The Slippery Measure of Inflation

Measure of InflationPerhaps the claim is apocryphal, but pollster George Gallup is reported to have claimed he could prove God statistically. If we didn’t know better, we might guess that he began his stellar career at the Bureau of Labor statistics, or maybe even at the Federal Reserve.
 
According to these influential government organizations, we have little to worry about in the way of inflation. In her speech last January at the Stanford Institute for Economic Policy Research, Fed Chair Janet Yellen echoed this sentiment when she talked of 2% inflation as being more of a goal than a current reality, and claimed “I feel the U.S. economy is in a reasonably good position and there is a little bit less to lose sleep about now than there was in 2008, 2009 and 2010….”
 
It would appear, then, the official measure of inflation is like Janet Yellen’s sleep cycle – it depends on what you’re used to. If you buy an item for $1.00, and next year it costs $1.02, then, yes, it’s fair to say the rate of inflation is 2%.
 
The Federal Reserve uses core inflation data – a metric that does not include food and energy. The reasoning here is that these are volatile industries subject to external factors. Fed officials feel that measuring inflation is much more accurate when food and energy don’t cloud their calculation.
 
This official perspective is of little consolation to those of us who shop for food and heat our homes. While our own measuring technique is, of necessity, it’s one we can rely on. Daily Reckoning writer Charles Hugh Smith whimsically refers to our subjective measure of inflation as the “Burrito Index”:
 
“…I can track the real-world inflation of the Burrito Index with great accuracy. The cost of a regular burrito from our local taco truck has gone up from $2.50 in 2001 to $5 in 2010 to $6.50 in 2016.”
 
That’s a $160% increase since 2001; 15 years in which the official inflation rate reports that what $1 bought in 2001 can supposedly be bought with $1.35 today. This enormous loss of purchasing power is not reflected in the official measure of inflation, which claims inflation is subdued (1% or so annually).”
 
So if you’re consoling yourself with the “biased and often-manipulated government reporting” of official statistics, it’s time to retrench and continue on with your personal investment program. The government is not out shopping for your car, paying your food bill, or heating your home.
 
Moreover, if the economy strengthens this year, it’s only natural that you’ll encounter greater inflation. If consumer prices continue to arrive, physical gold remains your best protection, the one hedge against a dollar of declining value and rising inflation.
 
Request more information now or call 800-777-6177 now, and ask to speak to a Fortress Gold Group representative.

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