Peter Schiff: The Mainstream Is Sugar-Coating Inflation
The CPI data for November came in pretty close to expectations. Of course, expectations were sky-high as the transitory inflation narrative has faded into myth.
The CPI surged another 0.8% month-on-month in November. The consensus expectation was for a 0.7% rise. The headline year-on-year increase was 6.8%. That was right in line with expectations. It was also the highest CPI print since 1982. And as Peter Schiff talked about on his podcast, the CPI number understates the inflation problem.
The November rise came on the heels of a sizzling hot 0.9% CPI in October. This was the biggest back-to-back CPI rise of the year.
Clearly, the gains we are seeing were not transitory if we’re at the end of the year and we’re seeing even bigger back-to-back increases in monthly consumer prices than at any point during the year.”
The total CPI gain for 2021 now stands at 7.1% with one month left to go.
- January – 0.3%
- February. – 0.4%
- March – 0.6%
- April – 0.8%
- May – 0.6%
- June – 0.9%
- July. – 0.5%
- August 0.3%
- September – 0.4%
- October – 0.9%
- November – 0.8%
Core inflation, excluding food and energy (as if consumers don’t have to eat or put gas in their car) rose 0.5%. The year-over-year core CPI was up 4.9%.
Peter said we need to remember that the Fed is still talking about inflation “slightly” above 2%.
We are miles above 2%. And there’s no way we’re going anywhere near 2% again.”
Peter brought up another important point. The inflation comparison between, 1982 and today is apples to oranges, and it is irrelevant.
The mainstream media and government officials like to compare today’s CPI numbers to the double-digit inflation of the 1970s.
They want to point to the higher numbers of the 1970s to remind us that it’s really not that bad, because after all, it’s nothing like the 1970s. Except it’s exactly like the 1970s — only worse.”
According to the government numbers, the CPI in 1970 rose 5.8%. In 1971, CPI was up 4.3%. The 1972 CPI increased by 3.3%. The 1973 CPI increase was 6.2%.
So, we’re already worse than the first four years of the 1970s. So, how is this not like the 1970s when we’re starting off this decade worse than we were starting off the 1970s?”
Inflation hit double digits in 1974 with an 11.1% CPI.
But you know what? That’s actually where we are. In fact, we’re higher than that right now. And that is because the CPI that we use today — and I’ve said this many times on the podcast — is not the same CPI that we were using in the 1970s. And that makes comparisons completely irrelevant.”
Back in 1998, the government significantly revised the CPI metrics. Even the Bureau of Labor Statistics (BLS) 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. It was 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.”
It serves the government’s agenda to make these false comparisons so they can claim that the inflation we have now isn’t as bad as it was in the 1970s, even though it’s already worse. If you measured inflation now the way it was measured in the 1970s, I think 2021 would be worse than any single year of the 1970s.”
The peak of 1970s inflation came between 1979 and 1981 with annual CPI increases of 11.3% (1979), 13.5% (1980) and 10.3% (1981). That’s when Paul Volker “went medieval and raised interest rates to 20% in order to kill the inflation dragon.
The reality is we are already at an inflation rate as bad as it was at the high point of the 1980s, and the Fed is doing nothing but pouring gasoline on the fire.”
Peter said he thinks if the government measured CPI under the old formula, CPI would clock in around 15%. ShadowStats comes up with a similar CPI estimate using 1980-based numbers.
In a nutshell, inflation as bad as the CPI numbers are, inflation is being sugar-coated.
As bad as it is, it’s actually so much worse if the numbers were honest.”