Real Inflation and Government Inflation
Most people are not aware real inflation and government inflation rate percentages differ. They feel it in their gut but fall short when articulating what they instinctively know.
A thinking person would read the headline and ask themselves what is the difference between real inflation and government inflation. Smart thing to do by the way.
A smart question not only deserves an honest answer, it will get one too. There is a difference and the gap is huge in almost every measurable category.
By the way, this isn’t an article on zeroing in on how the government computes inflation. You can research that for yourself in any number of expose type articles offered up by Google.
This article tells you what your real inflation probably was, is and will be.
“Why was, is and will be” you ask?
Because you’ve been lied to ever since the government began publishing the so called inflation rate. Subsequently, you’ll be lied to as long as they continue to publish an inflation rate.
“Why would they lie?”, I hear you ask.
Simple. They have certain obligations tied to the rate of inflation. Social security checks for example. And, no, this article is not anti Social Security.
You know that pot of gold (yes, I’m being facetious) that lands in your bank account on the first, second or third Wednesday of the month. The raises, if any, are tied to the inflation rate.
The raises have been between zero and two percent over the last 10 years. Imagine if the government had to pay the real rate.
Say the real inflation and not government inflation rate was eight percent. Your check would have gone up by eight percent and not the one percent you received.
This of course means that pot of gold called the social security fund would be in danger of going absolutely bottoms up. Oops, no more money would mean no more checks.
No more checks would mean our Washington politicians would be in grave, physical danger. They don’t like being in harm’s way. Of course they could cook the books.
Never mind. They already do.
A guy can’t blame them but then again a guy should only elect honest politicians. Oops, again, since that is an oxymoron.
So how do you know your real inflation rate? There are two rates. Pre-tax and post-tax. Most of us pay taxes so it is the post-tax rate we watch.
Consider these facts. Most of us use gasoline or diesel in our automobiles. The majority of us also buy groceries. Most of us use electricity or some other utility to keep warm or cool. And so forth, and so forth.
These facts all cost money. The gas station, like all merchants, has to charge for their products or they won’t be in business. We don’t want them out of business. Just stands to reason, right?
The real inflation rate happens to us every day. It is what we pay for our everyday items. Gasoline is a great example. We’ve all seen monthly prices escalate ten to fifteen percent. Sometimes it happens in a week.
Given that is true that means you and I pay whatever the pump reads. Unfortunately the pump doesn’t always read the same low number.
Let’s Fuel Up On a Quick Example
For example, last month I filled up the household car two times. The price of gas on the first visit was six percent lower than the second time. If buying gas was my only event of the year my inflation rate would have been six percent.
I was thankful I filled up at the low end of the price increase. Gas is probably the easiest, besides food, to use as an example. because all of us, in one way or another, are impacted by gas price fluctuations.
Unfortunately it wasn’t my only buying event for the year. I too like to eat so the grocery store was on the agenda. I use electricity so the power company was in the monthly mix as well.
Here is just one of my experiences at the grocery store. An item as simple as a can of beans will illustrate the point. At the beginning of the year the price was 88¢. Yesterday it was $1.08.
Every event was in my sphere of inflation but the government has a different idea about those events. They simply ignore them in their computations.
Yep, you read that correctly. The real inflation and government inflation computations differ because the government has the luxury of ignoring them. They happen to you and me but the government don’t acknowledge their happening.
Another “Not-So Shocking” Inflation Scenario
I mentioned using power. The power company is granted rate increases through a government agency. It was created to monitor how much we are being soaked. Over the years the power companies gradually slid the agency members from consumer advocates to consumer gougers. Rate increases don’t count in the inflation equation.
Hence, they can declare an inflation rate of any number they so elect. They do so by simply accusing them of being less important than their made up list and don’t include them in the algorithms. Hence computing a low inflation rate is easy-peasy, lemon squeezey according to the Washington D.C. number crunchers.
Since I don’t have children in college and my medical bills are almost non-existent I did not have to account for the rise in their respective costs. You, on the other hand, may not be so lucky.
If you aren’t, you need to factor those too into your real inflation rate and not the government inflation rate. If you don’t, you could go broke.
Some Final Thoughts That Hopefully Aren’t Deflating
Simply understanding the real inflation and not government inflation rate does little good unless we, as a collective body, take steps to right the ship. It won’t be easy. Nothing of this magnitude ever is easy.
Oh, for them it is. They make the rules, regulations, policies and laws. Moreover, if anyone is paying attention, they are people. You know, like you and me.
As such, we can replace them. Truth is we should be replacing them every election cycle. Then we might have a controlled real inflation and not government inflation.
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