1) The Federal Government Figures Appear to be Gamed
The Bureau of Labor Statistics (“BLS”) issues the inflation numbers monthly. It’s convenient that the government inserted the word ‘Labor’ into this bureau. Otherwise it would just be “BS”. The number to focus on is the Consumer Price Index (“CPI”).
To do this calculation, they strip out food and energy costs. Their reasoning for this is that these categories are too volatile. Fair enough, they are. But don’t forget, you are still constantly buying food and energy. After these two are removed, this is the so-called Core Inflation Rate. This is currently running at 1.6% annually as of January 2014.
The primary issue with how this number is calculated is what they call “quality improvements.” For example, if you buy a new computer that has more memory, a faster processor and better resolution in the monitor, this is adjusted in the inflation index. The bottom line is that the Core Inflation Index is suspect at best.