As I waited in the grocery store line, the customer ahead of me departed with a sardonic comment to the checker about higher food prices, citing last-month’s consumer price index (CPI) percentage for inflation.
“Did he say 2.1% last month?” I asked the checker as I moved up.
“More like 2% PER DAY,” he replied with a wry grin.
I grinned. His impertinent reply hit the mark: it feels closer to reality than the official CPI. People know through their guts and their wallets that the government figures don’t match reality. The sharp reduction in auto sales and other discretionary spending tells us otherwise.
That’s because the inflation figures have been manipulated. In 1983 they downgraded what’s in the basket of goods they’re checking — like exchanging steak for hamburger. Don’t increase the index, cut the lifestyle!
And since 1998 they removed energy and food costs from the consumer price index.
Helloooo?! What universe are they living in? Can you exclude gas, electricity and food in your life?? So that 4% CPI they report for March is actually 7.3% when you add food and energy back in, and 11.8% if based on the original basket of goods from before 1983. You can see it in a graph by Shadow Government Statistics in “Seeking Alpha: The White Elephant That Could Destroy Your Portfolio, part I.” They’re not dumb. Lower inflation figures means less paid out for services like social security.
You may not know the exact numbers for inflation or a lot of other things in the official reports, but like the grocery checker, you know in your gut the stories we’re being handed from many governmental and mainstream media sources are not the whole picture. To paraphrase a Teacher, “Trust your gut, Luke.”
All articles and videos on Peak Moment TV are licensed under a
Hy Hydraulic jacks,
Thanks, glad to have you visiting. The template for my blog is one of the themes offered by WordPress (can’t recall its name). I created the banner at the top.
It’s the first time I comment here and I should say you provide genuine, and quality information for bloggers! Good job.
p.s. You have an awesome template for your blog. Where have you got it from?
Thanks for the clarification. Both your points are right. The Federal Bank really overreacted to the subprime mortgage debacle by dropping interest rates much too low. The hedge funds are now using this cheap money to drive up prices of commodities far in excess of where they should be (they are also using Peak Oil arguments to justify it!). I guess I can understand some belly-aching by the common man in the street. But in a way I think it is good we are getting an oil shock now. It will maybe get more people on the same page as we are.
The subject of inflation is very interesting. I remember when I decided to strive for “financial independence” as described in that excellent book “Your Money or Your Life.” There was a whole chapter on inflation which basically said, “Don’t fixate on it.” It argued that inflation did occur, but that it tended to affect luxury items the most, food prices also would go up, but food prices are so low that price inflation doesn’t really hurt us as much as we think it will. If one accepted the main principle of the book, that one should simplify one’s life, i.e. eliminate luxuries, then one needn’t worry too much about inflation eroding our ability to buy essentials like food.
Well, maybe they didn’t factor in Peak Oil when that book was written! But I still think their point is valid. The point of the book “Your Money or Your Life” was to achieve financial independence which occured when your costs equaled your interest income, resulting in a dramatic increase in your free time to pursue those things you really like.
Obviously, reducing your cost of living is every bit as important as amassing capital to generate enough interest. Eating steak every day and driving gas guzzling SUV’s are not my idea of cost reduction. Eating meat occasionally and riding a bicycle or driving an economical car is more like it. The price of regular gasoline just hit the equivalent of $6.12 a gallon here in Japan. I can’t say that I am pained about it. I walk or ride my bike to my teaching jobs and only have to tank up once a month. Yes, that means over $60 a month, but that is probably way less than most people pay in Japan or America. I have made the decision to reduce my costs. Of course, I don’t want to belittle the role of petroleum products in driving food prices, but food is still a relatively small share of the family budget.
Travel (especially to America) has been a big chunk of our family budget which will be affected by petroleum prices. Again, cost reduction is the name of the game, we have decided that I will travel alone to visit my parents, thereby saving 2/3rds of the cost(1 traveller, not 3).
Well, sorry to have talked your ears off again, but I guess that book “Your Money or Your Life” was a really massive influence on me. Frankly, many of the wonderful people you have been interviewing in the Conversations seem to me to be living according to the “simplification precepts” in that book too (whether they are aware of it or not).
You’re right, Stuart. I didn’t go far enough to make a point. One point is that CPI is much
higher because of the Fed’s printing beaucoup dollars to bail out
their buddies and thus the dollar is devalued. The other is more
hidden, that the rising costs are due to higher energy costs due to
demand exceeding supply for petroleum. That will be our reality from here
forward.
Cheap prices…the cheaper imported chickens are based on cheap transportation. I heard tonight that fuel for long distance transportation (like the big container ships) has tripled in the past 5-7 years, and is poised to double again. That’ll make our local producers more competitive.
The same source, financialsense.com, said that some analysts are now talking about the higher cost of transportation reversing globalization. Hurrah for local!
But now, we should indeed be buying locally to keep our local farmers in business. I’m really happy we can get local eggs, milk, grass-fed beef, fruits and vegies, mushrooms, nuts. And a growers market, and community-supported agriculture, and people learning permaculture, and much more.
The purpose of this commentary isn’t all that clear to me (forgive me!). Are we supposed to be outraged by the increasing cost of living or just by the fact that the official inflation figures have been tampered with?
Yes, those Americans who are eating steak everyday (and driving SUV’s and owning houses way to big for their needs, etc.) are being lulled into a false sense of security by inflation figures that are lower because they no longer include steak or energy costs.
On the other hand, an interesting fact is that food actually comprises a small portion of the typical family’s home budget. Compared to the 1800’s when a typical city family had to spend almost ALL of its money on food to stay alive and the vast majority of Americans lived on subsistence farms, we are still sitting pretty here at the outset of the 21st century. What is the result of this cheap food? The food is often poor quality because the industrial farms have concentrated on keeping the price as low as possible. The foods are bombarded with pesticides, herbicides, growth hormone, etc., to get them on the grocery shelves at the lowest price.
Obviously, I believe that food as a necessity for life is something we should value very highly, and it should be safe and healthy to eat. Here in Japan we have three varieties of chicken to buy. The cheapest comes from Brazil(!), the next cheapest comes from the USA and the most expensive comes from right here in Hokkaido. We buy the Hokkaido chicken. What I am driving at is we should be spending a lot more than we are to ensure that (usually smaller scale) farmers can make a living providing us with good quality food.
The incessant clamoring for cheaper prices is what got us into trouble in the first place: shopping centers drove out the small merchants, Chinese labor replaced American workers, bad tasting food (probably unhealthy too) replaced better tasting food, etc.
I say bring on the higher prices! They are exactly what the Peak Oil analysis predicted and they are an important factor which will drive everyone to rethink globalization and rediscover the joys of buying locally grown food and buying locally manufactured products.