Fudging the Numbers…

If you’ve been to any grocery store over the last few years, you can’t tell me you honestly believe the inflation data the government reports. Fine, there is core inflation (PCE), and then there is the the consumer price index which includes such meaningful items (in ordinary citizens’ budgets such as food and energy costs… Either way, everything is getting more expensive all the time, and it’s hard to believe inflation is 3-4%.

Yesterday, I read a very interesting article about this phenomenon in Harper’s Magazine – “Why the Economy is Worse than We Know”. Not only does this article make the point or rather documents how recent administrations have been doctoring inflation to make numbers more palatable to the public, essentially by stripping the ‘indices’ of inflationary items and influences. But it also explains how the same is true for other parameters such as GDP, once known as GNP. Things started changing in 1983 when inflation was a problem and was ‘treated’ by changing the way of calculating it. That easy! Amazingly, using the pre-1983 way of calculating inflation, the current rate is around 12%. Sounds more like it. Or does this sound like conspiracy theory ?