February 27, 2006

House prices doubled. Gas prices doubled. Real estate taxes doubled. Health insurance costs doubled. Yet no inflation?

Another scam to add to the list (thanks 41 caddy for starting the discussion) is the way your government calculates inflation - rigged so that they don't have to increase the payouts on social security or pensions

But you can't kid a kidder. We all see prices skyrocketing, and people on fixed incomes falling behind - way behind. Especially when they get their new property tax bills. They could sell their home, cash out, and rent, but if they don't they gotta come up with the new cash. Refi?

Thanks to China (oh, wait, I mean WalMart) inflation on corn and beans is deflation. But we'll need a lot of corn and beans to make up for healthcare, or oil, or electricity, or taxes.

Statistics lie on the true cost of living

Take inflation. It's true that measured inflation is very low, but look at all that's left out.
In the case of health care, the government's consumer price index tracks the cost of medical services. But it is less precise about tracking who pays for them. If your employer's health plan is increasing your share of premiums and cutting the company's contribution or if the plan is increasing out-of-pocket charges or reducing what drugs it will cover, this shift is accounted for indirectly, after a lag of two years. But it hits your pocketbook immediately. And if rising medical costs deter you from seeing the doctor, that doesn't show up in the index at all.

Or consider housing. There are parts of the country where housing prices have been declining for a decade because few people want to move there. Statistically, these declines get averaged with astronomical housing costs in major metropolitan areas to show only modest average housing inflation. Around big cities, prices have plateaued at very high levels that are plainly outstripping incomes.

Try telling a young person in Greater Boston or New York or LA that there's no serious housing inflation or that rents have not increased faster than earnings.

The inflation numbers also fail to capture pocketbook realities for retired Americans. A low official inflation rate plays a cruel trick on seniors. For starters, it means that cost-of-living adjustments in Security Security checks are mere pocket change. One new prescription can more than eat up this year's Social Security increase


Anonymous said...

When times get hard people get angry. Just look at what people are saying to those they disagree with in other posts. It is brutal.

It sure looks like government inflation calculation is the ultimate betrayal.

Out at the peak said...

I was just commenting on this subject. True inflation is out of control. The Federal Reserve (Greenspan) completely messed up by keeping interest rates down for so long as well as cranking the printing press.

Fed, please go back to the 1988 definition of inflation.

Rob Dawg said...

Wait for the the other foot to drop. We are entering a period of deflation and I fully expect the inflation calculation to be "updated."

Anonymous said...

I was just reading an article
that stated that SS payments would be 70% higher today if the CPI used prior to the Carter Admin were still in use. Low inflation #'s are also helping to keep Int Rates low, which is causing heavy burden on Defined Benefit Pension plans. A double pronged attack on widows, orphans and retirees by the cabal.

Anonymous said...

I've thought inflation was under reported for years. Just a quick look at WalMart last summer confirmed my worst fears. I used the laspyres (fixed basket) theory to test my assumptions and the final bill was almost a 10% increase for the same goods I always purchase (ground beef, milk, eggs, toilet paper, charcoal).

But the scary thing is that economists believe the CPI overstates inflation by approx. 1%.

blogger said...

the gov't stopped using housing cost many years ago for the cpi and went to monthly rent

we all know what happened - housing went nuts - up over 100% in the past 5 years in many areas, while rents collapsed

so, cpi looks great!

Anonymous said...

one just has to walk into your local Home Depot to see inflation is out of control, the cost of everything in that store is up bigtime

Bubblepricker said...

Anyone who pays taxes knows what inflation is when they bump into the Alternative Minimum Tax!

arizonadude said...

Their inflation data is garbage! I don't where they get their numbers but garbage in = garbage out. Us in the real world know what is really going on. I heard bernake talking about stable prices for confident investment decsions. Where have they been for the last 5 years?

Anonymous said...

You read my mind Keith.

I was just wondering today, what DO they include to come up with the inflation figures?

We know it's not housing, energy, food, eg. basic cost of living expenses.

So what is it ?

Anonymous said...

The biggest offense is "hedonic adjustment": if a computer runs twice as fast, its "true price" is only half as much. Abra cadabra!

But for sheer willful refusal to accept reality, nothing beats "substitution": if beef goes up in price, some people will substitute chicken, or shop at a different store, etc. Basically, if something goes up in price...don't count it!


Anonymous said...

Click here: http://www.weedenco.com/welling/Downloads/2006/0804welling022106.pdf

This should give folks a better idea on the scope of this problem

Anonymous said...

My fastest growing expense is my healthcare cost. I signed up with Pacificare (I'm self-employed) 7 years ago.

My monthly premium was $147/month. years later it is $830/month, and I had to accept considerably higher copays to keep it that low.

That calculates to a 25% PER YEAR ANNUALIZED increase!

That is just ONE thing that keeps going up and up. The CPI is pure fiction, but don't expect the mainstream press to EVER question it.

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