The Consumer Price Index (CPI) Lie and the Real Inflation Rate

Here is another Big Lie – the Consumer Price Index (CPI). An article from the May 14, 2006, Financial Times, entitled, “Greenback Takes a Pounding Over Deficit” has some key things to say about inflation: “Worries about inflation, which have intensified since this week’s meeting of the US Federal Reserve rate-setting open market committee, also sparked sharp losses in stock markets.”

So why are the markets so concerned about inflation? Is inflation really a concern? Is it really here, or is it just a mirage? From what our government has to say, we only have between 3% and 4% inflation. Do the big boys who run the country understand the real inflation numbers? You can be sure they do.

As you may not know, the Consumer Price Index or CPI, doesn’t include food, fuel, or housing. So, if you take the big three out, there is nothing left. Then what is the actual rate of inflation in this country? Over the last few years while talking to people on the phone about the Consumer Price Index I have always told them that the actual rate of inflation in this country is between 12% and 15%. People are always shocked at my number, which by the way, I couldn’t prove, but I somehow had a feel for something a little closer to reality than what the government was telling us.

Let’s take a look at a little real research on actual inflation numbers over the last three years, and then I will comment after a look at this consumer price index commodity chart.