The past several years of economic reporting have been dominated by lies. They have lied about the jobs numbers. Full-time jobs are falling and have been replaced by part-time jobs. They have lied about retail spending. Once adjusted for inflation, it’s largely flat.
This number is uncomfortably close to where we were at the height of the Great Depression.
They might have even lied about recovery out of the “brief” recession of 2020. We might not ever have left recession at all.
Most of all, they lied about inflation.
You know this intuitively. This is because you are a shopper. You buy things and have a memory of prices from only five years ago. You can do the calculations in your head. You recall your grocery bills of the past, your electricity bills, your medical bills, your housing costs, your gasoline, and so on. The notion that on average everything is up by only 18 percent doesn’t quite fit with experience.
It certainly doesn’t fit with consumer and investment sentiment. Countless articles in the mainstream media have drawn attention to the vast gap between the down-in-the-mouth attitudes of the public versus the reported economic data. They always conclude with some version of: The public is dumb as rocks and cannot follow the science.
So how can we account for this? The inflation piece of this puzzle is particularly interesting. Finally some economists have become interested in the question. In a team led by Lawrence Summers, the last decent president of Harvard, these researchers have recalculated the inflation rate according to older formulas that included borrowing costs and housing in general.
There are plenty of other adjustments that they might have made, including how health insurance premiums are calculated. But even with their small recalculating, the results are truly astounding, at least to me.
Keep in mind that these economists are not somehow positioned as radical outsiders. They are 100 percent establishment. The publisher here is the National Bureau of Economic Research (NBER), which is the official business-cycle dating service of the United States. No one questions the credibility of the research. The only difference is that NBER is not a government agency, so there is a greater chance of getting the truth from them.
Here is a note on their method:
“We develop alternative CPI measures that explicitly incorporate the cost of money. We explain the methodology the Bureau of Labor Statistics (BLS) used historically to calculate the CPI measures for housing, which included a measure of the cost of homeownership which reflected mortgage payments. The current methodology relies solely on the rental market to impute the change in the price of owners’ equivalent rent. We also discuss the market for auto loans and personal interest payments in consumption to propose proxies that better reflect the actual costs borne by consumers. The cost of financing car purchases is absent from the official price indices. To the extent that vehicle lease prices represent the flow utility that an owner-driver receives from their car, there is an argument to be made that for consistency lease prices should be measured instead of headline car prices. The growth of lease prices has remained strong as list price growth has begun to slow. Having made these points, we then present alternative CPI measures that reflect mortgage interest payments, personal interest payments for car loans and other non-housing consumption, and lease prices for vehicles.”
They make all of these changes to better replicate historical methods and therefore allow some kind of comparisons that approximate actual science.
The bottom line conclusion: Inflation at its recent peak reached 18 percent. You read that right. That’s far beyond the 12 percent to 13 percent that felt like a revolutionary moment in the past, speaking of 1979–1980. That last inflation fundamentally changed the economics and politics in this country. It arguably brought Ronald Reagan to power. It forced households into going from one-income based to two-income based. It disgorged the value of American savings. The United States was never the same after that.
What we have just been through turns out to be far worse by comparison! The usual line is that we have experienced 18 percent total inflation over four years. But a more correct rendering shows that it is closer to 24 percent, with 18 percent as the peak only last year.
This website similarly shows that the recent inflation was substantially worse than 1979, but it shows even more. The official CPI and the real inflation number have been diverging since 1988. Each year it has gotten worse, but the gap has never been as large as it has been in the past three years.
What this means is that the reported CPI that you see on mainstream media every month is mostly a fiction. Reporters dutifully regurgitate what the Bureau of Labor Statistics says, but these numbers have little to nothing to do with the actual rate experienced by consumers.
In addition, these recalculated numbers also pertain to wholesale prices. This explains why businesses are so disabled these days. They can hardly afford the inputs and struggle to find ways to pass on the high costs to consumers while sustaining ever higher payroll costs. This is the reason for “shrinkflation.”
The Biden administration has been absolutely egregious in its messaging about all of this. They are blaming corporate America rather than the central bank and government policy generally. In other words, they are blaming the victim as being the source of the problem.
Fortunately, most people are not buying the Biden administration propaganda.
I never imagined that I would live in a country in which the government would so routinely, brazenly, and predictably lie about basic economic data. And why are they doing this? To cover up the truth about what the ruling class has done to economic prosperity and opportunity. They have crushed it and pillaged the public to take more wealth for themselves. This is not different from what took place in the old Soviet Union. The data were never real. But they kept pumping it out anyway as a way of fooling people into thinking that the system was working.
That’s where we are headed in the United States today. The subterfuge is so built into the way the system operates now that there is little hope of changing it. One can dream of some future presidential administration that shows up and puts truth and science in charge again, but that doesn’t seem likely. For the duration, the rest of us will be forced into a position of taking everything that the agencies crank out with a grain of salt.
