Meet the New Boss, Same as The Old Boss II - CPI Fraud
“The CPI as calculated may not be a conspiracy but it’s definitely a con job foisted on an unwitting public by government officials who choose to look the other way or who convince themselves that they are fostering some logical adjustment in a New Age Economy dependent on the markets and not the marketplace for its survival. It’s a con – pure and very, very simple.” - Bill Gross - Managing Director of PIMCO, one of the worlds largest fixed income asset management companies.
What is the CPI?
The Consumer Price Index (CPI) is compiled and published by the Bureau of Labor Statistics (BLS). It is a measure of general price levels that was introduced in World War I to help mediate labor disputes in defense related industries.
In the 60’s and 70’s, it became the basis for cost of living adjustments for benefit packages including social security. The CPI is used to calculate inflation adjusted returns from government bonds and private sector debt securities. As such, the CPI indirectly influences the valuations of the equity market and is the most widely used barometer of the dollar’s value.
Commodities Price Distortion
To keep up with the times, the CPI has evolved over the years, items are inserted and removed, seasonal adjustments are made. In Perception is Not Reality, Money Is, we pointed out that rising commodity costs, and in particular energy costs, are absorbed throughout the supply chain.
By stripping out food and energy, the core CPI attempts to minimize the distortion of fluctuating commodities prices. This is a rouse and fraud, Todd Heft, a 44-year-old salesman recently quoted in The Wall Street Journal exhibited common sense that seems to escape government economists, “People have to buy groceries and drive to work. It’s not realistic to strip out food and gas prices.”
Global Labor Arbitrage Distortion
During 1990 - 2003, the following price increases occurred: tuition fees 171%, cable television 115%, bank services 104%, auto insurance 85.2%, entertainment event tickets 81%. We will mention Health Care costs later. For the same period, the CPI reflected cost declines such as: computers 83%, televisions 56%, and women’s apparel 18%.
During this period our manufacturing and textiles industries were decimated. Outsourcing to labor at the margin in third world countries was the culprit.
Housing Market Distortion
41% of the CPI is the housing component, which several years ago was increasing at an annual rate of 4%. Today, despite an unheard of rise in housing prices, (i.e. Orange County 2002 - 05, a 68% increase)that number has decreased to 2.2% per annum. How can there be such a disconnect with reality?
The BLS does not use actual housing costs, it uses imputed rent to calculate the housing costs. Each homeowner is surveyed for their estimate of the house’s implicit rent and what the occupants would get for their rent, if the owner did rent their home. To add further distortion, the SFR boom has led to a glut of rental vacancies and a drop in rental rates.
The closing quote should be closely noted by those who play the Us vs. Them zero sum game. (I.e. Red vs. Blue states, Conservative vs. Liberal, Christian vs. Muslim, Jew vs. Arab, Protestant vs. Catholic and White vs. Black.) Bare in mind that its all about the money, and the real "Name of The Game" is the Haves vs. Have Nots, everything else is fodder for the feeble minded.
“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.” -
Abraham Lincoln, 1861-1865 16th President of the United States
More CPI Fraud to come in Part IIIHaute Con Job
Con Job Redux
What is the CPI?
The Consumer Price Index (CPI) is compiled and published by the Bureau of Labor Statistics (BLS). It is a measure of general price levels that was introduced in World War I to help mediate labor disputes in defense related industries.
In the 60’s and 70’s, it became the basis for cost of living adjustments for benefit packages including social security. The CPI is used to calculate inflation adjusted returns from government bonds and private sector debt securities. As such, the CPI indirectly influences the valuations of the equity market and is the most widely used barometer of the dollar’s value.
Commodities Price Distortion
To keep up with the times, the CPI has evolved over the years, items are inserted and removed, seasonal adjustments are made. In Perception is Not Reality, Money Is, we pointed out that rising commodity costs, and in particular energy costs, are absorbed throughout the supply chain.
By stripping out food and energy, the core CPI attempts to minimize the distortion of fluctuating commodities prices. This is a rouse and fraud, Todd Heft, a 44-year-old salesman recently quoted in The Wall Street Journal exhibited common sense that seems to escape government economists, “People have to buy groceries and drive to work. It’s not realistic to strip out food and gas prices.”
Global Labor Arbitrage Distortion
During 1990 - 2003, the following price increases occurred: tuition fees 171%, cable television 115%, bank services 104%, auto insurance 85.2%, entertainment event tickets 81%. We will mention Health Care costs later. For the same period, the CPI reflected cost declines such as: computers 83%, televisions 56%, and women’s apparel 18%.
During this period our manufacturing and textiles industries were decimated. Outsourcing to labor at the margin in third world countries was the culprit.
Housing Market Distortion
41% of the CPI is the housing component, which several years ago was increasing at an annual rate of 4%. Today, despite an unheard of rise in housing prices, (i.e. Orange County 2002 - 05, a 68% increase)that number has decreased to 2.2% per annum. How can there be such a disconnect with reality?
The BLS does not use actual housing costs, it uses imputed rent to calculate the housing costs. Each homeowner is surveyed for their estimate of the house’s implicit rent and what the occupants would get for their rent, if the owner did rent their home. To add further distortion, the SFR boom has led to a glut of rental vacancies and a drop in rental rates.
The closing quote should be closely noted by those who play the Us vs. Them zero sum game. (I.e. Red vs. Blue states, Conservative vs. Liberal, Christian vs. Muslim, Jew vs. Arab, Protestant vs. Catholic and White vs. Black.) Bare in mind that its all about the money, and the real "Name of The Game" is the Haves vs. Have Nots, everything else is fodder for the feeble minded.
“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.” -
Abraham Lincoln, 1861-1865 16th President of the United States
More CPI Fraud to come in Part IIIHaute Con Job
Con Job Redux
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