Chapwood, Shadowstats say US inflation much higher than official figure
Chapwood, Shadowstats say US inflation much higher than official figure
February 15, 20154:46 PM MST
Shadowstats and Chapwood Index Say Inflation Higher Than Estimated
shadowstats.com
Ask the economists at the Bureau of Labor Statistics, and they will tell you in no uncertain terms that prices in the US are rising at a manageable pace, less than 2 percent per year. But many private investment houses and analysts are challenging the official inflationcount, claiming that the price of most goods is increasing at a rate several times the government's official estimate.
The Chapwood Index of inflation was developed by a private investment house to help its clients navigate the rocky waters of the US economy. While Chapwood Investments, the firm compiling this Index, updates its clients on inflation periodically throughout the year, it has been releasing to the public its inflation estimate only on an annual basis.
Over the last few years, the Chapwood Index indicates that real inflation in the US is averaging close to 10%. The Chapwood Index just released its 2014 numbers a few days ago. The report reveals a disturbing pattern.
According to Chapwood, in New York City prices increased by a whopping 12.4 percent in 2014. Other metro-areas exhibited the same massive increase in prices: Los Angeles, 12.1 percent, Chicago, 10.9 percent, and San Diego, 13.1 percent. Inflation in the 50 American cities represented in the Index varied between 8 percent to 13 percent.
The Chapwood Index arrives at these numbers by measuring the price changes of over 4000 items commonly purchased by Americans, and compares these prices year to year, region by region.
Among the items measured are Starbucks coffee, gasoline, Advil, taxes, dry cleaning, tolls, movie tickets, fast-food restaurants, computer paper, internet service, toothpaste, oil changes, car washes, pizza, Gymboree lessons, mobile phone service, cable TV, home repairs, laundry detergent, light bulbs, school supplies, pet food, underwear and certain magazines.
The Index also includes health care. The increased costs associated with Obamacare, such as higher premiums and deductibles, are certainly contributing to the accelerating cost of living.
Another organization, Shadowstats, calculates inflation simply by using the same method of measuring price changes that the government employed around 30 years ago. Over the years, as theBLS continued to modify the way it measured price changes, the official inflation number headed downward, and is now well under 2 percent.
Using the older US government measurement formula,Shadowstats has found that inflation is running around 9 percent annually.
So who to believe? It is important to remember that the official CPI is the number the government uses to calculate how much Social Security and other benefits will be increased each year. If Social Security benefits grew annually at the same rate as inflation as measured by Shadowstats and the Chapwood Index, around 9 percent or 10 percent, or even at a milder 4 percent, the government would be hard put to fund these programs without raising taxes and/or increasing the deficit.
As it is, programs such as Social Security and Medicare are facing unfunded mandates in the hundreds of trillions over the next decades.
According to Ed Bukowsky, managing partner of Chapwood Investments, because of high inflation "Individual purchasing power is sinking in quicksand, and people are unable to maintain their current lifestyle."
These are strong words. However, it shows that consumers and investors must understand why they feel like their standard of living is suffering, why they are increasingly unable to afford to engage in some of the niceties of life, such as occasionally eating out, attending a movie (which in many cities is heading toward $15 or higher), or going on a vacation.
Until the the nation comes to grips with the reality of accelerating price inflation, the broad middle class will continue to lose ground year after year.
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