What is the real inflation? According to the Bureau of Labor Statistics, or BLS, the annualized core inflation was 1.8% for august. However, some are questioning the official numbers. For example, the American Institute for Economic Research (AIER) estimated that inflation was 5.2% in 2012. Officially the inflation for that period was 1.9%.
Another measure is done by Shadowstats, which estimates the inflation at over 8%. Those numbers also depend on what type of methodology is used. When using methods from 1980 the inflation will be higher than using current methods. The methodology has changed many times over the years. Is this just a coincidence? Is the BLS accurately calculating the inflation? Or is it just BS?
Investors like Marc Faber and Peter Schiff also say that inflation is considerably higher. Peter Schiff estimates that the real inflation is between 7% and 10%. The prices of commodities have also been rising faster than the official inflation.
Some economists, like Paul Krugman, don't question the official inflation numbers but what about the US Postal Service? They've been losing billions because they are not allowed by law to raise their prices more than the official rate of inflation. Their costs have obviously gone up more than that.
The Big Mac index is also an interesting example. This index has tracked the price of what a Big Mac costs in different countries since 1986. It has shown that since the quantitative easing started the price has risen considerably more than the official CPI. In 1986 a Big Mac cost $2.36 dollars. Today that cost has risen to $4.33 but if the price had only risen as much as the official CPI the same Big Mac would only cost $3.49.
The inflation seems to be somewhere between 5% and 10%. This has huge consequences. Not only has the average American gotten poorer but the higher inflation means that thereâs no growth in the economy. The official growth rate for the second quarter was 2.5%. If instead the real inflation is 3% to 8% higher this would mean that the economy has been contracting, not only for the last year but for the last six or seven years. Most likely the economy is contracting right now at a rate of 2% per year.
All the government is doing is adjusting the numbers so that people think that the economy is recovering. In reality there is no recovery. America is in a deep depression.
What do you think? Do you think the inflation is higher than 1.8? Comment below and let me know.