true rate of inflation

Discussion in 'Economics' started by jsv416, Sep 30, 2006.

  1. jsv416


    I am not an economist but definately like to keep myself up dated on the current economic environment. That being said, I would like to pose a question to others on ET who are smarter than me in the field of economics.

    Since M3 is not reported anymore and the government can print as much funny money as they want, nobody has any accurate fugures to how much they are printing. How do we really know what the true rate of inflation is, if we dont know how much funny money is being printed? Is the current way of calculating inflation rates really an accurate measure? Or can the gov. cook the figures, or control the figures that go into making up the rate of inflation? What if the true rate of inflation is much higher than what we are led to believe. I am not trying to be a conspiracy theorist, I just dont understand the whole process and if it is accurate.....

    Thanks in advance....
  2. rosy2


    TIPS_yield - Non-TIPS_yield
  3. rosy2


    heres a chart
  4. jsv416


    thanks rosy...

    would you mind giving me the basic explanation of your post??

    Also, how is the Consumer Price Index derived?
  5. It's probably 7-8%, but the Gummint has a vested interest in people acting like they believe it's 2%.

    So, Gummint keeps telling us it's 2% and we keep bopping along hoping nobody lets the cat out of the bag and makes it known the emperor really wears no clothes.
  6. Several years ago they started tieing entitlement payments to the CPI, it is amazing how low inflation has been since. TIPS are worthless to track and mean nothing as they are also tied to the CPI figure.
  7. piezoe


    Thanks, Rosy2, That's really intelligent and right on. It agrees very closely to all the estimates i've seen between actual and official. Some year ago, i think it was during Reagan, we changed the method of computing the inflation rate. Naturally the official rate was lower after the method was changed. Billions saved on TIPS and entitlements this way. That's one reason I would never recommend anyone buy TIPS. There is only two ways that i know of to beat inflation: one is to become a Swiss citizen, which is very, very difficult; the other is to be in debt up to your ears, which is very, very easy.
  8. True inflation is really tough to get to because it fails to capture quality of life enhancements. For example, if you figured your monthly budget 10 years ago, you would not account for things like broadband internet and cellphones. But now that is an expense basically everyone has. So it went from a zero calculation to current prices.
  9. jsv416


    Is the general consensus that there is no way that the govt. can tweak the numbers?? Is the rate of inflation as we see it generally accepted by most, if not all, economists as correct? OR are their wild valuations across the board??
  10. ROTFLMAO Not directed at you personally, but, I cracked up when I read that.

    The govt is the BIGGEST cooker of the books than ANY corporation in the US could aspire to be.

    The inflation numbers are SO understated, it's not even funny. The reason has already been explained... entitlement programs. If not for the low reported numbers, we as a nation would be in an even greater debt hole than we already are.
    #10     Oct 2, 2006