Today’s CPI misinformation report dutifully reports that inflation has been virtually non-existent over the last 12 months. The charts below beg to differ. But Bernanke doesn’t think food, energy and copper are that important to the average schmuck. With annual increases ranging from 4% to 35% for things we need everyday, how could the CPI only show annual inflation of 2.0%? We know from prior posts that 24% of the CPI is made up of owners equivalent rent. I keep reading that rents are skyrocketing by 10% and home prices are increasing. So, why isn’t this being heavily reflected in the CPI? The drones at the BLS say owners equivalent rent is only up 2.1% in the last year. The people running this country have no problem lying out of both sides of their mouth, saying housing is recovering strongly but their is no inflation in housing or rent.
I’ll tell you why the numbers don’t make sense. Because the Federal Government and the drones at the BLS are lying about the true inflation figures. They use their little regression models to manipulate the data and report tame inflation, when anyone with half a brain that fills up their tank, pays their utility bills, or goes grocery shopping knows that inflation is running north of 5%. The BLS is actually reporting that your food costs have only gone up by 0.8% in the last year.
Even the commodities below that show modest year over year changes should worry you.
- Heating oil is up 9% YTD and natural gas has surged 21% since May, just as we enter what is expected to be a colder than normal winter. Those senior citizens who are getting a $15 increase in their SS checks per month will just have to bundle up.
- Unleaded gas is up 19% YTD and 2012 has seen the HIGHEST average price in the history of the U.S.
- The huge increases in wheat, soybeans and corn due to the drought have resulted in some of the lowest inventories in history. The true impact of these price increases will really hit in 2013. Farmers have had to slaughter their cattle and hogs earlier to save on feed costs and this has resulted in meat prices temporarily declining. Prices for meat will soar next year as their is less supply. The other side effect will be unrest around the world, as food costs account for 50% of the budgets for poor people around the world.
The weightings in the CPI calculation are a joke. They have the balls to tell you that motor fuel only makes up 5% of your costs and food at home less than 9% of your costs. Let’s examine those assumptions. The median household income is $50,000. A family of four with both parents working would drive on average 12,000 miles per year for each of their two cars. That is 24,000 miles per year at 20 mpg equaling 1,200 gallons of gas used per year. At $3.80 per gallon, that would be an annual cost of $4,560. That would be 9.1% of your costs for a normal family. That is 80% more than the BLS weighting for motor fuel.
A normal family of four, based on my grocery expenditures of $150 to $200 per week, would spend $7,800 to $10,400 per year for food at home. Even using the low figure, it comes to 15% for a median income family. That is 67% higher than the BLS weighting. I would urge you to put your own circumstances into these equations and figure out if the BLS is full of shit. Thinking is essential to defeating the powers that be.
ThePessimisticChemist says:
I’ve talked my wife into looking at houses out in the country, with enough ground to have a veggie garden and hopefully some chickens.
I’d love to have enough room to have a jersey cow in addition to that, but I think I might be reaching.
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16th October 2012 at 9:50 am
Eddie says:
Reach for the cows, and if you miss them, at least you’ll be likely to land in….,well, compostable organic matter.
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16th October 2012 at 10:02 am
ThePessimisticChemist says:
@Eddie – I think I could talk her into snagging a property with the correct amount/quality of land for the setup I envision, but I’m not sure I would have the time to take care of everything properly.
Man, I wish I made a hair more, then I would just hire a farmhand out for a set amount of cash each month and produce enough eggs/milk for BOTH of our families lol
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16th October 2012 at 10:05 am
Administrator says:
Except For Food And Gas, September Inflation Barely Higher
Submitted by Tyler Durden on 10/16/2012 08:45 -0400
September core CPI, ex such trivial, hedonically displacable items as food and energy (remember: when in doubt, just nibble on your obsolete first generation iPad, for which you waited hours in line – cause Bill Dudley said so) rose a tiny 0.1%, on expectations of a 0.2% pick up. Of course, for those lucky few who still get to eat and/or have a job to drive to, inflation rose by 0.6% in September from August, higher than expectations of a 0.5% increase. Luckily, in America the intersection of the Venn Diagrams for those who i) eat and ii) drive is so small it is barely worth mentioning…
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16th October 2012 at 10:06 am
Administrator says:
——————————————————————————–
Posted 2012-10-16 08:44
by Karl Denninger
CPI: Nobody Buys Food Or Energy
There’s no problem with food and energy prices going up…. right?
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.0 percent before seasonal adjustment.
For the second month in a row, the substantial increase in the all items index was mostly the result of an increase in the gasoline index, which rose 7.0 percent in September after increasing 9.0 percent in August. The other major energy indexes increased in September as well.
That’ll leave a mark.
Let’s have a look inside at the unadjusted figures.
Notables are Dairy, fruits and vegetables, up 0.5% and 0.4% respectively, while meats and cereals were each down a similar amount. Non-alcoholic beverages were up 0.7% on the month, which is a curious change.
Energy commodities were up in a seirous way, other than piped gas and electricity; all sorts of fuels were up 4.1% (again, unadjusted.) And all items less food and energy, unadjusted, was up 0.3%, not 0.1%, which is a 3.7% annualized rate of increase in core.
Apparel was up 4.1% while used vehicles were down 2.1%. Demand problem? Hmmm….
Finally, physicians and hospitals were up 0.4 and 0.5%, respectively, on the month.
If you want to see real stunners, look in the detail tables. Women’s clothing was up a shocking 24.2% on the month for outerwear and 13.4% for dresses (!) Girls wasn’t much better, up 10.1%. It appears that whatever the “new fashion” game may be for this fall the clothing designers are screwing women in a big way; my recommendation would be to not bite on that bait.
Another interesting internal indication in the data is that car and truck rental prices were down over 7% on the month; this may be an indication of travel softness. These figures have been weak for the last year, and this is a rather notable secondary indication on business travel in particular.
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16th October 2012 at 10:07 am
Maddie's Mom says:
The PC,
No need to move to the country (well, except for the cow;)).
Just buy a house on a large enough lot and go ahead and have your garden and chickens.
We live in a very nice neighborhood and people are doing it.
There’s no HOA as of now, but we do have convenants, which they are obviously choosing to ignore.
One neighbor has complained to the developer, to no avail, and they’re his damn covenants. Ha!
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16th October 2012 at 10:12 am
Eddie says:
When you think about it, lying about inflation is the most important job that government statisticians have…because it’s an absolutely crucial part of the plan to destroy the dollar without causing a run on the currency.
This was the mistake that the Fed made in the 1970s, not controlling media spin. Inflation was constant headline news. They have learned how to control the stats and the media.
They are right now, today, relentlessly shorting gold and silver in the paper markets.
It’s a perfect storm of manipulation, misinformation and deception. Most people are fooled.
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16th October 2012 at 10:20 am
ThePessimisticChemist says:
“The PC,
No need to move to the country” – MM
=================================
Unfortunately the amount of money we would need to spend in town to get even a decent sized lawn is pretty large compared to how much we could get out in the countryside.
You get about triple the land, with the same size/quality house, for the same price.
The main thing is commuting. We have really gotten use to zero commute and she doesn’t want to go back to burning up gas again.
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16th October 2012 at 10:24 am
Persnickety says:
@TPC: garden and chickens are practical even with a postage stamp lawn (though city laws or the evil HOA may beg to differ). A 1/2 acre is more than plenty for those uses, and a 1/4 acre would satisfy most people given the time commitment.
As for the cow, well… can you use 5 to 15 gallons of milk A DAY? People who want home dairy, which is great btw, generally get dairy goats – think about 1 gal of milk/day, drink some and make cheese with the rest. That’s much more practical. As a bonus, if you get kicked you get a mild bruise, not a weeklong hospital stay.
Sounds like you are somewhere super-urban – are there any gardening or organic food co-ops or community gardens that you could join/use? If I were in the city and wanted to stay there, that’s what I would look at doing. Beats commuting. If there isn’t one already, maybe look at starting one.
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16th October 2012 at 10:50 am
Persnickety says:
{Rant mode: on}
{Begin unfiltered reality}
I’ve been living out in farm country for about six years now, dragged by my horse-fascinated bride. I’ve learned a number of things that I will now share with you so you can make a better evaluation of food and living options:
Raising your own meat – chickens and rabbits are very practical, with rabbits more economical. You could do goats or sheep with an acre plus and some commitment. Forget beef cattle. Really. They are huge and dangerous, cost a lot to maintain, damage your fences, and are too big for you to slaughter yourself. Once you take them somewhere, you will then need to find a place to store 500-700lbs of beef. That will entirely fill 1 to 1.5 large chest freezers. We’ve done this twice, and each time we were frantically contacting relatives to give away what we couldn’t store, AND we had to get dry ice to get the now-full freezer to cool back down, because the overload of 400lbs of new material at just 25-30 degrees F. made our nearly new freezer overheat – it couldn’t cool that much down quickly enough.
Dairy – dairy goats. Forget dairy cows. If you had any idea the amount of work that goes into maintaining dairy cows you would be astonished that cow milk is even available for sale. It’s only widespread because it lends itself to resource-intensive industrial-scale production, plus the government subsidies, plus the American belief that milk is an essential part of the daily diet for anyone under 18.
Growing food: think vegetables and whatever you might grow in your garden. You’re growing tomatos and zucchini because it’s easy to grow and harvest by hand. Notice that you aren’t growing wheat or field corn? There’s a reason for that. They also require large fertilizer inputs. Oh, and look up “threshing” if you’re not already familiar with that. It can be done by hand, much as castles can be built by hand, but having a combine ($200k+ for a machine that gets used 100 hours a year, maybe) is the only fast way to do it, and not practical on less than 80 acres, minimum.
{Rant mode: off}
{End unfiltered reality}
Note: I am not anti-meat or dairy, and in fact will probably have both twice today. I just have learned that there’s a huge difference between the food that is provided by our industrial agribusiness and the food you can realistically grow at home without major farm machinery.
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16th October 2012 at 11:06 am
Stucky says:
The Bureau of Lying Shitheads releases these lies for two reasons;
1) Get Obama reelected
2) 57 million get Social Security. Annual increases are tied in to inflation. So, now they can perpetuate the SS ponzi scheme by giving SS recipients a 1.5 increase this year. Let those oldfuks eat cat food!! \end:sarcasm/
They ain’t fooling nobody …. at least those of us, like TBPers, who have at least two synapse connections. Which, of course, leaves out the 50% Obama loving FSA fuckwads.
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16th October 2012 at 11:17 am
Stucky says:
An amazing coincidence …. or a BLS sack ‘o shit conspiracy?
For November unemployment rates on Presidential election years going back to FDR ….. EVERY SINGLE TIME when a Democrat was in the White House, unemployment was DOWN from the term before, and every time a Republican was in the White House (sans Reagan), unemployment had gone UP since the previous election.
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16th October 2012 at 11:31 am
Eddie says:
Persnickety
You are the man! I’d say everything you said makes absolute perfect sense.
To that I’d add….forget about being able to do any of that without being on site daily. You just can’t live in the city and viisit the rural property once a week and get anything done..It just snowballs out of control.
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16th October 2012 at 11:34 am
matt says:
Inflation has only risen on energy and food for now, water and oxygen coming soon.
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16th October 2012 at 11:47 am
ThePessimisticChemist says:
“Dairy – dairy goats. Forget dairy cows. If you had any idea the amount of work that goes into maintaining dairy cows you would be astonished that cow milk is even available for sale. It’s only widespread because it lends itself to resource-intensive industrial-scale production, plus the government subsidies, plus the American belief that milk is an essential part of the daily diet for anyone under 18.
”
If I had a dairy cow it would be providing for my family and someone else’s, else I would probably not even bother with my own dairy.
You are spot on with the beef cow, those things require a lot of work, and again its something you either split with another family, or you have 6 kids because thats what it will take to consume all that food.
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16th October 2012 at 1:32 pm
Outtahere says:
Wherever you live, rabbits are the way to go. Low maintenance, high volume of reproduction, highest protein meat available, rabbits eat most anything green (yard clippings included) and there’s no waste with a rabbit. You can eat the meat, sell the skin, use the manure for an excellent fertilizer and also use the entrails for fertilizer. You can sell or barter the extras that you don’t eat or put in the freezer. It’s a win win with rabbits!
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16th October 2012 at 1:39 pm
Administrator says:
Inflation: Washington is Blind to Main Street’s Biggest Concern
Peter Schiff
Euro Pacific Capital, Inc.
Posted Oct 16, 2012
Journalists, politicians and economists all seem to agree that the biggest economic issue currently worrying voters is unemployment. It follows then that most believe that the deciding factor in the presidential race will be the ability of each candidate to convince the public that his policies will create jobs. It seems that everyone got this memo… except the voters.
According to the results of a Fox News poll released last week (a random telephone sample of more than 1,200 registered voters), 41% identified “inflation” as “the biggest economic problem they faced.” This is nearly double the 24% that named “unemployment” as their chief concern. For further comparison, 19% identified “taxes” and 7% “the housing market” as their primary concern. A full 44% of women, who often do more of the household shopping and would therefore be more sensitive to price changes, identified rising prices as their primary concern.
My most recent video blog addresses this topic in detail.
While these statistics do not surprise me, they should shock the hell out of the establishment. According to the Federal Reserve, inflation is not a concern at all. Time after time, in front of Congress and the press, Fed Chairman Ben Bernanke has said that inflation is contained and that it is below the Fed’s “mandated” rate of inflation (whatever that may be.) The Bureau of Labor Statistics is saying the same thing. The measures they use to monitor inflation, such as the Consumer Price Index (CPI) and the Personal Consumption Expenditure (PCE), show annual inflation well below 2%. In fact, the GDP price deflator used by the Commerce Department to calculate the second quarter’s 1.3% annual growth rate assumed annual inflation was running at just 1.6%.
In fact, Bernanke thinks inflation is so low that he is actually worried about deflation, which he believes is a more dangerous issue. As a result, he is recommending policies that look to raise the inflation rate, not just to combat the phantom menace of deflation but to boost the housing market and reduce unemployment. He mistakenly believes these problems are the ones that concern Americans the most.
If inflation really is as subdued as the government claims, how is it that so many people are concerned? It’s not as if the media or political candidates are fanning the fears of rising prices. In fact, given the media’s preoccupation with the housing market, the fact that nearly seven times as many Americans worry more about rising food prices than falling home prices shows just how large the inflation problem must be. Yet most economic observers continue to swallow the government’s inflation propaganda hook, line and sinker. In fact, although the Fox poll came out last week, I did not read or hear a single story on this topic, even from Fox news itself, which appears to not have noticed the significance of its own data.
For years my critics have always attempted to discredit my inflation fears by pointing to government statistics showing low rates. However, I have long maintained that such statistics under-report inflation, and the results of this poll seem to confirm my suspicion. There are only two possible ways to explain the disconnect. Either the government is correct and consumers are worried about a non-existent problem, or the consumers’ concerns are real and the government’s statistics are not. From my perspective, it seems that it is far more likely that consumers are in the right. If so, we are in a lot of trouble.
If annual inflation is actually higher than 3%, which would certainly be the case if consumers are so worried about it, then we are already in recession. Had government used a 3% inflation deflator (rather than the 1.6% that they actually used) to calculate 2nd quarter GDP, then growth would have been reported at negative .1% rather than the positive 1.3%. I believe that if the government used more accurate inflation data over the past several years, it is possible that we would have seen no statistical recovery from the recession that began in the fourth quarter of 2007. This would help explain why the “recovery” has failed to create jobs or lift personal incomes.
The Fed’s zero percent interest rate policy is predicated on the assumption that there is currently no inflation. If this is not accurate, then they are making a major policy mistake. The Fed is easing when it should be tightening. If inflation is such a major concern now, imagine how much bigger the problem will become once the Fed achieves its goal of pushing the rate higher. More importantly, how much tighter will future monetary policy have to be to put the inflation genie back in her bottle? If inflation becomes so virulent before the Fed realizes its mistake, then it may be forced to raise interest rates significantly. U.S. national debt is projected to reach $20 trillion within a few years. As a result, a 10% interest rate (which would be needed to combat 1970′s style inflation) will require the U.S. government to pay about $2 trillion per year in interest on the national debt. This will absolutely upend all economic projections.
Since 10% interest rates will likely crush the economy, not to mention the banks and the real estate market, tax revenues will plunge and non-interest government expenditures will go through the roof. Assuming we try to borrow the difference, annual budget deficits could go much, much higher from the already ridiculously high levels that they have reached during President Obama’s term. Annual deficits of $2 trillion, $3 trillion, or even $4 trillion, would result in a sovereign debt crisis that would force the Federal Government to either default on its obligations or inflate them away. Given the tendency for politicians to prefer the latter, voters who think rising prices are a problem now should just wait until they see what is waiting down the road!
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16th October 2012 at 1:43 pm
Kill Bill says:
Meh, just buy a house with a pool and raise catfish or tilapia.
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16th October 2012 at 1:47 pm
ThePessimisticChemist says:
“It’s a win win with rabbits!”
Yeah, I don’t think my wife would be ok with that. They are too close to the “cuddle” zone for her comfort.
Chickens though? I’ll send her out to collect eggs just once and she’ll never have trouble with taking off their heads again.
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16th October 2012 at 1:52 pm
Eddie says:
Common fallacies:
1. Belief that inflation and deflation cannot coexist at the same time.
2. Belief that hyperinflation is preceded by a slow rise in inflation.
3. Belief that a smart guy like Peter Schiff can win his party’s nomination against a wrestling promoter with no political experience.
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16th October 2012 at 1:53 pm
Kill Bill says:
In fact, Bernanke thinks inflation is so low that he is actually worried about deflation, which he believes is a more dangerous issue -admin
I think Bernanke is worried about deflation…in toxic asset prices, so what if more wealth needs to be extracted from the sheople in higher costs for fuel and food.
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16th October 2012 at 2:59 pm
Maddie's Mom says:
The PC,
You are right. We (my dh) gave up 10 acres for a 1/2-acre lot. I still don’t understand it. But here we are. He cut his commute in half and I know that is great for him, so I’m ok with it (at least until the SHTF!)
Persnickety,
You are right also. Rabbit is delicious! Very much like chicken. When I was a child, my mom prepared rabbit for us every time my dad and brothers went hunting. Fried and then “smothered” in the oven or rabbit and dumplings. Yum! I never learned to clean them though…that was the men’s work :-/
After raising our own beef for a few years, dh and I were coming to the same conclusion about the beef cattle. Maybe a little risky at our middle-age and very pricey meat if you end up in the hospital. The largest animal we ever had was a 1200# mama-cow. But she was young and feisty. She unnerved me more than once (and I grew up on a farm!)
My parents made a very nice living for 25+ years on a dairy farm back when that was actually possible. It is a tremendous amount of work and takes some serious committment. Whether it’s one cow or 40, they must be milked daily. Days off? Forget about it unless you’ve got someone to take over for you.
And farming? Yup. You’ve got that down too.
Eddie,
We still have our rural property and just mowing the grass and keeping things tidy is almost more than dh has time for. Once upon a time, we considered having a garden there though we live about 30 minutes away. We can see now how nearly impossible that would be. It sure sounded like a good idea when we were brainstorming though.
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16th October 2012 at 3:06 pm
Willy2 says:
1. Stop using corn to make ethanol to be blended with gasoline.
2. Stop eating meat. Then grain prices will come down. It’s also good to reduce obesitas among US citizens. And too many US citizens are obese/overweight.
3. And Congress still thnks the reported inflation is too high. They want a new calculalation that would say that inflation is even lower.
4. Since 1981 the average yearly increase of wages has been below the real inflation. That means that workers have seen their real purchasing power shrink for 30 years. But employers shoot themselves in the foot as well because by reducing wages they curtail the purchasing power of their customers and that hurts profits.
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16th October 2012 at 5:01 pm
ThePessimisticChemist says:
“he largest animal we ever had was a 1200# mama-cow. But she was young and feisty. She unnerved me more than once (and I grew up on a farm!)”
I’m rather ashamed to say it, but my object of choice in the farm lot was a “walking tall” style board that I had reinforced at the handle side with duct tape.
I got injured by hogs, cattle and horses for years before I started carrying that thing. Never had a lick of trouble afterwards.
I did accidentally kill a hog with it once though :-/
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16th October 2012 at 10:26 pm