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Stunning Chart: The Real State of Inflation

The CPI, or Consumer Price Index, is the official measure of inflation in the United States. The government utilizes the CPI as a way to make adjustments to interest rates for things like TIPS (Treasury Inflation Protected Securities) bonds and entitlement payouts like Social Security. According to the Bureau of Labor and Statistics, the CPI for the month of August was 1.1%, which means that prices were up just 1.1% over the previous year. According to Federal Reserve chairman Ben Bernanke, this is proof positive that there is no inflation to be had, and that we are, in fact, in a deflationary spiral... On its face, viewing the government’s official numbers, the uninformed observer would assume that inflation really is under control, and that the immediate threat, as touted by mainstream economist is deflation. This has been used to justify what has been referred to Quantitative Easing 2, or QE2, leading to ever more money printing by The Fed. As with all things “official,” however, the CPI lacks appropriate weighting for critical goods - essential goods - like food and energy. The following chart from Casey Research shows just how skewed the “official” CPI figures are.

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