The real inflation rate...

What's the real rate of inflation?

Rick Moran

It won't surprise you that it is not the "official" rate of 3.1%.

CBS News:

Forget the modest 3.1 percent rise in the Consumer Price Index, the government's widely used measure of inflation. Everyday prices are up some 8 percent over the past year, according to the American Institute for Economic Research.

The not-for-profit research group measures inflation without looking at the big, one-time purchases that can skew the numbers. That means they don't look at the price of houses, furniture, appliances, cars, or computers. Instead, AIER focuses on Americans' typical daily purchases, such as food, gasoline, child care, prescription drugs, phone and television service, and other household products.

The institute contends that to get a good read on inflation's "sticker shock" effect, you must look at the cost of goods that the average household buys at least once a month and factor in only the kinds of expenses that are subject to change. That, too, eliminates the cost of housing because when you finance your home with a fixed-rate mortgage, that expense remains constant until you refinance or move.

The group maintains that this index better measures the real-world impact of price changes, particularly for people on a budget. And, largely as the result of the recent run-up in gas prices, this "everyday price index" (EPI) suggests that Americans are being pinched far more tightly than the official inflation measure would have you believe.

Over the past year, the EPI is up just over 8 percent, according to the economics group. The biggest factor: Motor fuel and transportation costs are up 21.06 percent from year-ago levels. The cost of food, prescription drugs, and tobacco also have increased faster than the government's inflation measure, rising 3.56 percent, 4.21 percent, and 3.4 percent, respectively.

The CPI "market basket" is rigged to show a lower rate of inflation. It has been this way for more than 20 years. With so many pensions, union raises, not to mention Social Security tied to the CPI, there is a significant lobby out there to keep the "official" rate of inflation as low as possible.

Is the rate coming out of Washington a total scam? Not really when one considers that the market basket gives less weight to items like food and fuel which tend to fluctuate wildly from month to month. For statistical purposes, that is probably ok.

But anyone who goes to the grocery store on a regular basis knows they're spending a lot more to feed their families and fill their car with gas than they were last year.

Read more: http://www.americanthinker.com/blog/2012/03/whats_the_real_rate_of_inflation.html#ixzz241ucfThq