Lies, Damned Lies and Inflation Statistics

I´m from Ecuador (South America). In our country and in most of South America central banks have a history for covering up economic stats in order to favor politics. But that is not the case with, core inflation in the US. Sadly I see a great lack of understanding of what economics is and how core and regular inflation works (it amazes me that a journalist from Newsweek didn´t knows about this!!!). Core inflation does not take into account energy and food because they respond to recurring cycles. For example, energy price can go up on December and August (for heating and cooling); food prices may go up on regular and predictable basis according to crops and climate conditions. So In order to have a good economic policy, it is important to see the long run, and that´s why core inflation exists. Regular inflation, is also a good measure and central bankers should always keep an eye on this statistic, because this kind on inflation will determine consumption trends. In other words, when someone mentions core inflation, he/she is not lying. It´s just a different kind of statistic information. Although it is very important to know why statistics is been used (politicians soon mislead public opinion, and ???forget??? to say which inflation they are talking about).
The situation in South American countries is very different, because inflation rates are often manipulated??? That???s why it´s so difficult to keep track of what is really happening in the economy. jprado@ide.edu.ec

Our government lies to us about a lot of things. The inflation rate is one of the more blatant lies designed to make us think we are better off than reality tells us. The truth is that the government doesn't want us to know the real inflation rate because business doesn't want it employees demanding raises. Another lie is that tax cuts will bring in more revenue. Politicians lie about economics all the time, but we are now being told the biggest lies of all, by both Obama and McCain, that they will be able to cut taxes and grow ourselves out the hole Reagan and Bush dug for us. Anybody who thinks that this country will be able to continue to prosper while the federal budget deficit continues to grow is fooling themselves, and anybody who thinks we can erase the federal deficit without massive tax increases is blind, deaf, and dumb. We are in debt to everyone in the world, and the bill will come due soon.

Looks like inflation statics may not be alone in lying.

Does Suskind have the smoking gun showing that the White House called for forged documents to support their case for the Iraq war? If he does, it's over for Bush, McCain, Tenet, Cheney and a whole host of other Republicans. If this turns out to be on the Abramoff level mainlined into the White House, it's bigger than Watergate. Notice everyone, I say if if if. I'm not giving this Administration the benefit of the doubt anymore, however.

See the exclusive here:

http://www.msnbc.msn.com/id/3036677/#26045433
http://www.dailykos.com/storyonly/2008/8/5/172840/1570/289/563123

The prices of basic goods is not included in the inflation index because it would effect how business and the government have to pay the cost of living index in peoples pay checks It is that simple.

The problem is simple corruption needs to be stopped beginning with those who have profited for years from corruption. Please look up this individual ---- Nelson Wilmarth Aldrich ---- he was the father in law of Mr. Rockefeller who's family went on to controll the private banks which became the central bank the FED which is a private institution. This individual Nelson came up with the Income Tax and The Central Bank. Follow the money and you will find the corruption behind the problems in society. For 240.00 the Central Bank the Fed can create 1 million dollars then using the IRS they can bilk the public for 1 Million plus interest. Its easy math to see they have the complete control of the US government and even the world. Money is the root of all evil. Look up the owners of Standard oil it is a circle leading right back to the FED.

House prices are asset prices and not consumption prices and therefore should not be included in the CPI calculation.
As far as I know, no one denies that inflation is high. But this doesn't mean that overall inflation is the best measure of price evolution to use in monetary policy. Using a measure of inflation that is too volatile would create problems for monetary authorities as it could induce too much instability. Another reason for using core inflation and not overall inflation as a benchmark for monetary policy is the fact that monetary policy will not be able to affect the consumption of items like gas or food as much as it is able to affect the consumption of cars, electronics, clothing. You can postpone a car purchase but you can't postpone eating!!

All you need to figure out how bad inflation is is a calculator when you go to the store. Some products have increased 18.5% in a week's time. I don't listen to the government when they try to tell me that I am doing fine financially and that there is no recession. I have access to my checkbook which tells me otherwise.

Personnaly, I don't believe anything that the government OR the media has to say!

There is a major difference between the American and Chinese attitudes towards statistics : in the US, both 'headline' AND 'core' inflation measures are published and available to everyone_ as well as the RPI fwiw. Therefore, any citizen that would doubt the 'reality' of the inflation figures can check the whole data. Instead of that in China, the central bank is not independent and the only inflation data that are published have previously been altered by the government, making it impossible for academics and professionals to know the exact numbers.

Besides, the reason core inflation is used by the government rather than headline inflation is not in order to shamelessly manipulate the American people as this article seems to suggest but because core inflation is widely belived to be a much more relevant tool to adjust monetary policy. As monetary policy often takes 6m to 1yr to have effects, it is important not to overreact to "noise" _ i.e highly volatile data with no long-term effects. An argument could be made there has been a structural shift, causing energy prices to permanently rise but this has not been proven and the recent pullback affecting oil-prices (-$25 since peak) points towards the opposit direction.

This has been obvious to me for years. However, the tragedy with the U.S. government lying regarding true inflation is that social security, civil service and military retirements, official poverty levels, etc, are all tied to this lie. So call "cost of living" increases have not matched the true increase in the cost of living in decades. Most Americans have become much poorer. Many of our senior citizens have to choose between food and medicine. It is a national disgrace. The true poverty level is probably about double the U.S. official rate. The U.S. working class and middle class have been getting screwed by the U.S. government since Nixon took us off the Gold Standard in the 1970s. Of course, LBJ fighting the unnecessary war in Vietnam on credit did not help matters either. Now we have Bush Jr. in the 6th year of an illegal and unwarranted war that is being fought on credit. It is madness. Pure madness. You can lie about inflation for only so long. Eventually, the lies will lead to the total collapse of the U.S. Government.

At little late Newsweek.....
After years of saying the emperors clothes are divine it is a bit disingenuous to now say; "Hold on a minute".
Thanks Newsweek for stating the obvious. The whole lot of you cannot be believed.

I'm glad to see the so-called "main-stream" media get on the bandwagon to expose the government's cover-up of inflation. It's long past time to get the word out that such cover-ups and outright lies by the government, by politicians and even by economic/financial leaders outside of government have played a major role in bringing us to the awful place where we are today.

W. Joseph Stroupe, editor of Global Events Magazine online at www.globaleventsmagazine.com