Three Reasons the Fed is Lying About Inflation
Why would the US federal government purposely underreport or flat out lie about the current rate of US inflation? Below are three specific reasons given during a recent interview of Robert Zuccaro, CFA, Founder & CIO of Golden Eagle Strategies.
He actually cautioned about inflation last February in an earlier interview, and published his findings the following July, accurately reporting that transitory inflation was wishful thinking! He is pessimistic on inflation and explains why the Department of Labor has continuously under reported it for the past year.
Four Examples of Inflation Being Higher Than What the Feds Are Reporting.
- The latest report shows inflation is up on an annual 12-month basis of 8.3%. Over last year, the reported rate increase is 5.1%. The apartment list, national survey of brands over the past 12 months, show an increase of 17%. And realtor.com has inflation going up 16.8%.
So rent is a very important component of the CPI, it constitutes 32% of the overall index.
- In terms of energy, the government claims that energy prices are up 23%. However, natural gas has doubled in price this year, gasoline is up 55% over the past 12 months, and home heating oil is up 70%. So, there’s no way in a world that we get to the numbers that are being reported.
- In addition, food inflation is reported to be up 9.1%. The major food supplier Tyson Foods reported that it has raised prices on pork 38% over the past year and beef, 33%. The United Nations reports food inflation worldwide over the past 12 months is running at 33%.
- So inflation is a lot worse than we’re being led to believe. And we are now in the worst environment in history for bond investors. As of this morning, 10-year bonds were yielding 2.8%.
The government reports inflation has been running at 8.3%. We think it’s closer to 14 – 15%, which means there is a loss in real terms of at least 10% taking place. In the current environment Bond investors are being eaten alive.
True Current Inflation Rate?
Mr. Zuccaro estimates actual current inflation to be approximately 14 to 15%. Consumers know this just watching food prices increase. They go to the market once or twice a week, and they see prices going up before their eyes.
From a personal experience, Mr. Zuccaro relates that he recently purchased a case of water for $7.49. The exact same case of water, one month prior, only cost $5.78. So in only one month, the price of that commodity/product increased more than 25%!
Inflation’s Silver Lining?
Yes, for many stockholders in large companies there is a silver lining. During the 1970s there was a high inflation period. In that environment, companies raise prices to keep up with inflation. In this environment, something entirely different is taking place.
Not only are companies raising prices to protect margins, but they are also raising prices to expand margins.
For example, in the first quarter early estimates for corporate profits for the S&P 500, specifically earnings per share, were expected to expand by 4.7%. But with 95% of S&P companies reporting, the first quarter growth right now stands at 11.1%.
Many businesses have done a good job in dealing with the adversity of inflation in dealing with higher fuel and labor costs.
The American businessman and businesswoman can adjust to all kinds of economic conditions, high inflation, low inflation, change in soybean prices, oil prices, strong dollar, weak dollar and so forth.
And they are doing this today and doing a good job of it.
Why Would the Fed Lie? Three Reasons.
- In Mr. Zucarro’s opinion, the CPI has been purposely under reported, because if the true rate of inflation was reported, the government would have to pay out more cost-of-living allowances. As of September 30, the government calculated the 12-month inflation at 5.9%; it was probably running double that.
Social Security recipients are pegged to the increase of the CPI in their payouts. If the government had to pay the actual rate of inflation, it means that they would have had to fork over $75 million to millions of retirees.
- In addition, higher Social Security payments, which exceed $1 trillion. There are at least five other programs that are geared to COLA, better veteran benefits, the SNAP program, which we used to refer to as food stamps, and others. They are all indexed to inflation.
If the government reported the true rate of inflation, the federal deficit would be a lot greater than it is.
- Finally, the national deficit. We’ve been running a multi trillion-dollar deficit for the first time in history, and higher inflation would only aggravate the egregious problem we have. At the end of the Bush administration in 2000, the national debt was $5 trillion. It took us 225 years to amass a national debt of $5 trillion.
Today, the national debt exceeds $30 trillion.
In 21 short years, we have created additional national debt of $25 trillion. If at some point down the road interest rates go up, the federal government is going to have great difficulty in financing their debt. Regardless of difficulty or cost, they will finance the debt because they have no choice.
They must protect the obligations to credit holders. Unfortunately, that means paying more interest to service the debt, resulting in less money for social programs, Social Security, Medicaid, Medicare and all the other government programs some individuals rely on to survive.
We hope you found this article about “Three Reasons the Fed is Lying About Inflation” helpful. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page or website www.GROCO.com.
To receive our free newsletter, contact us here.
Subscribe our YouTube Channel for more updates.
Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com. GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.
Alan L. Olsen, CPA, Wikipedia Bio
GROCO.com is a proud sponsor of The American Dreams Show.
The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.
Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.
The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.
They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..
American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:
Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…
MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness. It’s mission statement:
In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.
Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.
A new course has been charted for healthcare. Now people will be able to compare the quality to the price that they pay for with healthcare. Listen as Mark Gaunya discusses these exciting changes. Mark Gaunya Biography BIO: Mark is a principal at Borislow Insurance (BI) and the Founder of Captivated Health located in…
In this episode we cover, how Joe Manchin blocks The Build Back Better Bill again, Hungary wants to be left alone, more proposed Low Income Housing Credits, and the 3.8% tax expansion proposal is criticized by the real estate industry. Tax Update with Ron · Episode 22, Joe Manchin Blocks The Build Back Better Bill…