The politicians think they have pulled a real sly trick on the American public with buying into and propagating the Boskin Commission’s Core Index method of reporting inflation. By using this method they have avoided raising COLA (Cost of Living Adjustment) payments to seniors on Social Security payments, veterans pensions, and federal employee pensions. No one has been able to break this stance and many in the media simply accept it and meekly mumble that inflation is under control - because the government says so. This is blindness, self-inflicted.
To see the practical workings of the fallacy - other than by simply buying groceries and fuel - please consider the following scenario. Since the essential component of the Core Index method of reporting inflation excludes food and fuel from the calculation, let's look at how that works in the real world. Suppose you are a person working or running a business and you decide to eat or fill up your vehicle with gas. The contention of the Boskin Commission is that food and fuel are “volatile “ and therefore should be excluded when reporting inflation. But what if food and fuel prices are not fluctuating up and down but are rapidly rising as we see today? As you order your meal or fill up your tank more money is required from your pocket. How much did it cost you rto fill up your gas tank eight years ago compared to today?
This means that unless you are willing to live with a lower standard of living you must raise prices on the products or services you sell, or if you are a working person your wages must go up to offset the higher cost of living you are experiencing. As a business owner you must raise prices to keep your bottom line from turning red. The point here is that food and fuel drive all price increases if these two categories go up. Everybody eats and almost everybody travels. So while the government says inflation is low, the reality is that it is increasing rapidly as food and fuel accelerate. And this is not reported by the tame news media.
You would think if there was any concern with this core index reporting by the government they would insist on comparing core index figures with figures reporting inflation rates without core index figures. This would show the discrepancies and demonstrate whether the core index has validity. The evasion the government is utilizing to dismiss the fallacy of the core index shows the government is not interested in honest reporting, but rather is hiding the inflation they are generating. Prices in food and fuel are not rising simply because of supply and demand.
The way the market works, as supply increases prices drop, as long as demand remains stable or drops. Likewise, if demand soars and supply is short then prices rise as people will pay more to get items in short supply. Now compound the issue with printed money saturating the market and you have all the ingredients that fuel inflation. For a benchmark of this phenomena take a look at the price of gold. Gold has been on a steady upward rise as government debt and infusion of printed dollars has hit the market. Paper money, as more appears, is simply worth less than if it were in short supply. These are simple economic principles that work for any commodity.
The swelling rage toward government spending is commendable and necessary if we are to avoid total collapse. But if we are not going to insist on the honest reporting of inflation we cannot stop the printing of money, which is going unchallenged.
The debt limit extension is a bellwether event which will show whether we have a new breed in Congress or more of the same political flunkies who think that ever greater debt is necessary. Necessary for what? To continue deficit spending of course. If the debt limit is extended you can bet the nation will reach the same crisis again in a few months, and the debt ceiling will have to be revisited. If and when it is rejected we will see the beginning of cost reduction by the government. For those seeking more power and more political pandering this will be the battle of last resort And you can be sure those who want to redistribute wealth and enhance their political power will fight tooth and nail to continue to raise the debt limit and continue with their deficit spending.
They will talk of greater priorities, moral imperatives and how progress must come from a government that passes more laws, more regulations, and more taxes. We have seen where their progress has brought us and it is to the precipice of Socialistic failure. It is time to press for honesty and accuracy in reporting of government spending and it should begin with exposing the sham of the Core Index method of reporting inflation. If this continues to be ignored and glossed over, the reality of hyper inflation will appear so rapidly it will be almost impossible to contain. Those of us who remember the Carter years - with double-digit inflation, high interest rates, and much lower debt limits and deficits - can only imagine the reaction to an inflation rate much higher and much more difficult to contain.
I fear it really is too late to avoid this ugly event. The cause is not too hard to discern. A mesmerized press, a lying government and a preponderance of spineless ignorant politicians along with a band of compartmentalized academics ignoring the role of ideas and pretending to maintain the status quo, while simultaneously calling themselves progressives is holding on to the stage as the play has run its course and the audience simply waits for the curtain to close.
The promise of America is on the line. It is a sad testimonial for those who have been fortunate enough to experience her special status that she is being allowed to sink into third world status because of a citizenry that is willing to accept a corrupt government reporting system on face value. The problem with democracy is the danger of a complacent citizenry willing to allow politicians free rein while shackling themselves under the political yoke. Our Founding Fathers talked of necessary uprisings. They too must have seen the obtuse evasions of politicians willing to destroy by dishonesty and fraud. It is said that experience keeps a dear school but fools will learn by no other. Analogously freedom cannot survive in a land of complacency.
If the people who are paying the bills are content to have the spenders lie to them, take from them and lead them into a financial abyss, do these citizens deserve anything but what they have condoned?
The question answers itself.