Sunday, March 16, 2008

A Picture is Worth a Thousand Words: Inflation

Courtesy of Tim Iacono, courtesy of Barry Ritholtz, is this chart that shows what inflation would look like if the government had not constantly adjusted the way it measures CPI. The blue lines represent what inflation would like today if we continued using early 1980's methodology... and the red lines are what you are fed today after "1001 adjustments". I think this is what the American people feel, but how many Dow points would we lose if we started printing 14% CPI numbers? (Remember I keep saying 13-13.5% is the true inflation since our IMPORTED goods are coming in at that level, and we import almost everything) - this tells me that the way the government used to report things *was* in fact, relatively accurate. Was. Now, I am sure the early 80s methodology measurements were not perfect either, but they sure seem a lot more realistic cross referenced to what we see in real life Main Street economy. Just keep this chart in mind each time Wall Street claps (as it was going to do early Friday) at these bogus government inflation numbers.

The truth is out there - sadly it's kept from us and/or the government cannot afford to tell us the reality due to COLA (cost of living) adjustments. So we continue to tinker with the number to keep pushing it down. Again, as I said Friday, I truly hope we show negative CPI next month while crude is $125 and gold $1100, and wheat $16, etc etc. The farce will just continue to be exposed piece by piece....

(click on graph to enlarge)

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