Friday, December 5, 2008

Three Cheers for Jim Jubak!

Jubak's recent article, "Fake Inflation Numbers Masked Crisis", hit the nail right on the head.

Most people with any sense have known for years that the Fed Govt's price inflation numbers couldn't possibly be correct. They are always lower than actual price inflation numbers. This has been going on for over two decades, at least. The DC crowd lives in its own little world, where up is down, and down is up.

A couple of years ago I conducted my own little micro-study of price inflation at the grocery store. After shopping one day, I wrote down all the items purchased, their brand names, sizes, and prices...a wide variety of everyday items, from breakfast cereal to dog food to paper towels to paper clips to canned peaches to frozen dinners to bananas to Scotch tape, and on & on. One year later, I went back to the same store and bought the same items. The overall price increase was 10.7%; for the period of time involved, the Fed Govt claimed that price inflation was at 2.3%.

Now, admittedly (and obviously), my little experiment didn't cover all sectors of the economy. But still, it was clear to me that something was amiss with the government's estimate of price inflation. [Naturally, it is in the Administration's best interest to keep the number as low as hook or crook.]

I don't think that Jubak's main point in the article actually is news to a lot of people, but he does a great job of explaining how the government pulls off such fakery. Kudos to Jubak!

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