Yet Another Way Fantasy Inflation Estimates Will Cost You Plenty


Just noticed this article this morning on Yahoo Finance:

Yahoo – Inflation

Apparently, the Congressional Budget Office (CBO) Estimates  are so low, they do not expect social security recipients to receive cost of living adjustments (COLAs) until 2010 or later!

This affects not only the potential recipients of these increases, but also the calculations of many other costs. For example, Erickson Retirement Communities, determines their cost of living adjustments based on the social security increase figures. What will they do next year? Raise the fee even though the residents won’t get a pay raise? And will the government increase medicare premiums (which usually eats up the COLA on the social security check)? Will there really be no inflation?

Most of you can easily see, just by a trip to the super market that inflation DOES exist. Cereal, one of my favorite foods, has certainly experienced monster price increases over the past couple of years – to the point that I buy mostly generic or wait for a sale – because full price for a box of cereal often tops $4.50-5! What’s happening is that, inflation is one of the many calculations that fall under the “fantasy” rules. If we measured inflation using the same metrics we used during the 1970’s, inflation would have shown double digit levels last year. For more information on that, check (link to the right under “Great Resources”). But we have currently, more “modern” ways to measure inflation which conveniently exclude food and energy – two items we don’t spend much money on, it’s so much better to measure prices of things like computers which we buy every day (wow was that sentence full of sarcasm!). Inflation is the hidden thief, and with government finagling, it becomes the hidden thief manipulated by a visible puppeteer.

Yes we will have more inflation, in my opinion. The question is, will our government economists recognize it? Or a more pertinent question, will those in charge of the government economists allow them to report the real inflation figure?

Chris Grande