In January 2008, the Bureau of Labor Statistics (BLS) changed its adjustment methodology for the CPI number. Martin Hutchinson, an economic and market writer, looked at the CPI numbers and used the old methodology. The result, an annualized inflation rate of 9%. Link to article (requires a subscription).
"Before the adjustment for typical seasonal price fluctuations, the CPI increase was 0.9%. The Bureau of Labor Statistics, which compiles the index, has generally adjusted March numbers downward. In the decade 1998-2007, the average drop was 0.2 percentage points, and the maximum was 0.3. But this year it was 0.6 percentage points. The BLS changed its adjustment methodology in January 2008, but the process appears to have gone wrong.
If this year had followed the 10-year average, the monthly inflation would have been 0.7%, which annualises to an annual rate just below 9%."
More on the flip.
As Mr. Hutchinson further explains -
"That is remarkably close to the inflation rate in China, where the central bank is busy raising rates and squeezing financial institutions. It's well above the rate in the eurozone, where the European Central Bank has held rates constant, without letting troubled banks run out of money. But the Fed has been cutting while prices rise."
The BLS is trying to tell us Americans that prices have only gone up 4.5% in the past year. How many of us believe that?
Other countries are reporting inflation rates that are over 10%, but somehow, with a dollar that is becoming worthless by the day, we have inflation under 5%. If you beleive that I have a couple of well performing sub prime loans to sell you.