Guest post by Peter Schiff from his blog on SchiffGold.com:
Based on the Consumer Price Index (CPI), prices were up 7.7% year-on-year in October. That’s a pretty hefty inflationary bite. But we’ve been saying the impact of inflation is a lot worse.
The increased cost of a Thanksgiving meal this year bears that out.
According to data compiled by the American Farm Bureau, the price of a Thanksgiving dinner increased by over 20% compared to just one year ago.
That piles on top of a 14% price increase for your Thanksgiving meal in 2021.
The total cost of a traditional Thanksgiving meal for 10 came in at $64.05, based on the Farm Bureau data.
The cost of a turkey was up about 20%. The price of stuffing rose a whopping 69.4%. Whipped cream was up 23.8%, and a gallon of milk set you back an extra 16.4%. Cranberries were the only major Thanksgiving food that dropped in price over the last year.
Forbes produced a nice infographic showing the price increase.
The big increase in the cost of Thanksgiving underscores an important point — the government uses a CPI formula that understates the actual rise in prices. Based on the formula used in the 1970s, CPI is closer to double the official numbers – much more in line with the increased cost of Thanksgiving that came out of your pocket this year.
The Bureau of Labor Statistics (BLS) calculates CPI by analyzing the price of a “basket of goods.” Obviously, the things the government chooses to put in that basket have a big impact on the final CPI number.
Under the current formula, 10.9% of the CPI is based on durable goods (computers, automobiles, appliances, etc.). Nondurable goods (primarily food and energy) make up 26.6% of CPI. Services account for the remaining 62.5% of the basket. This includes rent, healthcare, cellphone service, etc.)
Again, the things the government includes and excludes from the basket can make a profound difference in that final CPI number.
Back in 1998, the government significantly revised the CPI metrics. Even the Bureau of Labor Statistics admitted the changes were “sweeping.”
According to the BLS, periodic changes to the CPI calculation are necessary because “consumers change their preferences or new products and services emerge. During these occasions, the Bureau reexamines the CPI item structure, which is the classification scheme of the CPI market basket. The item structure is a central feature of the CPI program and many CPI processes depend on it.”
In 1998, the BLS followed the recommendations of the Boskin Commission, a committee appointed by the Senate in 1995. Initially called the “Advisory Commission to Study the Consumer Price Index,” its job was to study possible bias in the computation of the CPI. Unsurprisingly, it determined that the index overstated inflation — by about 1.1% per year in 1996 and about 1.3% prior to 1996. The 1998 changes to CPI were meant to address this “issue” by ensuring the formula consistently spits out a smaller number.
In effect, the government cooked the books.
That’s not the only way the BLS can manipulate CPI data. It built in all kinds of geometric weighting, substitution and hedonics into the calculation. By manipulating those numbers in the formula, the government can basically create an index that outputs whatever it wants.
Why would the government do this?
Because it wants to hide the true extent of the inflation it creates by borrowing and spending and printing money.
As Peter Schiff pointed out in a recent podcast, inflation is a stealth tax. Everything costs more because the government spends more.
Why does everything cost more?
But they didn’t raise taxes to pay for that spending because the government didn’t want the voters to know that all the stuff they were getting from government they had to pay for. They wanted to pretend they could get it for nothing, or that somehow, the rich would pay for it. But the rich aren’t paying for it. The middle class and the working poor are paying for it. But they’re not paying for it honestly through increased legitimate taxes. They are paying for it dishonestly through the inflation tax.”
Guest post by Peter Schiff from his blog on SchiffGold.com.