Is The Real Rate Of Inflation More Than Twice As High As The Number We Were Just Given?

Neha Sharma
Neha Sharma
15 Feb 2022

We were warned that inflation would keep getting worse. Just a few days ago, the latest inflation numbers were released and showed that the consumer price index rose 7.5 percent over the past year. Experts say that this was the highest reading since February 1982, a historic period when the U.S. economy was falling into the abyss. The 0.06 percent monthly increase alarmed many economists and put policymakers on the edge because it essentially meant that inflation isn’t going to cool off and fade away by itself. 
But this crisis is way worse than it seems. Official numbers don’t tell us the whole truth. Government data isn’t exactly honest given that the rate of inflation changed more than two dozen times since 1980. So if we want to compare the current rate of inflation to historical numbers, we should look beyond what they’re telling us. For instance, in a recent analysis, Michael Pento reported that in 2009, the inflation rate was at -0.3%, and by 2019, that number surged to 1.8%, with a brief 3.2% spike in 2011, which means that inflation right now is twice as high as the ten-year norm.
However, when we calculate the rate of inflation the way it was just ten years ago, then the real rate would be nearing a staggering 15 percent, according to John Williams of And if we calculated the way that it was back in 1980, the official rate of inflation would be even higher. Simply put, by using the same methodology that the government used not so long ago, we would have an official rate that is more than double the official number they just released, and almost five times higher than the 10-year average.
And we’re being told that this persistent surge isn’t over yet. "U.S. annual CPI is the highest in four decades, and what’s worse is that this likely isn’t the peak," explained Seema Shah, chief strategist at Principal Global Investors. "Higher-than-expected monthly gains in core CPI indicate continued underlying heat and will do nothing to relieve pressure on the Fed to tighten sharply and urgently." That’s just another way to say that things are spinning out of control fairly quickly. While many are comparing the ongoing crisis to what happened during the Jimmy Carter era, in real terms, what we’re facing right now has surpassed anything that we witnessed back then.
With inflation raging and prices soaring, the fact that U.S. consumers have already burned through their stimulus checks and are now furiously maxing out their credit cards to afford all those suddenly-way-more-expensive necessities mean that not only household debt is going through the roof, but consumer spending is rapidly decelerating as people’s purchasing power collapse. Quite a recipe for disaster.
Recently, Washington Post columnist Heather Long shared some specific numbers that point out exactly where American consumers are being hit the hardest. Over the past 12 months, the price of used cars jumped 40.5%, while gas soared 40% nationally. Rental car prices increased 29%, utility gas went up 24%. Meanwhile, hotel prices rose 21%, furniture 20%, and daily essentials such as bacon faced an 18% increase, steak 17%, peanut butter 15.5%, pork 14.5%, fish 13%, eggs 13%, new cars 12%, chicken 10%, and the list goes on and on... You got the idea. When we analyze these massive price hikes, it becomes clear that there’s no way our current inflation rate is at only 7.5%. 
Another particularly concerning aspect of this upward trend is the rise in energy prices. The latest data show that the cost of energy soared almost 30% nationwide. On Thursday, The Labor Department reported that natural gas rose 22.6% and electricity is up 10.7%. And don’t keep your hopes up about a reversal in this trend. The global energy crisis has just begun, and different from the energy crunch of the 1970s, this time it will likely stay with us for decades. 
So where do we go from here? Well, the Federal Reserve will be forced to significantly hike interest rates to fight such absurd levels of inflation. By doing so, it avoids an economic recession but triggers a financial meltdown, which will ultimately result in a recession anyway, so the near and long-term prospects aren’t looking good at all. Low interest rates have helped to fuel the everything bubble that we are witnessing right now, and when policy changes that will mean for investors that the party is finally over. A lot more turbulence is ahead. We can only hope for the best and prepare for the worst.​

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