Raging US inflation is FAR WORSE than we're being told

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Raging US inflation is FAR WORSE than we're being told: If the government calculated price increases the same way it did in the 1980s, we'd ALREADY be in Jimmy Carter territory, write former restaurant empire CEO ANDY PUZDER and ex-senator JIM TALENT


The outlook for the U.S. economy is bad and potentially getting worse.

On Thursday, the Commerce Department released new consumer spending numbers showing that the prices Americans are paying for goods and services climbed 6.3% over the past year, as inflation maintained its upward momentum.

Just 24 hours earlier, Federal Reserve Chairman Jerome Powell warned, yet again, that his efforts to rein in runaway price increases by raising interest rates may plunge the nation into recession.

And he said it's worth the risk.

'The bigger mistake to make—let's put it that way—would be to fail to restore price stability,' he said at the European Central Bank's annual economic policy conference in Portugal.

Prior to that revised GDP numbers showed the US economy contracted even more than initially reported in the first quarter of the fiscal year, as more consumers opted to save instead of spending their hard-earned dollars.

Now, what if we told you that America's economic outlook is even darker than that?

What if we told you that the dire statistics splashed across the headlines and your TV screens don't even come close to accurately describing the reality?

Well, buckle up – because that's what we're telling you.

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One way to understand today's inflation is to compare it to the last major inflationary spiral that occurred during the Jimmy Carter Administration in the late 1970s and early 1980s.

The headline inflation rate – the measure of total consumer inflation in the economy – peaked in March of 1980 at 14.8%.

In May of 2022, headline inflation was 8.6%.

On the surface, that comparison is reassuring.

But is the comparison valid?

There's a lot of evidence to suggest that it isn't.

In 1983, the government changed the way it calculated inflation in ways that tend to understate inflation today as compared to 40 years ago.

Bill Clinton's former Treasury Secretary Larry Summers recently co-authored a report in June for the National Bureau of Economic Research titled Comparing Past and Present Inflation (Summers Report).

The Summers' Report specifically analyzed the impact of a formula change by the Bureau of Labor Statistics (BLS), whereas it discounted the impact of homeownership costs on overall inflation measurements.

Adjusting for that change alone, the Summers Report found that the headline inflation rate of 14.8% in March of 1980 would drop to 11.6%, only barely 3 percentage points higher than the current rate of 8.6%.

The Fed's preferred inflation rate known as core inflation (a measure that excludes energy and food prices), would experience an even more significant adjustment.

Core inflation clocked in at a peak of 12.5% in March 1980 but would only have been 6.7% by today's standards.

For comparison, in March 2022 the post-pandemic core inflation rate peaked at 6.5%.


This suggests that if we were to evaluate today's inflation numbers in the same way that we calculated inflation in the 1980s – we'd already be squarely in Jimmy Carter territory.

In the words of the Summers Report, '[t]he current situation is of similar magnitude of past [inflationary] episodes.'
 
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its not the 1980s anymore, *****. things change, including calculations. lol
 
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economists predict everything and anything. lol.
 
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