CNBC Reports CPI Rigged, New Indexes Show Inflation Nearly Double
By Craig R. Smith
BLAST FROM THE PAST! ~ May 16, 2005
"Number's don't lie, people lie!"
Modern culture is based upon our trust in numbers. They are commonly accepted as the means to achieving objectivity in analysis, certainty in conclusions, and truth. Numbers tell us about the health of our society and they provide a demarcation between what is accepted as safe and what is believed to be dangerous.
But in reality, numbers are nowhere near as objective as we often take them to be. They do not exist in the air, but instead always come from someone's computations. Someone put them there and they often hide his or her intentions or assumptions.
It is easy to use numbers to lie, but it's very hard to discover that lie because our culture tells us that numbers are objective and true. For the same reasons, it is easy to see that a whole economic system may also be reported falsely when using only government numbers to describe it.
For example, last week CNBC "Squakbox" discussed the Consumer Price Index, the top U.S. inflation indicator. After reviewing all the facts, CNBC concluded that the CPI is rigged, and not representative of the true rising cost of living that is widely reported.
CNBC discovered that government statisticians arbitrarily evaluate an item, like a computer, by comparing the cost of the same computer last year, but since this year's model has more features, they calculate that the net price has dropped by 29 percent. No joke!
A deceptively low "official" CPI number hurts everyone, but especially those who rely on SSI and fixed retirement incomes. Cost-of-living income adjustments based off the CPI are not able to keep pace with higher "real world" prices. Even Fed Chairman Alan Greenspan has said that official CPI numbers have no basis in reality.
It's nonsense to say that we live in a world of 2 to 3 percent inflation today, because the government has systematically stripped out of their CPI virtually all of the "real world" indicators, such as rising home costs.
Stamp Price Index reveals "real world" inflation
Here's another way to judge the true rate of inflation using the U.S. Postal Service stamp price statistics. According to the government, the cost of a postage stamp reflects only true cost-of-living increases, since the USPS is not-for-profit, right?
USAToday reports, "The price for a first-class stamp jumped by 517 percent between 1970 to 2004, compared to the official CPI inflation gauge which has only registered a 293 percent increase." That means in 1970 a $10,000 car now costs $51,700, instead of $29,300. That's a whopping 76 percent discrepancy!
If we use the price of a postage stamp index as a "real world" inflation gauge, we've had substantially rising inflation during a time the government has reported that inflation is almost nil. And in 2005, the U.S. Postal Service is proposing another increase in the price of a first-class stamp from 37 cents to 39 cents – a 5.4 percent rate increase.
In whose numbers can you trust?
It was a British economist who first said, "I never trust anything the government says until they officially deny it!" A sad statement, but apparently true regarding government statistics.
The numbers that you can trust are not as easily found. Finding "real world" statistics involves stripping out the political-financial spin by cross-checking the numbers with multiple sources.
For example, if a financial broker reports a certain rate of return over a period of time for a particular investment, don't just accept it, do an Internet search to see if the numbers quoted have really panned out over the long term.
Financial research takes time and energy, but the alternative is to passively take a loss year after year. My fear is that when consumers finally wake up, they'll suddenly find themselves so far behind the curve that it will be too late to do anything about it.
Next time you hear that the CPI figure is this, or the GDP figure is that, keep in mind that these numbers are calculated with a hidden purpose to help bolster public confidence in government and Wall Street. The fabric of U.S. confidence is badly torn and now the whole system is in jeopardy of exposure – including your money.
This is one of the reasons I wrote "Rediscovering Gold in the 21st Century" – to help Americans understand the vital role that tangible investments like gold and silver have played in keeping our economy trustworthy by keeping government numbers honest.
Remember: Numbers don't lie, governments do.
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Here's what's covered...
"Dollars are worth less and less, and ultimately less, bringing the ruination of nations. When Germans needed a wheel barrel of currency to buy a loaf of bread, their frustration paved the way for Hitler." -PAUL HARVEY
I. THE CONFUSION OVER MONEY & INFLATION
"All the perplexities, confusion and distress in America arise... from from downright ignorance of the nature of coin, credit and circulation." -JOHN ADAMS
II. THE ORIGIN OF MODERN INFLATION
"Original sin was that Eve told Adam about central banking, about the notion that you can create value with a stroke of the pen." -THE FED
III. THE CHARACTER OF INFLATION
"Inflation is like sin; every government denounces it and every government practices it." -FREDERICK LEITH-ROSS
IV. INTEREST RATES AND INFLATION
"Inflation is the one form of taxation that can be imposed without legislation." -MILTON FRIEDMAN
V. CONCLUSION: LIVING ABOVE INFLATION
"Inflation, like sin, begins with a desire to gain some undue advantage." -STEVEN SAMSON
VI. THE TOP INFLATION FIGHTERS
"Remember the 1970s? Low growth. Newly opened international markets. Drifting and falling stock prices. ... And, inflation through the roof. The moral: It's a good idea to keep an inflation kicker in a well-balanced portfolio." -LINDA STERN
DISCLAIMER: All of the information in this story is believed to be true, however errors are possible. Past performance is no guarantee of future performance. All investments have risk. -SATC