Government Deceptively Reports Inflation Rate in Latest Report

Inflation is a hidden tax that destroys purchasing power and reduces the standard of living, especially for retired people and seniors.

Statistics about the gross domestic product released by the government on July 30 paint a rosy picture of economic activity. However, the government report on the GDP is misleading. If we factor in the true inflation rate, then the economy barely grew over the first six months of this year.

When you buy a car that costs 53 percent more than it did in 2008, the GDP numbers reflect this increased cost, but economic activity remains unchanged. Merely paying more for a car, beef or beer has nothing to do with increased economic activity, despite what the government may claim.

[sharequote align="center"]Paying more for a car, beef or beer has nothing to do with increased economic activity.[/sharequote]

The government dramatically underreports the true inflation rate.

For example, the price of beef is up 76 percent since 2009 - an all time high - and milk prices are the highest since 2011. These cost increases pale in comparison to the increase in energy prices. According to the American Coalition for Clean Coal Electricity, U.S. household expenditures for gasoline grew by 136 percent from 2001 to 2012, while home energy costs increased by 43 percent during the same period.

Low-income families suffer the most from higher energy and food costs. Seniors and those living on a fixed income continue to fall further and further behind and are among the most vulnerable to energy cost increases. In 2010, the median gross income of 25 million households with a principal householder aged 65 or older was 36 percent below the national median household income.

The government claims that inflation remains in check, with consumer inflation increasing only 1.6 percent from a year ago. Does anybody in government buy food, drive a car or heat their homes? It doesn't take a government statistician to tell us what it costs to live. All one has to do is buy a some beef at the market or spend $75 to fill up their car.

Photo Credit: Getty Images

So why would the government distort the true inflation rate?

Because by underreporting inflation, the government saves billions on social security payments and anything else linked to the inflation rate.

If inflation is currently running at 7 percent, as many economists claim, but the government reports it at under 2 percent, guess who pays the difference? We do.

And the result is a reduction in the standard of living with consumers spending more and more of their after-tax dollars on basic necessities, leaving little to spend on vacations and other non-essential items.

The Federal Reserve's policy of printing vast amounts of money to keep the economy from rolling over into a depression only exacerbates the problem. By increasing the amount of money in circulation, the Fed is reducing the purchasing power of everyone and thus reducing our standard of living.

(Lisa Poole, AP file) 

The only ones profiting from this debasement are the banks, the Wall Street crowd and the super rich friends of government who received the bailouts, and other government handouts for their pet projects. We pay for this debasement in the form of higher costs.

We can't sit idly by while our representatives continue spending our tax dollars on non-productive government projects so they can get re-elected. We can't allow the Fed to increase the money supply to infinity. And we can't keep borrowing more and more money from China to pay for our consumption.

If we don't stand up for our rights and elect people who will rein in the government and the Fed, we are going to experience hyper-inflation that will make today's prices seem like a bargain.

John Lawrence Allen, a nationally recognized legal expert, represents investors nationwide in securities arbitration. Mr. Allen’s second book, “Make Wall Street Pay You Back,” was just released. For more information visit MakeWallStreetPayYouBack.com.

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