The Truth About Economics: Part 3 Government Deception

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(See Comic) Text from comic: Inflation is Sneaky, Deflation is Unpopular Economic medicine is politically unpopular. Politicians like to spend money and buy votes today with the eroded financial future of an uninformed public. And so, the necessary deflations that would be required to wipe out malinvestments are avoided by instead pumping up spending by increasing money and credit and thus inflating. All that really does though is postpone the day of reckoning, making the inevitable worse. It is a classic robbing Peter to pay Paul scenario. Inflation is the thief’s method. And Peter is the average citizen who is robbed by inflation. Some day Peter will have nothing left, and so no one will be able to rob him to pay Paul. That is when the excesses will finally come home to roost. But until then, the thief can keep the scam going if he stays sneaky. Hiding The Truth: The Government’s Bogus Numbers Government Inflation Measures Consumer Price Index (CPI): Measures the average price of consumer goods and services. Producer Price Index (PPI): Measures average prices received by domestic producers for their output. Tweaking Inflation Numbers It is in the government's best interest to under-report inflation. That is how it remains a sneaky thief. Here are some examples of its deceptive methods: The Core Rate: The “Core Rate” is the CPI or PPI excluding food and energy prices. So there is a core cpi and a core ppi number. By excluding food and energy prices, the CPI and PPI can often be made to look lower. Although the CPI may be up 3%, the Core CPI may be unchanged. QAM: The quality adjustment method (QAM) is a means of statistical manipulation whereby price increases are written off as quality increases. So, for example, if the average price of new cars goes up 10% in one year, using the QAM, that increase can be written off saying that the new cars simply became more expensive because they got 10% better. Further more there is the Substitution method. The New 2008 Phallus XG is Now 10% longer Girthier Consumer Substitutions: If something gets too expensive it is assumed consumers will substitute it for something cheaper. And so, when certain things get too expensive, they are taken out of the calculations and replaced with cheaper things. Gas too expensive? Substitute it by staying home. That means that many federal programs, such as Social Security, Medicare, Unemployment Insurance, Food Stamps, and so forth, are adjusted by a cost-of-living adjustment, which is pegged to the CPI. By artificially cutting the CPI, the cost-of-living adjustment is lowered, and the expenditures for these programs are lowered. Coming Next: Part 4, The Money Supply Figure Tell The Tale

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