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April 25, 2008

Inflation Is 11.6% If Calculated The Old Way

-- by Dave Johnson

The government changed the way it calculated inflation. If we mneasured inflation the same way we used to it would be as bad as it was during the Ford-Carter years. And we all KNOW this is true because we can see for ourselves that prices are rising so much faster than paychecks.

The Fed's inflation gauge isn't realistic, critics say,

John Williams, who spent more than two decades as an economic consultant to Fortune 500 companies, said the government figures understate the true rate of inflation.

Williams, who runs Shadow Government Statistics in Oakland, which tracks changes in inflation, unemployment, the gross national product and other data, said that over the past 25 years, the government has changed the method of calculating price increases in ways that have lowered the reported inflation rate.

The changes include measuring the cost of shelter by rental prices instead of home values, as well as giving nearly as much weight to high-ticket items such as cars and electronics as to daily necessities such as food and gasoline.

According to Williams, if the government measured inflation based on pre-1982 methods, it would be running at 11.6 percent right now, or 7.3 percent using pre-1998 calculations.

Click through to see a chart that will shock you.

Posted by Dave Johnson at April 25, 2008 9:19 AM

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