CPI Inflation Report — Why You Can't Trust it

"And we're talking about the adjustments for the standard deduction, the tax brackets, the retirement plan contribution limits, EITC, etc. It also affects wages and labor contracts especially for union contracts and it affects minimum wage laws in many cities and jurisdictions."

"The CPI inflation report measures the change in the cost of maintaining the same standard of living which is highly subjective which leaves a lot of wiggle room for manipulation."

"So the first issue is sampling. The government collects price data from retailers and establishments from 75 urban areas and the government does not reveal the actual price quotes from the specific stores or the providers. So in other words, we just have to take their word for it and their numbers are not auditable."

"And then there's the substitution effect. ... the substitution effect is always going to understate the true rate of inflation."

"So they use the substitution effect to pad their numbers. And then you have the hydonic adjustment. So for this one too, you tell me if you think this is fair or not or if this makes sense. So this removes price increases that are attributed to quality improvements."

"So, for example, if your smartphone, let's just say that it costs $800 this year, okay? But 5 years ago, it was $400 for a cell phone, right? The CPI method can effectively say that the price of cell phones have not gone up in the past 5 years because the cell phones today are better than they were before."

"And here's another major issue that a lot of people have a problem with. It's the theoretical questions that do not reflect real prices. So for example, about 33% of the entire CPI consists of the cost of housing. Okay? And for that they rely heaviest on the owner's equivalent rents question. So they asked the respondent, how much do you think theoretically would you expect to pay to rent your home that you're living in? So, this is not based on any hard data or real market rates."

"Questions have recently arisen surrounding the reliability and usefulness of certain federally produced data including the consumer price index the CPI and these concerns arise from the CPI methodology. Another concern which is listed on page two of the report says that survey response rates for the CPI are falling which is leading to a lower quality of data."

"So it says the surveys are generally voluntary and have been exhibiting a downward trend in the number of responses. Survey response rates are important for precision. Higher response rates are typically associated with data of higher quality, which means that lower response rates are typically associated with data of lower quality. And as you can see over the years, response rates have been falling, which means that the data quality has been deteriorating over the years."

"When you look at other straightforward ways of calculating inflation, like if you're going to look at shadow stats or even use the true living cost measurement, it shows you that real life expenses are rising much faster than the government's reported rate of inflation."

"Well, from my perspective, it's pretty straightforward. It's all about the money. So, I'll just say my perspective is because the government wants to save money. There are 74.5 million Americans that receive social security benefits. Can you imagine how expensive it would be if the government reported the correct rate of inflation and gave all 74 million Americans a correct cost of living adjustments?"

"But still, if the money supply is growing at 5% and they're reporting 3%, then that's still a massive under reporting. You know, that's the difference between getting a 3% cost of living adjustments compared to a 5% cost of living adjustments. And that's happening year after year after year. It compounds. And again, this is a calm period. They reported 8% inflation, you know, during the pandemic when it was really running at 15%."