Why/How can our inflation rate be at 3.36%?

[Lochloosa]

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave
2006 3.99% 3.60% 3.36%

I am a project manager for an electrical company. We have had to absorb huge increases in our base materials over the last year. I am not talking about 2 - 3% increases. Our copper price rose 23% last week. Last year our PVC pipe cost went up over 40%. Today, we were informed that the cost of our cast aluminum fittings will go up 50% at the end of the month.

Folks, these are not items specific to the electrical industry. These are base materials used throughout our economy.

Something stinks!

[Pacifist Patriot]

1. I do believe there was some "new math" involved in the...

calculations and the cost of certain key items was excluded from the equations.

[Lochloosa]

7. That is the problem I have with these numbers.

The "KEY" Items are copper, aluminum, steel, PVC.

What the hell are they building all the houses with?

And wood prices have been so volitile that it's hard to get the mills to even give you a quote. They will tell you to call them when your ready to buy the material.

[Radio_Guy]

8. Exactly

The Bush administration deliberately excludes gas and oil, or else real inflation would be close to double digits now.

[Lochloosa]

12. Exclude the gas and oil.

I am seeing huge increases across the board.

[anarch]

30. well then just exclude anything that might alarm people

Everything's just fine! There's no problem! We can go on with our American lifestyle. Relax, go to the mall and buy stuff or something....

[capi888]

2. Can We Say THEY...

fix the Books....its being done in all areas of the Gov't. Housing , Consumer index, retail....on and on.

[KeepItReal]

3. Every time I hear those stats, they say "Non-Food and Energy" Inflation

So they are not even factoring in stuff regular folks spend money on every day.

[Yollam]

33. Yep, food has been soaring.

But to be fair, I lived in Japan from 1995 to 2000, and during those years, the grocery prices in the states went from much lower to those in Japan to the same and sometimes higher. I was shocked to find milk at $4.50/gal (in Miami, at Publix) and even the el cheapo store brand was $3.50! The milk here in Japan costs more, but do you have any idea how heavily subsidized milk in the states is, how much surplus they produce, and how they have increased the per cow output with hormones, etc? Amazing.

Now I'm back in Japan, the price of gas in the US is now almost as high as in Japan (it was once 3 times higher here),. groceries are a comparable price, and health care is completely out of reach to almost half of the people in the states. "Richest nation in the world" my ass. Only Dumbya's "base".

[magellan]

44. And I'll bet the average Japanese is being paid a living wage

...to go with those prices. (Glad to hear you and yours are happily dwelling in the Land of the Rising Sun again, Yollam!)

[Yollam]

50. Wages are more equitable here, yes, and there is little real poverty.

And CEOs here only make 6 figure salaries. But then again, most people live stacked in homes that are 1000 sq. ft. or less, so I suppose to many McMansion-loving Americans, that would seem "poor". It depends on what your priorities are, I suppose. I like it here, but it's not for everyone.

[napi21]

4. Statistics can be presented to support ANYTHING!

Many things are simply NOT CONSIDERED in compiling stats like that. Makes the admin look good...if you're not really paying attention!

[Laura PourMeADrink]

5. here's all the data

http://www.bls.gov/cpi/

[jimshoes]

6. It's based primarily

on the price of sealing wax and saddle soap. All other factors have been removed from the equation I think. (Probably not too far from the truth)

[kenny blankenship]

11. But sealing wax and saddle soap are officially subsidized!

to keep their prices low. Sealing wax is edible at least, which you cannot say for saddle soap--still it's a hard life gleaning nourishment from little maroon buttons of wax.

[Pacifist Patriot]

22. I thought it was based on average selling prices on eBay.

[Binka]

25. And Sex Toys But Those Will Be Banned Soon So Don't Worry

This isn't "fuzzy math" it is truly "fuck you up the ass math." Bastards.

[Lochloosa]

37. How is my favorite lady?

Always a way with words....}(

[Binka]

41. I Knew That Would Get Your Attention Sparky!

I am busy planning a trip to the Uk and Scotland. I am gonna meet up with some DUers! I have a pretty close friendship with an American woman who is married to a brit. I met her on DU her handle is tenshi816, she is brilliant and funny! So that is what I am up to, that and NO GOOD...as usual!:evilgrin:

[Lochloosa]

45. I'm jealous

I have always wanted to go to Scotland. Are sex toys legal there. Just thinking of what you may need to pack.:P

[Binka]

46. Oh Thanks For Reminding Me! About What To Pack!

Deb and I will get drunk and take pictures for you...NO..not those kind of pictures!:evilgrin: Nice ones of drunk 40 somethings doing stupid shit!

[FloridaPat]

9. We all must sacrifice to build that new embassy in Iraq and those 14

bases.

[msongs]

10. counterbalanced by cheap trash from china... nt

[seemunkee]

13. Maybe this will help

Despite my father having been an economist I'm not very good at understanding these things but this article explains how some of the inflation is being hidden.
http://themessthatgreenspanmade.blogspot.com/2005/10/housing-costs-core-cpi-recap.html

[RaleighNCDUer]

28. Interesting. I was wondering how the housing bubble fit into this. nt

[Redbear]

14. It is manipulated to look better than it is.

Check out:

<http://www.gillespieresearch.com/cgi-bin/bgn>

If they used the same measurements today that they used 15 years ago, inflation would be over 6%.

[Lochloosa]

18. I think 6% would be on the low end.

[Pacifist Patriot]

20. So do I.

[insane_cratic_gal]

15. Just curious but have you seen Enron?

the Smartest guy in the room?

I just rented this doc the other day.. I've now joined in with the conspiracy theorist..I have little trust for anyone.

[Warpy]

16. Thank Greenspan

who decided that the market basket of goods and services needed to be changed. He reasoned that when money was tight, families switched from steak to hamburger, so the market basket should reflect that. That made the market basket an indicator of a reduction in lifestyle, not an indicator of inflation.

Schieffer on CBS blew the gaffe last year when he said "If you subtract food, shelter and energy from the market basket, why there's no inflation!"

This is basically what they've been doing. That inflation rate covers things like those plasma TVs that are actually declining in price while ignoring food and gas and heating oil and real estate and everything else we actually need to live on.

The real inflation rate is well into the double digits, from what I've been seeing.

[madokie]

17. this * cabal pulls numbers out their assesssss

where is assholeless tony gonna fit in all this.

[Pacifist Patriot]

19. Yep, definitely POTA stats.

"Pulled Out of The Ass"

[OmmmSweetOmmm]

21. Voodoo Economics? Nothing is ever mentioned about the under reported

unemployment rate either. The unemployment figures only cover those who are collecting benefits, not those who used their benefits up and are still unemployed. Or those who wound up having to take jobs well below what they were earning before. It's such BS.

[Pacifist Patriot]

24. Excellent topic for media coverage!

Oh wait, that would require an independent press. Sorry, I got ahead of myself.

[MadHound]

34. You are pretty much correct on both accounts

From Wikipedia

<snip>Neo-Keynesian's measure inflation by observing the change in the price of a large number of goods and services in an economy (usually based on data collected by government agencies, though labor unions and business magazines have also done this job). The prices of goods and services are combined to give a price index. When the CPI was first created, this was an Arithmetic mean of the prices in the basket of goods but when Alan Greenspan was chairing the Federal reserve the CPI changed to a Geometric mean which reduces the weighting of goods that are rising in price. This price level is then adjusted for changes in the underlying basket of goods, a process called hedonic adjustment. For example, if the base model of a car goes up in price but includes air conditioning, the price put in to the index will be adjusted down to account for improved model despite the fact that the consumer must pay for it whether the feature has value or not. This raises the question: what percentage of the price increase is inflationary, and how much should be counted for the new feature which some consumers may, or may not, want? Some inflation figures deliberately exclude volatile goods (e.g. energy and fuel) from the basket to be able to gauge the "core" rate of inflation despite the fact that they are basic components of everyday living and go in to every good delivered to a store shelf.


U.S. Historical inflation rates 1914-2006.The inflation rate as measured by Neo-Keynesian's is the percentage rate of increase in this index; while the price level might be seen as measuring the size of a balloon, inflation refers to the rate of increase in its size. There is no single true measure of inflation, because the value of inflation will depend on the weight given to each good in the index, as well as the extent of the economic region being examined.<snip><http://en.wikipedia.org/wiki/Inflation#Measuring_inflation>

Lots of seemingly arbitrary weighing of certain figures, and not weighing others. Why, well I'm sure that there is some vague reason, but the reality of the matter is that it seems designed to keep the "official" inflation rate low, mainly for political reasons. This is why "volatile prices of food and energy" are excluded in a lot of cases, it would shoot the inflation rate way up. Nevermind the fact that nobody in this country is uneffected by the price of food and energy, it's just too "volatile" so they either don't measure it, or dismiss it out of hand.

I think that the telling statement in this piece is "There is no single true measure of inflation, because the value of inflation will depend on the weight given to each good in the index, as well as the extent of the economic region being examined." Essentially they're just pulling this figure out of their ass, and if real numbers are too high, they weigh it and measure it until the "official" inflation rate is low enough to keep the politicians out of public hot water.

And the unemployment number is similar voodoo. These numbers aren't put out to give the American public real information on how the country is doing, they are put out to keep politicians in power, and if the numbers are too high, the numbers are changed. Yup, it's BS.

[Roland99]

40. Unemployment is actually about 9.5 - 12.5%. Here's some detail >>>>>>>

"GOVERNMENT ECONOMIC REPORTS: THINGS YOU'VE
SUSPECTED BUT WERE AFRAID TO ASK!"

A Series Authored by Walter J. "John" Williams

"Employment and Unemployment Reporting"
(Part Two in a Series of Five)

August 24, 2004
http://www.gillespieresearch.com/cgi-bin/bgn/article/id=341

[Roland99]

42. Plus, here are some GREAT articles on the lack of priv. sector jobs >>>>>>

Here are some articles from EPI (albeit several months old) that explain the dearth of private-sector job growth.

http://www.epi.org/content.cfm/webfeatures_econindicators_jobspict_20060407

...

This decline of 16% in factory employment over the past five years is by far the largest on record for expansions that have lasted this long (the average is about -a 1% decline; in the 1990s recovery, manufacturing employment fell 2.7% over the comparable period). Thus far in this expansion, manufacturing's share of total employment has fallen from 12.8% to 10.5%. A shift of this magnitude over a relatively short time period suggests an acceleration of an important structural shift in the composition of employment in the United States....

The boom that wasn't The economy has little to show for $860 billion in tax cuts
http://www.epi.org/content.cfm/bp168

Full article:
http://www.epi.org/briefingpapers/168/bp168.pdf

[dysfunctional press]

23. with cost-of-living increases in entitlement programs...

it's in their best interest to report a number that's as low as possible.

our government is for the corporations, NOT the people.

[leveymg]

26. K&N. That increase in commodities and producer prices is the result

of increasing energy prices and a weakening dollar being passed on to industry, whcih shows up in the PPI. It's setting up a cascade effect where consumer prices are going to shoot up dramatically as they did in the early and mid 1970s due to the convergence of rising interest rates, energy prices, commodity prices, and finally prices for finished consumer goods, housing and food.

Unless there's some sort of dramatic change in demand psychology -- such as the outbreak of another war and a market crash -- in six months we could see the current rate of CPI price inflation double.

[newportdadde]

32. Also throw in flat/declining wages. Looks like stagflation setup.

[leveymg]

35. For middle-income earners, that's the situation we've been in since 2001.

The only relief has been the decline in the cost of imported finished consumer goods. That's a double-edged benefit, as the trade and current accounts imbalances are putting huge pressure on the Dollar. The only reason we haven't seen an explosion in interest rates is because of the cooperation of the Chinese and Japanese in their purchase of US T-bills and other dollar-denominated investments.

If the PRC were to cease buying back US debt issues and assets -- because the Asian central bankers shifted to safer, higher-yield returns, elsewhere -- then the bottom would fall out, and the whole house would come crashing down. That would happen very quickly if BushCo actually attacks Iran.

[Lochloosa]

38. What he said!

[newportdadde]

27. Core vs Non-core.

Core doesn't include gas and energy. They only talk about total inflation if it goes down, even if its a paltry decrease after months of increases.

They also manipulate housing costs with the whole 'rents' bullshit not what a home actually costs to buy now vs 4 years ago.

Core also takes decline off of items like new Cars(because they do more) PC(same thing), TVs DVDs etc. Which if your not purchasing these things does not help the inflation rate that YOU feel.

The advantages of core is that if helps keep the gov from having to up their payout on securities(like I-bonds), entitlements etc and they can keep the Fed printing press spewing out more and more dollars because it 'hides' inflation.

I do not believe healthcare is in their either. My premiums have doubled in 2 years.

Your not alone many people on both sides of the aisle are scratching their heads when they hear low inflation because their wallet sure as hell doesn't feel heavier.

[spanone]

29. Why shouldn't Bush* lie about the economy? Lied about everything else.

[ProfessorGAC]

31. The Number Reported Is Based Upon. . .

. . .a specific market basket of goods, AT RETAIL! Since the big box merchants are clamping down on price increases, these increases described at your point in the economy aren't hitting the consumer. It does mean, however, that your margins will be squeezed, which is happening to at least 85% of all companies in the U.S.

At the same time, the direct cost of energy is not included in the inflation numbers reported by Commerce or Treasury. So, the 17% increase in gasoline or diesel, which is a nearly $1 trillion dollar industry, would mean that around $170 billion of cash is now being spent (annualized) for which no added good or service was obtained. That reflects an inflation rate of 1.55% overall, which has to be added to the 3.66% you describe. It also explains the GDP growth rate which is reported higher than would normally correlate to "real" growth.
The Professor

[endarkenment]

36. It isn't just the bush regime.

Here is another view on the CPI bullshit:
http://www.financialsense.com/stormwatch/2005/0624.html

The major thesis here is that this scam is essential to maintain the fiction of SS solvency as SS payouts are COLA adjusted and the COLA adjustment is based on the CPI.

Anyone here paying for food housing, education, healthcare and now fuel knows that the f'ing government is a lying sack of shit.

The whole system is run for the benefit of a small group of very wealthy and very powerful elites.

Class warfare: bring it on.

[Roland99]

39. It's really about 8-9% and here's the detail on how it's altered >>>>>>>

"GOVERNMENT ECONOMIC REPORTS: THINGS YOU'VE
SUSPECTED BUT WERE AFRAID TO ASK!"

A Series Authored by Walter J. "John" Williams

"The Consumer Price Index"
(Part Four in a Series of Five)

September 22, 2004
http://www.gillespieresearch.com/cgi-bin/bgn/article/id=343

[Darkhawk32]

51. Absolutely BRILLIANT find!!! You're a real asset to DU, Roland99!!! n/t

[TahitiNut]

43. The key word in CPI is "Consumer"

The prices for raw materials and components in manufacturing and fabrication are incorporated into what's called the "Producer Price Index" ... which is one of what some call "leading indicators" of the economy. The reason it's called a "leading indicators" is because these costs will later show up in other economic indicators (such as CPI) which incorporate a wider array of factors. To the degree the products thus produced have an elastic demand, we might see inventories rise and revenues drop.

I hope this helps. It's important that we have an understanding of the underlying meaning of such statistics, independent of our skepticism.

[Zynx]

53. Ding Ding Ding Ding Ding! Exactly.

Some industries have gotten squeezed by the huge price increases in raw materials and they have been unable to pass the costs on.

[wiggs]

47. Number are intentionally minimized because

so many government and private payout benefits and cost of living increases are tied to inflaction rate. There may be a political component as well, but I've read somewhere that higher inflation rates mean huge increases across the board for many important institutions.

So not only is it deceptive, it is damaging to those entitled to increases in benefits.

[Autonomy]

48. And unemployment is only 4.8%. Riiiight.

Something stinks all right.

[slipslidingaway]

49. Ron Paul "What the Price of Gold is Telling Us"

http://www.house.gov/paul/congrec/congrec2006/cr042506.htm

snip>>

"These were momentous monetary events, and every knowledgeable person worldwide paid close attention. Major changes were endured in 1979 and 1980 to save the dollar from disintegration. This involved a severe recession, interest rates over 21%, and general price inflation of 15%.


Today we face a 60% devaluation and counting, yet no one seems to care. It’s of greater significance than the three events mentioned above. And yet the one measurement that best reflects the degree of inflation, the Fed and our government deny us. Since March, M3 reporting has been discontinued. For starters, I’d like to see Congress demand that this report be resumed. I fully believe the American people and Congress are entitled to this information. Will we one day complain about false intelligence, as we have with the Iraq war? Will we complain about not having enough information to address monetary policy after it’s too late?

If ever there was a time to get a handle on what sound money is and what it means, that time is today.

Inflation, as exposed by high gold prices, transfers wealth from the middle class to the rich, as real wages decline while the salaries of CEOs, movie stars, and athletes skyrocket-- along with the profits of the military industrial complex, the oil industry, and other special interests."

[lovuian]

52. Its ALL LIES!!! Economists are on the take!!!

Its just a way to keep Social Security and raises of workers done....