Karl Denninger analyzes the government’s inflation calculations . . .

. . . and finds them wanting in almost every respect.

How do you measure inflation?  Well, the common claim … is that you use the government’s numbers — specifically, CPI.  It says there’s no inflation so there isn’t, so it is claimed.


Let me point out a few inconvenient facts.

First, CPI only measures some things.  The name is consumer price index.  In other words, it is only intended to measure the price of things you consume.  That explicitly excludes assets.  But you require assets to live, and the price of them is inevitably paid for by you.

Then there’s this nonsense, directly from the CPI itself:

In calculating the index, price changes for the various items in each location are aggregated using weights, which represent their importance in the spending of the appropriate population group.

Or so the Bureau of Lies and Scams claims.

The reference of “100” is set at 1982-84; in other words, a “200” means that item is allegedly twice as expensive as it was in 1982.

The “all items” index number, unadjusted, is 251 at the present time. If there has been no inflation why is the average price 251% of what it was in 1982?

Then there are the crazy outliers — medical care services are 522% of the 1982 price, for example.

Shelter is over 300% the price.

Car insurance is 572% as expensive.

Do you smoke?  That’s 1,082% as expensive.

But there’s been no inflation.

Uh huh.

. . .

Health insurance is claimed to be 1.08% of your budget.  Uh huh.  The price is claimed to have been up 5.4% in the last year.  This is an improvement, I suppose, in that health insurance a few years ago was claimed to be 0.6% of your household budget!  For comparison car insurance is claimed to be 250% more expensive as a percentage of household operating budgets than health insurance.  If you believe this I have a bridge for sale over the Hudson River.

The CPI also ignores such things as property taxes.  It claims to include all direct taxes in the price of a product or service, but property tax isn’t a direct tax.  It also ignores house price inflation, instead using what is called “Owner’s Equivalent Rent”, which is claimed to be what you would have to pay to rent your owned house.  How do they come up with this?  Good question — and without much if anything in the way of a decently-documented answer.  May I point out that when people charge a lower rent because they believe prices will rise and thus they’ll make a capital gain that would lead to a LOWER “Owner’s Equivalent Rent” and yet the expectation and market price of houses is rising in a bubble!  That is exactly, and intentionally, backward and produces an intentional false inflation reading.

The facts are that property taxes have skyrocketed.  That’s inflation.  The property tax on the house I used to own in the Chicagoland area has more than doubled since I sold it, and now is over $20,000 a year.  That’s insane.  The property tax on the home of my late mother’s residence has gone up enough that in nominal terms the house is worth no more today, before wear, than it was in 1995.

Due to inflation the actual value of that home in constant dollars (that is, constant spending power) has been cut by half or more!


Like Hell.

There’s much more at the link.  Important and thought-provoking reading.

Compare Mr. Denninger’s figures to those we discussed a few weeks ago in these two articles:

I think his estimate of current US inflation is woefully low at just 6.2%.  Based on information from Shadowstats and the Chapwood Index (see the articles linked immediately above for details), I’d say it’s more like 8-10%.  Nevertheless, his analysis of the insanely low values assigned to everyday costs of living by Government economists are very enlightening.  (If any reader is paying a mere 1.08% of his or her monthly or annual budget for health insurance, please tell us in Comments.  I’m willing to bet everyone’s paying a lot more than that!)

Our government, and both major political parties, are consistently and persistently lying to us about inflation and our economic prospects.  Only those who have their eyes wide open, and are reading the economic facts and figures for themselves, understand the true situation.  That information’s not hard to find, but it’s largely ignored – particularly by those who rely on government support, in cash and in kind, to make ends meet.  What happens when inflation erodes the value of that support to the point where it’s no longer enough to live on?  I think we can all guess the answer.

Inflation is a direct and immediate threat to us all, a clear and present danger to our current standard of living and future prospects.  We need to be aware of its reality, and should already be taking steps to shelter ourselves from the worst of its ravages in any and every way possible.



  1. Just to cherry-pick one example: Health insurance is claimed to be 1.08% of your budget.

    For this to be accurate, I would need to NET over $30,000.00 per month. If BLS is basing anything on this, their numbers are total bullshit

  2. Inflation is as always driven by the Federal reserves creation of money by fiat. First they create inflation then they lie about it.

  3. "If any reader is paying a mere 1.08% of his or her monthly or annual budget for health insurance, please tell us in Comments. I'm willing to bet everyone's paying a lot more than that!"

    I suspect this is a case of "lying by misdirection" more than by outright lying. My company pays for 100% of my health care premiums, so the amount I pay for out of my own budget for health INSURANCE is 0.0%.


    The amount that my company pays is much closer to 2% of my pre-tax income (note: NOT my household budget) – and my income is pretty high. *AND*, with 4 kids, I pay probably half a percent of my household budget on various copays and deductibles.

    So while the "1.08% of the household budget spent on health insurance" is probably technically "true" as an average, it's very highly misleading.

    Which is basically what our government does, so no surprises there.

  4. Similar to Russell, my employer (State University) pays for all of my health insurance premiums (how much longer that lasts is debatable) so my cost is 0%. Though I still have an out of pocket co-pay and a hefty co-insurance for every visit. And since my insurance coverage 'hasn't changed' since before the ACA, the things that the ACA supposedly mandated for coverage still have never been covered. My wife's out of pocket for her insurance runs around 2% after her employer's covering most of the premium. And since her insurance hasn't changed since before the ACA, it also has never covered the things that the ACA mandated. If we had to pay for those insurance premiums completely by ourselves the amount would be running around 12% of our income. And we're not all that far from being in the top quintile of household income.

  5. If I were paying the premiums for my health insurance, it would be just under 16% of my monthly wages.

    Thanks to the "Advance Premium Tax Credit" that the government put in place to "solve" the problem of the cost of the insurance that they require us to buy, I pay 0. At the moment.

  6. I'm retired and my premiums for medicare, co insurance and perscription coverage run about 25% of my income. Just saying.

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