Everyone Should Be Very Worried About the Interest Rate Drop

 I have long complained that CPI is not a real measure of inflation. About 15 years or so ago, I looked into what was in the actual "market basket" when it was first invented and researched--back in the 1950s--and then went to the store and priced it. If I just did math and relied on the CPI as adjusted by the FED, that market basket should have cost around $250. It actually would have cost $400. 

This should be no surprise for people living in the USA today. In 2019, we could go to McDonalds and get a chicken sandwich for $1. Now it is $2.59. That is 259% inflation. However, the cumulative rate of inflation according to the FED is about 25%. 

If you are wondering how I can price the exact same things the FED says it's pricing and come up with a much larger inflation rate, that's because I am really reporting the price changes. After the FED prices things, it frequently decides they are too expensive and instead of simply reporting the new cost of say a car, it decides to fudge its numbers. It makes a subjective but "research based" estimate of how much more value a car today is than a car from ten years ago. There is a good breakdown of this here. 

Cars supposedly last longer these days, but the average car on the road today is 12.5 years old with 169,000 miles according to the Department of Transportation. The average car on the road in the 1970s based on what the online consensus seems to be is that they lasted 10 years and 100,000 miles. Now, I had a 1981 Honda Civic with over 200,000 miles, and it was still running when I got rid of it in 2000. There are tons of problems with the logic that modern cars are more technologically advanced so they last longer. In 1950, the average new car cost about $1,600. Now, $48,000 is the average price--for 2.5 more years of life. That's a straight CPI of 3000% but after the FED adjusts their CPI, its only 1206%. Since cars make up a decent amount of the overall percentage of CPI, "adjusting" or as I like to say "fudging" the numbers is not good. This is not a real "cost of living." And of course this is only one of many ways the CPI is "adjusted."

All poverty levels and state programs including disability and social security are based on these numbers. So, a person living on social security in 1950 might have been able to afford a new car, but they could not today. This also means that poverty is a lot worse in the US than what is reported, which is 12.5% or about 1:10. However, 36% of people are skipping meals because they cannot afford to eat or 1:3 people. Not being able to buy food because you can no longer afford it is, to me, living in poverty. 

Ironically, inflation isn't really going down even with the interest rate increases. So why is it going down? I bet you can figure that out--the FED changed how they were calculating CPI and did one of their subjective "adjustments." Everyone rejoiced and the stock market was confused why they didn't immediately cut the rates again. Well, the FED obviously knew its new numbers were fudged. Now inflation numbers are down where "normal" is supposed to be. With all these investors and politicians complaining--because in America we hire the dumbest of the dumb to represent us in Washington (i.e. they can't do basic math and will just give themselves a pay raise if they start to struggle with groceries), the FED just slashed our interest rates. 

The problem here is obvious. Inflation didn't stop when they raised interest rates. Inflation is higher than what the numbers say. A large portion of Americans can't afford food, and our idiot government keeps printing money to send to Ukraine and Israel so they can massacre people we don't like and to pay our overpaid weapons dealers and banknote holders. Our GDP gets fudged--I mean "adjusted"--for inflation based on the inflation numbers that were fudg--I mean "adjusted." That means our GDP looks a whole lot bigger than what it actually is because our inflation adjustment is not as big as what it should be. Our current GDP is probably overinflated by more than 200%. With a national debt of 28 trillion and growing astronomically by the minute, the fudged GDP, which is ironically called "real GDP" has us at about 23 trillion right now. 

Japan has been able to maintain a much higher debt ratio, but their people have large savings accounts that the government can borrow from cheaply. We do not. If we are fudging our inflation, we are spending as much as we need to be spending on our people, and we are not giving accurate information to our creditors. Further, our inflation is still raging out of control and our government has not done much to reign it in. The only real thing it did was increase interest rates and now we are lowering them. I don't think this will last long. Inflation is not just a result of interest rates. It is a result of debt and money printing. As long as we keep doing that, more and more Americans will go hungry. With the government fixing the books, fewer and fewer of them will be able to get any aid.