Reply #8: Here are 2 good links to look at that address what you post

[Phoebe Loosinhouse]

http://www.actionforex.com/articles-library/general-investing-articles/lies,-(darn)-lies-and-government-statistics-2008012835795/

(To see the page I'm referencing, you'll need to paste the entire link into your browser)


What else happens to the CPI? Well, government officials in their wisdom said that if prices went up too much, people would buy cheaper things. Thus, if steak increased from $1/lb to $10/lb, then people who could no longer buy steak would buy hamburger instead. That is, because people could do that, the government could now make adjustments to how the CPI was calculated. If something became too expensive because its price went up too much, we'd just put something cheaper in the basket. When this idea was first thought of, it was unconscionable.

However, when Bill Clinton took office, it suddenly became the way to do things. But they really didn't substitute hamburger for steak, instead, they just changed the weighting of each item. For example, if steak was 2% of the basket, the government would simply change the weighting if it got too expensive and make it 1% of the basket. This was the Boskin/Greenspan concept. Wasn't our former Federal Reserve Chairman brilliant? He went from being a strong supporter of a gold standard in his early years to figuring out ways to adjust the CPI so that a gold standard is not necessary. This kind of geometric weighting reduces the CPI by 2.7% each year. So if inflation is reported at 2%, it is really 4.7%, but you don't really know that, right

This is the link to the ShadowStatistics site referenced in this article. Fascinating

http://www.shadowstats.com/alternate_data