CPI, with the goal of removing from the index expensive items, including food and energy, that would push the CPI higher.

Today, the Federal Reserve when setting interest rates focuses on a variation of the CPI that measures “core inflation.”

According to the Forbes “Investopedia,” core inflation excludes items such as food and energy because food and energy “face volatile price movements.”

In other words, since food and energy prices can spike upwards, as they have this year, the Bureau of Labor Statistics calculates “core inflation” without food and energy prices, under the rationale that food and energy price spikes are merely temporary price shocks that would distort the measurement of underlying long-term inflation.

To a family faced with paying rising food costs to feed the kids and skyrocketing gas costs just get to work, the definition of “core inflation” at 2 percent is a joke, not at all reflective of the increased dollars the family has to shovel out just to get by.

Even more disturbing, the Bureau of Labor Statistics’ calculation of “core inflation” is not limited merely to throwing food and energy prices out of the CPI.

The price of any good or service in the CPI market basket prone to spiking can be thrown out, under the rationale that the items with the largest price changes reflect passing market disequilibrium that would distort the measurement of long-term trends.

When removing expensive items from the CPI market basket of goods and services was not enough to depress inflation numbers, the Bureau of Labor Statistics innovated even more, changing the “weighted factors” used in calculating CPI statistics, so the results end up under-reporting the true inflation people experience in everyday living.”

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In the UK they have already discovered the “Cost of Living Index” does not reflect the actual cost of living.

“Under the headline ‘The Real Rate of Inflation’ , The Daily Mail launches its new Cost of Living Index. The idea is to show that the Consumer Price Index’s 2.5 percent rate does not reflect the actual cost of living.

The Mail finds that the price of food is up 15.5 percent, with the price of tea bags up by two-thirds for some reason. People’s gas and electricity bills are up by 12.5 and 12.9 percent respectively. Indeed, the only things that seem to be going down in price are booze and broadband.”

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They aren’t faring much better in Canada .. take a look at their latest release of the Canadian Consumer Price Index .

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We’re all between a rock and a hard place … You can only cut non fixed expenses … but you have to eat … you have to pay the rent … you have to pay taxes … you have to pay insurance … you need to have gas to get to work and you need to have electricity.

I don’t think there is much we can do besides pray the economy gets better … but I will tell you one thing … I’ll pound my clothes on a rock by the river before I’ll ever pay $15.99 for a gallon of laundry detergent.

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One response to “What’s the real inflation rate? Does anyone really believe 5.6%?

  1. Pingback: GNC-2008-09-16 #408 Time to Bash iTunes! | Geek News Central

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