Santelli: I don’t Believe Government Inflation Numbers

perception cc

I don’t believe them either. I feel inflation.

The other day my wife said she went to buy juice and when she picked up the bottle it felt a just a bit light. When she looked at the label, sure enough, the bottle was a shade smaller. The bottle which had previously been 64 ounces was now 60 ounces. This is happening all over the grocery store. Portions are getting smaller but the price is staying the same or rising. Consumers are getting less for more at the grocery store.

But this is food, and food and fuel costs do not factor into official government inflation numbers as they are too “volatile.” There is truth to that. However, for many people on the ground, such prices are are the most important with which they must deal from day to day.

The cost of housing is another. Rents are up in many places. In and around Washington DC this is absolutely true. Same in New York.

They are down in Detroit however. Indeed we may be seeing an increasing spread between the “capitals” and “flyover country.” This likely is an important factor in the new official inflation numbers.

However, for many people the cost of food, fuel, and housing are up solidly over the past 3 years or so.

The stock market is up also, a direct result of the cascade of easy money pouring out of the Fed window.

The Consumer Price Index has increasingly been manipulated to depress official inflation numbers. More and more formulas are used to factor in the “substitution” of goods in the marketplace (If your cereal becomes too expensive you substitute it with generic cereal or oatmeal for instance) and other consumer phenomena. But these formulas are probably educated guesses at best and it is reasonable to question the number magic being employed.

It should always be remembered also that the Federal Reserve is there to lie to us. The Fed believes that if they can keep the “animal spirits” in check – through various means – they can keep the economy in check. That perception is economic reality.

The Fed fears that acknowledging inflation actually leads to greater inflation so therefore the public must be lied to. It’s for our own good.

One must always remember that when officials at the Fed speak about policy, or if an economic number comes out of the bowels of the BLS, this information is floated to create perception, not necessarily to reflect economic reality.