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IPFS News Link • Inflation

Rage Against The Inflation Denialists

•, by Jeffrey Tucker

We are living through the most destructive bout of inflation in 45 years, one that threatens to become worse and perhaps just as ruinous in the long run as the last one.

And yet daily and for years, we've been told it's not so bad and that it's nearly over anyway.

How can we reconcile these two realities? They cannot both be true.

An image of verified accuracy has been circulating all over social media lately: A list showing the price increases from the end of 2019 to now at major fast-food outlets. It fits with your own experience. It indicates that in four years, your fast-food prices have doubled, so that your dollar is now worth 50 cents or even 25 cents. That's an astounding level of inflation by any standard.

The validity of this is easily verified, and it certainly fits with our experience. And not only with fast food. It's true of all food out—and food at home, too. In my own estimation, trying my best to recall prices from late 2019, I, too, have a sense of inflation of 50 percent to 100 percent or more.

But there is a major problem.

The government says otherwise. Looking at official inflation data, what we see is something very different. It shows food-away-from-home prices going up by about 26 percent and prices in general up by 21 percent. Setting the index at 100 for January 2020, we end up with indexes of 126 and 121, respectively, today.

What does one do when official data depart so dramatically from lived experience? As Chico Marx said, who are you going to believe, me or your own eyes? It seems to me that your own eyes are a better guide.

So what in the world is wrong with government statistics on inflation? It's a huge combination of factors. In the most rudimentary form, the inflation calculation used by the government no longer consists of a basket of goods and services carried over from one period to the next. Starting in 1996 and following, economists started pushing "hedonic" adjustments to the index. What does this word mean? It is from the Greeks meaning pleasure.