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.
