A Day's Wages for a Loaf of Bread

Inflation is Going to Get Worse

March 29, 2010

USA WatchDog - One of my consistent views on this site is “real” inflation is much higher than what the government is telling us. For example, recently the Bureau of Labor Statistics announced February’s inflation number (CPI) was “unchanged” at a 2.1% annual rate. Over the years, the BLS has changed the way it calculates inflation by using accounting gimmicks that understate what most people would consider the true cost of living. So, the government inflation numbers of today make inflation look much lower than it really is for main street America.

One of my readers, David from Salem Alabama, is under no illusion the inflation genie is captured in the bottle. David admits he is a “dollar store junkie”, and shops at places such as “Dollar General and Big Lots, etc.” Here is an excerpt from a recent email to me from David on what he is seeing first hand:

“. . .There IS inflation big time!!

1. Cat food: was 5 cans for a $1.00, NOW are 3 cans
   
2. Dog food: 5 oz was $.33 per can, NOW $.55 to $.65; BIG can was $.65 to $.75 NOW a $1.00 or more…


3. Boxes of flavored rice: was 2 boxes for a $1.00, NOW ONE box for $1.00 or $1.15 ??


4. A basic candy bar: was 3 for a $1.00, NOW is 2 for a $1.00 or $.65 each


5. Sam’s flavored water: was $.50, NOW $.65


6. ‘Ruffles’: Wal-Mart $4.38, regular price $4.99, BUT the bag is VERY small now and price was; a few months ago, about $3 for the same thing !! ??


7. AND: have you ’seen’ the shrinking rolls of toilet paper too?? You get my drift??


8. AND: That CPI basket of 30 items is full of BS!! WHAT is the real cost of things!! . . .”

What David has documented is the real cost of living or inflation.

According to John Williams of shadowstats.com, the inflation rate in February is running at 9.4% annually. That is the “real cost of things!” (Williams calculates the inflation rate the way BLS did it in 1980.) In a recent report, Williams said:

“. . . evidence continues to mount of higher prices across a much broader spectrum of products and services. . . . eventually — within six-to-nine months — the broader inflation issues also should surface in official reporting.”

Government calculations can distort the public’s perception of inflation. It is nowhere better demonstrated than in the price of gold. According to shadowstats.com:

“. . . the 1980 gold price peak ($850) would be $7,494 per troy ounce in terms of SGS-Alternate-CPI . . .” (figured the way BLS computed inflation in 1980, which is the same way shadowstats.com computes inflation now)

Shadowstats.com also predicts:

“The just-enacted, effective government takeover of the healthcare and health insurance industry will damage the economy, widen the federal deficit and likely contribute directly to consumer inflation.”

According to former Congressional Budget Office director Douglas Holtz-Eakin, the reason the new health care legislation will cause the economy to tank is government red ink will explode in the next 10 years. Instead of saving $138 billion, as the president claimed, the country will go deeper in debt by adding “additional deficits of $562 billion,” says Holtz-Eakin. (Click here for the full report.)

Because of the sinking economy, the government will, once again, feel compelled to start a new round of bailouts for the banking system and states. So far, nearly 40 banks have failed this year. With continuing commercial and residential real estate foreclosures, dozens more will be taken over by the FDIC at taxpayer expense.

Also, many states face severe budget problems such as California, Illinois and New York, to name a few. In an election year, these states will all receive billions of bucks in bailout money.

All of this new borrowing and money printing could cause a massive sell-off of the dollar. That means imported goods like oil would rocket up in price. According to shadowstats.com:

“. . . that could move the U.S. into the early phases of hyperinflation in the months ahead.”

So, look for the economy to slow down, especially when companies such as AT&T are projecting the new health care reform will cost it an additional $1 billion a year. And, look for inflation to pick up because the borrowing, bailouts and money printing are simply going to continue.