Reverberations of Reality
The Memorex Company emerged during the early phase of computer technology, focusing initially on creating reliable chromium dioxide computer tape, with their operations beginning in Santa Clara, California, in 1961 under the leadership of Laurence Spitters.
Venturing into the consumer audiotape market by the 1970s, they gained recognition through their advertising campaign featuring jazz singer Ella Fitzgerald with the slogan "Is it live, or is it Memorex?" The company expanded over the years into manufacturing IBM-compatible hardware and exploring consumer audio markets.
However, challenges arose, leading to their acquisition by different entities and eventually declaring bankruptcy in 1996, although the brand continues to exist through various ownerships, marking its legacy in the audio and data storage industry.
What Does This Have To Do With Today’s Economy?
With all the smoke and mirrors the government throws at us every day, it can be pretty hard to tell what is real, and what is not. Follow me on a journey to get a handle on what some believe is real inflation.
The Consumer Price Index (CPI) has been calculated differently by the Bureau of Labor Statistics (BLS) since 1980 in order to take product substitution and quality improvements into consideration.
Why does this matter?
The rise in Social Security benefits for individuals in 1980 was 14.3%. Social Security (and COLA) benefits increased by 8.7% in 2022. If earlier techniques for estimating inflation had still been in use, the gap would not have been this significant.
The indicator that is typically used to report the inflation rate in our nation is the Consumer Price indicator for All Urban Consumers (CPI-U). For the 12 months ending in March, the BLS's calculation of the all-items index showed a rise of 5.0%. Since the 12-month period that ended in May 2021, this was the least inflation increase.
Payment increases for people receiving Social Security, food stamps, military and federal Civil Service retirees and survivors, and kids enrolled in school meal programs are determined using CPI data. The amount of money the government spends to fund these programs increases in direct proportion to the rate of inflation.
According to Shadow Government Statistics, if the old approach (1980-based) had been used, the inflation rate as of March 2023 would have been closer to 14.1% than the actual rate of 5%. The contrast between the old and modern computation techniques is shown in this graph.
Since 1990, more modifications have been made to the way inflation is calculated. Here is how the 1990 calculating method may have reported the current inflation rate. Inflation data for March 2023 was made public in April. Based on this graph, the actual inflation rate for April would have been closer to 8.3% than the stated 5% annual inflation rate using the 1990 approach.
How Inflation Is Being Misrepresented By The BLS.
The Bureau of Labor Statistics (BLS) is a unit of the United States Department of Labor. It's basically the go-to place for all kinds of data related to employment, inflation, and other economic indicators. Founded in 1884, its main gig is to gather, process, analyze, and publish a bunch of stats that help us understand what's going on in the U.S. economy.
One of the key economic indicators that has the biggest impact on consumers' purchasing power and standards of living is inflation. The official measure of inflation (the CPI), according to some experts, is inaccurate and does not accurately reflect the true cost of living for the majority of Americans. They contend that by making incorrect assumptions and use of defective methodology, the CPI understates inflation.
Substitution: The CPI assumes that consumers can switch to cheaper alternatives when prices rise, which may not be realistic or desirable for some goods and services.
Quality adjustment: The CPI adjusts for changes in the quality and features of products over time, which may overstate the benefits and understate the costs of technological improvements.
Housing: The CPI uses a measure called owners’ equivalent rent (OER) to estimate the cost of housing for homeowners, which may not capture the actual changes in home prices and mortgage payments.
Weighting: The CPI assigns different weights to different categories of goods and services based on their share of consumer spending, which may not reflect the preferences and needs of different groups of consumers.
The true inflation rate is substantially higher than the official CPI, according to several alternative inflation gauges as the ShadowStats Index.
Has The FED Lost The Battle Against Inflation?
Writing for Breitbart, John Carney says the Federal Reserve’s fight against inflation has faltered. The Department of Labor reported on Thursday that the consumer price index climbed 0.4 percent from a year ago, which annualizes to 4.9 percent. That’s a slowdown in the month-to-month figure compared with August but still uncomfortably high and worse than the 0.3 percent expected by Wall Street.
The year-over-year number showed inflation going nowhere fast. The consumer price index (CPI) rose 3.7 percent compared with September of last year, exactly the same as the 12-month increase recorded in August. So, progress on headline inflation has stalled.
At this point, we’ve lost count of how many times the White House has declared victory over inflation. To its credit, however, the White House was far more restrained than the usual suspects, who quickly jumped to point out that inflation has been totally defeated once you exclude food, energy, shelter, and used cars (which actually were disinflationary this month).
Excluding specific items from inflation is a time-honored tradition that can be traced as far back as Fed Chairman Arthur Burns.
He was convinced that nearly all inflation measures were distorted by idiosyncratic factors that needed to be excluded from economic analysis.
So, he excluded oil prices when the OPEC oil embargo sent those skyrocketing. And when food prices surged, perhaps because of El Nino, he excluded those too. Eventually, prices of mobile homes, women’s jewelry, children’s toys, and used cars were excluded. Eventually, only about 35 percent of CPI was left, according to economist Stephen Roach, who worked at the Fed at the time.
Critics joked that Burns had discovered a unique solution to inflation: once you exclude things that go up in price, inflation vanishes.
Of course, the Burns approach was a disaster and led to the Fed badly underestimating how high inflation would go and how entrenched it would become in the economy.
