The Truth About Government Inflation Figures

When the US Government releases the quarterly inflation figures the numbers can be rather misleading. These numbers as reported include only consumer goods. This is flawed in that for the average person consumer goods are purchased far less often than are things not included in the numbers...the cost of food and the cost of fuel.

Televisions, washers, furniture, vehicles and the like are the consumer goods included in the inflation numbers reported by government. Not included are food and fuel. Think about that situation for a moment. How often does one buy a new washing machine? A new car? A new computer? On an individual basis these are rarely purchased items, so in that regard inflation numbers mean little to most individuals except when taken in the whole of all economic activity.

Food and fuel are items every adult must purchase on an ongoing basis, yet they are not included in the reporting numbers. Why? Because they are too volatile and both retail and wholesale prices can and do vary greatly, and often over the short term basis. Government claims it would be misleading to include these potentially rising and lowering prices.

During these times of economic downturn inflation stays lower for many reasons. One of the primary reasons is supply and demand. When money is tight and people fear their future economic fortunes they often delay purchasing major items. Manufacturers and retailers know they must cut their profit margins to move the product. When shoppers are not buying is when we see sales trying to drive shoppers to make a purchase. Such efforts by retailers help keep the overall prices low, thus when inflation figures are compiled and released they do not reflect actual burdens upon consumers.

I am of the mind this is misleading and confusing. Food and fuel must be purchased whatever the price. I can delay buying a new TV when the price is higher than I wish to pay but I have to eat and have to have gasoline for my vehicle, so inflation, even not reported inflation, does indeed effect every one of us.

Food is rising in cost for numerous reasons but rising it is and drastically too. This effects all of us. Food inflation is strong yet since not reported one only will hear of it when they go to pay for their items in the grocery checkout line. Gasoline is rising on pure speculation of future shortages due to Middle Eastern unrest. If no shortage actually occurs gas prices will fall. If Libya lights their oil wells and gas pipelines on fire or if the Straits of Hormuz were to be blockaded, gasoline prices will explode. If these things do not happen we can expect to see gasoline return to a lower price.

One year ago gasoline was about $2.50 per gallon yet today it's about $3.25 on national average. That is a one year inflation rate of about 30%. That would be considered drastic inflation if that number were included in the mix. Add in the fuel needed to raise and transport crops and we can see how one can effect the other.

I am of the firm belief government can assist in lessening the price of both of these products by open oil drilling and stopping the use of food - corn for ethanol - to make fuel. Ethanol is one of the major causes of food inflation as corn, corn oil and corn syrup are ingredients in many, many things. As well if more land is converted from other food production to corn to meet the increased demand that will cause shortages, thus higher demand than the supply, which will then cause other non-corn foods to rise as well.

Government can help fix this but it will require a suspension of hopeful political ideology in order to do so. Isn't now the time if ever there were one for government to drop ideology for the overall good of the nation's economy?