Inflation is Just a Gaslit Number

Does inflation of 5% feel like the right number? A recent study led by former U.S. Treasury Secretary Larry Summers claims inflation is sitting around 18% when adding financing costs including mortgage payments. Looking at McDonalds inflation since the 1980s, inflation appears to be four times higher than what has been reported. So as the gaslighting by governments escalates and the numbers can no longer hide the reality, how does this inflation calamity end and what do you need to do to protect your financial freedom?

Summers – An Inflation Bellwether

Larry Summers, an American Economist who served as the 71^st United States Secretary of the Treasury from 1999-2001 has recently come out to state inflation is actually around 18%, and it was a flaw in 1983 rejigged CPI calculation that has caused rampant miscalculated inflation.

His recent working paper for the National Bureau of Economic Research;

The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly | NBER

By ignoring the cost of finance in day-to-day inflation calculations, inflation has been misreported for decades and the reality of inflation is far higher than reported. The report highlights the damage of monetary policy as it sets interest rates based on inflation, but when interest rates increase there becomes a misrepresentation of the impact of these rates on inflation.

In fact, inflation rates are subjective, economists in statistical bureaus who report these numbers make hundreds of judgement calls, including goods substitution and what goods should be included in the basket. With political bias undeniable within these departments, over time, inflation has been massively underreported.

In 1983 an argument was made by BLS economist Robert Gillingham to remove home mortgage payments and replace it with rental rates as it was overstating inflation. The study claims this had a huge impact on current inflation rates as, due to the compounding rate of this ‘good’, it now makes up over 25% of the current CPI, and due to the rate of housing asset growth far outstripping this, mortgage payments inflation have been far higher, particularly in the higher interest rate environments we have seen in the last 3 years. This has led to underreported inflation, with interest rates rising so rapidly recently, the inflation becomes dramatically underreported.

What does McDonalds Inflation Say?

A recent report from the Kobeissi Letter found fast food inflation has doubled since 2014 while official data is at 31%. How can the official inflation numbers be so far from the hip pocket reality?

Even more damning is the additional Shrinkflation effect when added to inflation. Since the 1980’s, McDonalds, according to Bobby Casey, Big Mac shrunk 40% and is now 16 times the price it was in 1980. So, the Big Mac price is up around 20 times when accounting for Shrinkflation, but annualised price hikes are at 5.13 times. This indicates inflation is actually four times higher than what is reported – and correlates a lot more closely to Larry Summers findings.

Political Gaslighting

It’s one thing to fudge the figures, which as we’ve established both today and in the past in both unemployment and inflation is a common occurrence, but the sheer amount of gaslighting in regards to inflation in particular is alarming. Biden has recently doubled down stating inflation was at 9.1% when he came into office, despite official data of 1.4%.