ECONOMICS: Understating inflation systematically

http://lewrockwell.com/roberts/roberts374.html

The Virtual Recovery
by Paul Craig Roberts

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Statistician John Williams (shadowstats.com), who closely follows the collecting and reporting of official US economic statistics, reports that consumer inflation, as measured by the 1990 official government methodology has been running at about 5%. If the 1980 official methodology for measuring the CPI is used, John Williams reports that the current rate of US inflation is about 9%.

The 9% figure is more consistent with people’s experience in grocery stores.

Officially the recession that began in 2007 ended in June 2009 after 18 months, making the Bush Recession the longest recession since World War II. However, John Williams says that the recession has not ended. He says that only the GDP reporting, distorted by an erroneous measurement of inflation, shows a recovery. Other, more reliable measures of economic activity, show no recovery.

Williams reports that the economy began turning down in 2006, falling lower in 2008 and 2009, and bottom-bouncing ever since. Not only is there no sign of any recovery, but “the economic downturn now is intensifying once again.” The absence of an economic recovery “is evident in the [official] reporting of nearly all major economic series. Not one of these series shows a pattern of activity that confirms the recovery [shown] in the GDP series.”

Williams concludes that “the official recovery simply is a statistical illusion created by the government’s use of understated inflation in deflating the GDP.” In other words, the reported gains in GDP are accounted for by price increases, not increases in real output.

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This says it all. The Gooferment’s politicians and bureaucrats want to fool us.

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One Response to ECONOMICS: Understating inflation systematically

  1. Does the CPI include gasoline prices? If so, then maybe they could stop it from going up so much simply by removing gasoline purchases from the Index! Problem solved!!

    Hey, it worked in the 80s/90s when they removed tobacco purchases from the CPI so they could increase taxes with impunity, right?

    Imagine the money they could make if they instituted tax parity for gasoline and cigarettes in NYC! Simply quadruple gas prices and all would be fair and everyone would be happy and singing in the parks…

    No?

    – MJM

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