“Inflation is under control, and Americans shouldn’t think twice about it.”
At least that’s the conventional wisdom — and for a long time, it has gone unchallenged in the public eye. But on February 29, CBS News shed some light on a poorly kept secret: that inflation is far worse than the government lets on.
The study referenced in the article, performed by the American Institute for Economic Research, concludes that everyday prices have risen 8 percent over the past year, as opposed to the 3.1 percent figure proposed by the government. Food, prescription drug, and motor fuel costs have all risen faster than the official rate would suggest.
Of course, this is no surprise to anyone who has lived or shopped in America lately. Most Americans are well aware that their dollars aren’t going nearly as far as they used to, no matter what the official statistics say. The real question is why we continue to put our faith in these obviously faulty formulas.
There are several notable problems with the consumer price index (CPI), the government’s most frequently used measure of inflation. Perhaps most significantly, the core index commonly cited by the government conveniently excludes goods like food and energy whose prices tend to be volatile. This is good news for the government, since it creates the impression that prices are stable and inflation is under control. The people, however, know better, since they don’t have the luxury of just ignoring the price increases that don’t fit a certain narrative. (Gas prices hitting $4 a gallon? Oh, we just won’t count that).
Behind the scenes, the government has a strong interest in keeping inflation high. It has very little choice given the massive deficit spending it continues to indulge in, not to mention the perpetual push for consumption at the expense of saving and investing. Weakening the value of the dollar is a sneaky way to ease this debt burden and allow the pattern to continue. This is what happens when an unaccountable Federal Reserve is given free reign over the nation’s money supply.
If it is going to pursue the same reckless and ineffective policies it has been attempting for decades, the government needs inflation. But that’s not exactly something you can tell the public, so the result is a bunch of manipulated numbers that do very little to paint an accurate picture of the economy, but can be easily cited by politicians eager to please the voters.
Note: This article, which summarizes the debate over excluding food and energy from core inflation, mentions the plethora of variables monetary policymakers are forced to contend with — and the admittedly strong likelihood of error in analyzing them. This uncertainty should demonstrate the absurdity of ceding control of a complex national economy to an extremely fallible group of bankers. These “misjudgments” can and do have catastrophic effects, as we continue to see.Published in