Inflation Now at 9.2% This Year, But It’s Really Much Worse Than That

In a brief story in USA Today, Mike Carney tells us that:

New inflation data show that wholesale prices have grown 9.2% over the last year, marking the biggest increase since June 1981, according to the Labor Department.  Reuters adds, "Economists had expected producer prices — a gauge of costs at the farm and factory gate — to rise by 1.3 percent overall after a 1.4 percent increase in May, [and that] energy prices were up 6.0 percent in June, the largest gain since November 2007."

But in reality, things have been bad for some time now, and the reason why we haven’t been able to see this is because the government keeps changing the way inflation and unemployment data is presented to the public.  As reported in Harper’s:

. . . since the 1960s, Washington has been forced to gull its citizens and creditors by debasing official statistics: the vital instruments with which the vigor and muscle of the American economy are measured. The effect, over the past twenty-five years, has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed.

In particular, the author Kevin P. Phillips singles out the monthly Consumer Price Index (CPI), the quarterly Gross Domestic Product (GDP), and the monthly unemployment figures as being either grossly over- (GDP) or under- (CPI and unemployment) stated.  He asks his readers how much angrier people would be if, over the past five years, the media “had been citing 8 percent unemployment (instead of 5 percent), 5 percent inflation (instead of 2 percent), and average annual growth in the 1 percent range (instead of the 3–4 percent range).”

Phillips is careful to point out that this “Pollyanna creep” in these indices is the fault of both Republican and Democratic administrations, which have all tried to consistently make their own time in office look better than it actually was/is.  Bravo to him for being fair and unbiased on this point, and kudos to him for trying to wake the American public up to the real state of our economy.  At the end of his article he concludes:

The real numbers, to most economically minded Americans, would be a face full of cold water. Based on the criteria in place a quarter century ago, today’s U.S. unemployment rate is somewhere between 9 percent and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession.

It makes you wonder what the figures released today would be in “the real world,” rather then in the world as construed and presented by Washington.  Methinks that the chickens are finally coming home to roost (as my Ma Nelly used to say).

———-

You can read Phillip’s article in full here, and here is the link to Carney’s brief post.