Real US Inflation Now Near 10%?

Posted by Adam Sharp - Wednesday, April 13th, 2011

Last month we published an article titled, "MIT and ShadowStats Agree: Inflation Around 9%".

The MSM seems to be catching on, as CNBC's John Melloy just published a nice piece along the same lines.

Inflation, using the reporting methodologies in place before 1980, hit an annual rate of 9.6 percent in February, according to the Shadow Government Statistics newsletter.

Melloy does a good job pointing out the specific changes made to "official" inflation numbers, and how they mask real price increases:

Since 1980, the Bureau of Labor Statistics has changed the way it calculates the CPI in order to account for the substitution of products, improvements in quality (i.e. iPad 2 costing the same as original iPad) and other things. Backing out more methods implemented in 1990 by the BLS still puts inflation at a 5.5 percent rate and getting worse, according to the calculations by the newsletter’s web site, Shadowstats.com.

Essentially, the Feds are making downward-adjustments to inflation based on improved manufacturing and productivity. That seems like a convoluted way to measure prices.

These "adjustments" are why we continue to rely on alternative inflation indices, such as those produced by John Williams of Shadowstats, and the MIT Billion Prices Project.

Here is the latest inflation chart by ShadowStats.com. The blue line shows Williams' alternate gauge, while the red line represents "official" inflation data:

inflation

Source: ShadowStats.com

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