The Real Cost of Inflation is Everywhere

Protect yourself from rising prices with gold and silver!

Although we’re not in a position to fire anyone for them, we’ve always been skeptical about government economic numbers.

Inflation figures have been monkeyed with for decades to help politicians soft-pedal the damage they’ve done.

The latest government report shows consumer prices rose 0.2 percent in July and 2.7 percent over 12 months.  Bloomberg writes, “Underlying US inflation accelerated in July.”  

But the big hit is producer prices.  In July the producer price index jumped 0.9 percent from a month earlier.  That’s big.  Producer prices are like wholesale prices, destined to be felt in consumer prices eventually. 

As for the Consumer Price Index, it has been over the Federal Reserve’s two percent target for 53 consecutive  months.  Most people in their private jobs are not given tolerance for being that wrong and underperforming for so long.

The so-called core CPI, which excludes food and energy costs, rose 0.3 percent in July and 2.7 percent for the 12-month period.  

Are the government CPI numbers the real story, an accurate portrayal of actual price increases?  Probably not.  They never really have been, and there’s no reason they should start being reliable now.

John Williams of ShadowStats has detailed the changing basis of the Bureau of Labor Statistics inflation reports:

The Consumer Price Index has been reconfigured since early-1980s so as to understate inflation versus common experience.  The CPI no longer measures the cost of maintaining a constant standard of living.  CPI no longer measures full inflation for out-of-pocket expenditures.

With the misused cover of academic theory, politicians forced significant underreporting of official inflation, so as to cut annual cost-of-living adjustments to Social Security…

Use of the CPI to adjust retirement benefits, private income or to set investment goals impairs the ability of retirees, income earners and investors to stay ahead of inflation.

So let’s zero in on a few things.

Beef has never been more expensive than it is today.  The average price of a pound of ground beef is over $6.  That’s a first.  

Eggs are 16.4 percent higher over the last 12 months, coffee is 14.8 percent.

No wonder that a majority of Americans report that the high cost of groceries is a major source of stress in their lives.

It is important to remember that price inflation compounds.  If next month’s CPI is up 0. 3 percent over this month, that means higher prices next month will be up built upon the increases already present this month.  Inflation has been compounding like that for 53 months in a row.  The eighth wonder of the world!

“For those living in a U.S. dollar-denominated world, physical gold remains the primary hedge against the ultimate dollar crisis, along with physical silver,” says ShadowStat’s Williams.