Thursday, October 31, 2013

Do you still think inflation is only 1.5%... I have some prime swamp land for sale!

If inflation was as low as the government says it is, would prices have spiked higher and higher as they have in the past 7 years, or 40 years? Oh, but you say the 20oz can of beans I bought yesterday only went up in price by a few pennies. Look more closely at the can. It more than likely says that 20oz can of beans is now only 16.5oz. Not only did the price increase, the amount of the contents decreased. True inflation as it was calculated in the early 1970's is well over 12% and rising. Since then, the government removed food, energy, and any other item they could tag as having the ability to 'price spike'.

If the average chief executive officer cooked balance sheet numbers the way the U.S. Bureau of Labor Statistics calculates the Consumer Price Index, the CEO would be in jail, even without Sarbanes-Oxley reporting standards.

Telling the truth about inflation would require the Federal Reserve to raise interest rates and that would be bad for economic growth.
Besides, hundreds of billions of dollars in government entitlement payment outflows depend on the inflation number.
For instance, federal law mandates that Social Security checks increase thanks to “cost-of-living adjustments,” or COLAs, that are supposed to compensate for inflation.
So, higher inflation numbers cost the federal government millions more in increased Social Security payments.
But when the Bureau of Labor Statistics intentionally rigs the Consumer Price Index calculations to low-ball the inflation rate, Social Security entitlement payments are kept level.
As a result, retirees quietly lose billions of dollars that should have been paid out, had the cost of living numbers been reported honestly. But the government saves the expense.
How does the federal government manipulate inflation numbers?
The Consumer Price Index, or CPI, is the central statistic the federal government uses to calculate inflation.
The CPI is a complex government statistic that was introduced in the 1920s to track the market cost of a “basket of goods and services.”
Beginning during the Carter administration, federal economists cleverly redefined the CPI, with the goal of removing from the index expensive items, including food and energy, that would push the CPI higher.
Today, the Federal Reserve when setting interest rates focuses on a variation of the CPI that measures “core inflation.”
According to the Forbes “Investopedia,” core inflation excludes items such as food and energy because food and energy “face volatile price movements.”
In other words, since food and energy prices can spike upwards, as they have this year, the Bureau of Labor Statistics calculates “core inflation” without food and energy prices, under the rationale that food and energy price spikes are merely temporary price shocks that would distort the measurement of underlying long-term inflation.
To a family faced with paying rising food costs to feed the kids and skyrocketing gas costs just get to work, the definition of “core inflation” at 2 percent is a joke, not at all reflective of the increased dollars the family has to shovel out just to get by.
Even more disturbing, the Bureau of Labor Statistics’ calculation of “core inflation” is not limited merely to throwing food and energy prices out of the CPI.
The price of any good or service in the CPI market basket prone to spiking can be thrown out, under the rationale that the items with the largest price changes reflect passing market disequilibrium that would distort the measurement of long-term trends.
When removing expensive items from the CPI market basket of goods and services was not enough to depress inflation numbers, the Bureau of Labor Statistics innovated even more, changing the “weighted factors” used in calculating CPI statistics, so the results end up under-reporting the true inflation people experience in everyday living.

The Only SAFE hedge for inflation is physical gold and silver. It is the only commodity that typically increases in price relative to inflation. The government is even trying to control them. Right now, gold and silver prices are tracking at well below where they should. which means they are under valued. Now is the time to buy... before the market overrules the government controls and their prices skyrocket to where they should be!