Chart courtesy of Shadow Statistics. The chart above compares the official CPI-U to the pre-1980 methodology for computing the CPI-U. It shows that without the government’s manipulation of the methodology for computing the CPI, current inflation would be nearly 10%.
Today’s headline core CPI excludes food and energy completely. That’s impossible for us to do that in our real lives. Remember the old sub-$2 per gallon gasoline prices? How about the health insurance premiums, grocery expenses and electric bills you’re paying today versus four or five years ago?
The Bureau of Labor Statistics also uses a technique called ‘substitution’ to hold down their reported inflation figures. If an item in their index goes up in price they can assume consumer would simply trade down to something cheaper instead.
If your favorite rib-eye steak went from $7.99 to $12.99 per pound you’d simply eat hamburger instead. Have those organic bananas gotten too expensive. Try prunes. Need a replacement for your Lexus? Buy a Kia instead. Presto, there’s no inflation evident in any of those situations according to the BLS.