The United States' measure of inflation is vastly under-reported by our Government which could lead to serious financial consequences. The Federal Reserve, in its role to set monetary policy, is focusing now on keeping prices in check by changing the interest rate, most notably and likely up for the 17th time when they meet tomorrow. The goal is to keep the economy humming along, but not too fast as to cause rising prices, which hurts consumption and may lead to a recession.
My stance is that inflation reporting is seriously understated as to what the average American is experiencing. Just in the news this week, college tuition was reported rising 6.4% in May from a year ago, hospital costs rose 6.7%, hotel rates were up 4.7%, trash, sewer and water services, up 4.8%. And energy prices? They are considerably ahead year over year. To report fairly, many imported goods prices have been flat or have actually fallen. TV's, computers and clothing are among them, espected as these goods are mostly manufactured overseas where labor costs are dirt cheap.
For years now, I have harped that price inflation is a very personalized issue. You have to look at it consumer by consumer. If you are a college student, middle age professional, or retiree, you experience far different inflation scenarios. College students buy books and must pay tuition, workers who own homes pay a big chunk towards mortgage payments, and seniors have larger medical and drug costs...and insurance co-pays and deductibles. Reminds me of a quote I heard recently, "I have enough money to last the rest of my life, so long as I don't buy anything".
As for me, my beef has been insurance costs. Life, Health, Auto, Hurricane, Home hazard: these have all shot ahead considerably and take a chunk out of my budget. Family health will rise 8% in July and hurricane (windstorm) shot up 65% after last year's storms.
If I had to guess, our overall household inflation rate is somewhere between 6-10 percent. That is considerable higher than the 4.2% overall inflation reported by the labor department. Since Social Security and many retirement plan payments are tied to the inflation rate, American's are not getting their moneysworth to keep pace with increased costs. Walter Williams publishes a nifty web site at http://www.gillespieresearch.com/cgi-bin/bgn/ called Shadow Government Statistics which outlines the inflation myth in more detail. The Gov't. has all the statistics - it does not take a rocket scientist to break them down and report on the real inflation rate more accurately so more American's can see a much clearer picture.