Mike -
usajournal.com
"Inflation rate double official figures report says..."
"...Federal Government Fixed Numbers
Since the early 1990s, the federal government has been gradually altering the way CPI is computed by making various adjustments
According to economist John Williams, who directs the Shadow Bureau of Government Statistics, a private firm that monitors government number crunching, the federal government has been using several clever and questionable techniques to keep the stated inflation rate low.
Mr. Williams estimates that the current annualized CPI is above 5 percent ? more than double the 2.4 percent annual rate reported by the federal government.
To create a false and artificially low rate, Mr. Williams reveals, government economists use the technique of "geometric weighting."
Mr. Williams states that geometric weighting "gives a lower weighting over time to goods that are increasing in price." The first year that geometric weighting was fully implemented was in 1999.
The thinking behind geometric weighting goes like this: if prices rise on a brand name product, consumers just move to generic brands, or use other types of products.
It?s s nice theory, but consider why such thinking might not apply to real people. Gas prices have increased dramatically. Have motorists stopped driving cars? Have they begun using buses? Bicycles? Walking instead? The answers are likely no.
Quality adjustments are another way the government keeps the stated inflation number low.
For example when the government required that an additive be put into gasoline to make it cleaner, the CPI was adjusted to not reflect the price increase that was directly related to the additive.
In other words, the end consumer saw higher prices, but because the government thought they were getting a better product, they shouldn?t think of this as inflation!
Other quality adjustments include government-mandated changes to auto production such as the addition of catalytic converters. Mr. Williams says these adjustments are "not legitimate if the buyer doesn?t have any alternative. The buyers are stuck paying the higher price."
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Regards, Don |
