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CHART: The Real Inflation Rate Is 11% According To CPI Calculations From 1980s

UPDATE - The chart above has been updated to include data for December, showing the true CPI at just under 10%.


From Shadow Stats

The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980.  In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living. Further definition is provided in our CPI Glossary.


History of the CPI

By John Melloy

Executive Producer, CNBC's Fast Money

After former Federal Reserve Chairman Paul Volcker was appointed in 1979, the consumer price index surged into the double digits, causing the now revered Fed Chief to double the benchmark interest rate in order to break the back of inflation. Using the methodology in place at that time puts the CPI back near those levels.

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.

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.

“Near-term circumstances generally have continued to deteriorate,” said John Williams, creator of the site, in a new note out Tuesday. “Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem.  Until such time as financial-market expectations catch up with underlying reality, reporting generally will continue to show higher-than-expected inflation and weaker-than-expected economic results in the month and months ahead.”

Continue reading at CNBC...


UPDATE - Congress is discussing changing CPI calculation again, this time to save as much as $220 billion over ten years...


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Reader Comments (15)

Apr 13, 2011 at 9:28 PM | Registered CommenterDailyBail
A Sidney Lumet Hidden Gem

Most film fans are aware of the recently departed film director Sidney Lumet’s more famous works such as Fail Safe, Serpico, Network, and The Verdict. But here is an overlooked Sidney Lumet gem that was the first of several films in which he directed Sean Connery. (Connery was already a superstar by the time he made this film. He had appeared in the first three James Bond films. He gives one of his best performances here.) LRC fans will find this film of particular interest as the always socially/politically conscious Lumet excoriates the military mindset in this depiction of a British military prison camp for British soldiers.

Apr 13, 2011 at 9:30 PM | Registered CommenterDailyBail
Chicago public school has banned the slaves students from bringing their lunches from home

Apr 13, 2011 at 9:31 PM | Registered CommenterDailyBail
CPI are the initials for Consumer Price INDEX. CPI does not measure inflation.

CPI measures the change in prices over successive periods of arbitrarily selected products. That's all it does.

Inflation is a process undertaken by Central Bankers (in the case of the U.S.A., Federal Reserve bankers) to try to spur an increase in sales of the products of members of the Federal Reserve System, i.e., Commercial Bankers.

When Fed Res Bankers cut interbank lending rates (Fed Funds Rates) or cut the amount of reserves bankers must hold and not lend, Fed Res Bankers engage in inflation.

Inflation does not work, always.

If you want to see if inflation is working, go to Fred [ http://research.stlouisfed.org/fred2/ ] and look at the charts for
revolving credit and non-revolving credit. Those categories encompass all banking products that Commercial Bankers sell.

[1] http://research.stlouisfed.org/fred2/series/REVOLNS?cid=101

[2] http://research.stlouisfed.org/fred2/series/NONREVNS?cid=101

Because people do not understand all things money, credit, commercial banking and central banking, they do not get at all economics and thus the economy.

Most, including most Ph.D. economists, have never heard of key concepts like money accretion and economic quantities of purchasing.

They do not know that some products get bought with cash, mostly, other goods get bought on revolving credit (credit cards), mostly, and still other goods get bought with non-revolving credit (loans), mostly.

Right now, owing to effects of Money Accretion -- new Federal Reserve bank notes and U.S. Treasury token coins joining into circulation existing notes and coins -- the prices of goods bought (hence products sold) primarily with cash have been rising rapidly.

This is a result of QE2, which of course, where Fed Res bankers buy U.S. Government agency debt with conjured checking account bank credits. As those checking account bank credits get deposited into the banks of unionized government workers (higher pay, more employed) and government contractors, those bank credits often act as near cash -- owning to fast clearing of the ACH -- and eventually much becomes cash.

When cash and near cash (bank credits) rise faster than production of products, ceteris paribus, prices rise. That's why prices of food and gasoline have risen as much as you have seen since 2008.

For sure, CPI does not measure inflation.
Apr 14, 2011 at 12:07 PM | Unregistered CommenterSmack MacDougal
Faber Likes Gold, Silver; Will Keep Accumulating Gold


short bloomberg interview from yesterday
Jun 23, 2011 at 1:20 PM | Registered CommenterDailyBail
I'm the Gov'ment if I don't like the results I'll change the rules.

Smack, The only thing I understand about money & credit is that I don't have any. LMOA
Jun 23, 2011 at 1:54 PM | Unregistered CommenterTR
For 2yrsI haven't received a raise in s/s ,sheeple wake up!
Today is your future if you are 20 to 50 yrs old !
Why is there not a movement to "share the pain", congress should pay more for "their caddy" health care.
Pay a more resonable price for thier meals in congress dining room,pay more towards all the perks that
they award themselves,(even though they did such a poor job there is no budget for two yrs.) & much much
more I don't have time or mood to go over again & again .
I'am70 I really don't give a shit but I'am sure really tired of the "herd" saying " I love my kids" what b/s !
Jun 23, 2011 at 9:14 PM | Unregistered Commenterspec/ops ret
They don't like to Fu-k their wives but SURE like to SCREW their KIDS!!!!!!!!!!!....AB
Jul 16, 2011 at 6:39 PM | Unregistered Commenterain't bullshitt'n
The following statistics were updated to the Department of Labor's website.
Consumer Price Index (CPI)
View the latest DOL statistics.


GovDelivery, Inc. (800-439-1420) sending on behalf of the United States Department of Labor · 
Frances Perkins Building · 200 Constitution Avenue NW · Washington DC 20210
DOL's MSHA seeks to collect nearly $240,000 in unpaid civil penalties from 2 mining companies in North Carolina and Texas [07/14/2011]
On behalf of its Mine Safety and Health Administration, the U.S. Department of Labor has filed complaints in U.S. district courts against two companies in North Carolina and Texas to collect unpaid civil fines resulting from federal mine safety violations.

DOL announces $2.5 million grant competition for evaluation and monitoring of international child labor projects [07/14/2011]
The U.S. Department of Labor's Bureau of International Labor Affairs today announced a $2.5 million competitive solicitation for a cooperative agreement to evaluate and monitor child labor projects funded by the agency.

DOL announces $15 million grant competition to combat child labor through Global Action Program [07/14/2011]
The U.S. Department of Labor's Bureau of International Labor Affairs today announced a $15 million competitive solicitation for a cooperative agreement to combat exploitative child labor internationally by implementing the Global Action Program. This initiative aims to advance and scale up ILAB's global efforts to reduce the prevalence of child labor and improve the livelihoods of vulnerable populations, including child domestic workers.

DOL announces $15 million grant competition to combat child labor in Philippine sugarcane production [07/14/2011]
The U.S. Department of Labor's Bureau of International Labor Affairs today announced a $15 million competitive solicitation for a cooperative agreement to support efforts to combat exploitative child labor in areas of sugarcane production in the Philippines.

DOL assistant secretary testifies before Senate HELP committee on improving employment opportunities for people with disabilities [07/14/2011]
Kathy Martinez, assistant secretary of labor for the Office of Disability Employment Policy, today testified before the U.S. Senate Committee on Health, Education, Labor and Pensions to discuss the U.S. Department of Labor’s public and private partnership initiatives designed to connect people with disabilities and employment opportunities.

DOL launches 2 application development contests [07/14/2011]
The U.S. Department of Labor today announced two contests with a total of $70,000 in prize money for software applications that showcase innovative uses of the department’s data. The goal of the first contest is to connect unemployed workers with promising careers, and the goal of the second is to empower consumer choices about the hotel, motel, restaurant and retail industries. Information about both is posted at http://www.challenge.gov.

Unemployment Insurance Weekly Claims Report [07/14/2011]
In the week ending July 9, the advance figure for seasonally adjusted initial claims was 405,000, a decrease of 22,000 from the previous week's revised figure of 427,000. The 4-week moving average was 423,250, a decrease of 3,750 from the previous week's revised average of 427,000.
Jul 17, 2011 at 1:21 AM | Unregistered CommenterDave
Thanks dave...
Jul 17, 2011 at 11:53 PM | Registered CommenterDailyBail
Jct: So they're going to need interest rates higher than 12% very soon since they think printing money causes inflation Shift A when printing money for paychecks fights inflation Shift B. SEarch "Big Lie of Economics"
Jul 19, 2011 at 6:35 AM | Unregistered CommenterKingofthePaupers
Speaking of great actors, Congress is acting like IDIOTS. STOP!! They are IDIOTS
Jul 22, 2011 at 3:28 AM | Unregistered CommenterTR
Jct: And the for suckers who believe interest fights inflation Shift A, more money chasing goods, the "Big Lie of Economics" hides that printing money for paychecks fights, not causes, inflation Shift B. Sure, inflation can be more money chasing the goods over there or it can be the same money chasing less goods over there after foreclosure due to interest! Economics teaches only "Up over here" and nothing about "down over there." Wonder why? Search and ye shall find.
Jul 22, 2011 at 5:18 AM | Unregistered CommenterKingofthePaupers
Here is the short version and layman's explanation on economics; If gas was only $3.67 per gallon and you were unemployed for 9 months with zero income, there's no gas in your car if it goes to $1.00 per or $20.00 per, see? If milk was... $4.89 and your unemployed for 18 months it doesn't matter that milk rolls on up to $10.00 because you aren't getting milk at the current subsidized price of $4.89; corn syrup (also subsidized) and tainted water, painted with the color of let's sayyyyyyy... cancer dye # 46 is $1.67. 3 out of 4 chemist say, "The milk may actually be more toxic than the corn, heavy water, and die?". Imagine, fucking, that. Not literally or figuratively small brain users; women included, but as an explicative interjection, descriptive of my disgust.

By the by, I am not an expert on anything..., but I did sleep with a professional sleeping person who was $300.00 per hour a month ago, for a buck fifty last night at a Holiday Inn... Expressssss. CPI, GDP, PhD, MIT, or as simple as 1, 2, 3 without the 3-Card-Monty?

Jul 31, 2011 at 1:32 AM | Unregistered CommenterGhana
Nice one Ghana.
Jul 31, 2011 at 11:50 AM | Registered CommenterDailyBail

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