The "official" cost of living rose above its pre-meltdown high last week. CNBC reported the bad news in US Cost of Living Hits Record, Passing Pre-Crisis High.
One would think that after the worst financial crisis since the Great Depression, Americans could at least catch a break for a while with deflationary forces keeping the cost of living relatively low. That’s not the case.
A special index created by the Labor Department to measure the actual cost of living for Americans hit a record high in February, according to data released Thursday, surpassing the old high in July 2008. The Chained Consumer Price Index (C-CPI-U), released along with the more widely-watched CPI, increased 0.5 percent to 127.4, from 126.8 in January. In July 2008, just as the housing crisis was tightening its grip, the Chained Consumer Price Index hit its previous record of 126.9.
The regular CPI, which has already been at a record for a while, increased 0.5 percent, the fastest pace in 1-1/2 years. However, the Fed’s preferred measure, CPI excluding food and energy, increased by just 0.2 percent.
This is a remarkable result, coming as it does from the Bureau of Labor Statistics, the official arbiter of inflation reality. If you consider that the price of oil was well over $120 per barrel through much of the first half of 2008, and is well short of that level now, imagine what the cost of living will be when oil prices finally do reach the stratosphere.
The CNBC article tells us a bit about how the BLS "adjusts" the data so things don't look quite as bad as they really are.
In 2002, the BLS created this often-overlooked cost of living index in order to account for the kinds of substitutions consumers make when times are tough. It is supposed to be even closer to an actual “cost of living” measure than the regular CPI. From the BLS website:
For example, pork and beef are two separate CPI item categories. If the price of pork increases while the price of beef does not, consumers might shift away from pork to beef. The C-CPI-U (Chain Consumer Price Index) is designed to account for this type of consumer substitution between CPI item categories. In this example, the C-CPI-U would rise, but not by as much as an index that was based on fixed purchase patterns.
Well! For those of you who can still afford to buy meat, one wonders what the BLS has decided you might do when pork becomes too expensive. What comes next? Chicken? And after that? Soybeans? Compacted animal turds? I'm sure you find it reassuring that the Labor Department is making happy assumptions about your behavior to keep the "official" cost of living at a manageable level.
Still, with all those theoretical substitutions the Labor Department assumes you are making, the cost of living (C-CPI-U) is at its highest level ever. Although there's little to be done about the rising costs of food and energy, current circumstances present yet another opportunity for the BLS to revise its methodology so things don't look so bad.
Thanks to "counter-cyclical" deficit spending and bold monetary policy, we're not having the Great Depression II. Anyway, that's the official story. Instead, your cost of living just goes up and up, even with underemployment hovering around 20% according to Gallup. All this should come as no surprise. Nothing to see here, folks, move on, move on...
Surely you didn't think those in our Imperial Capital actually give a damn about you, did you?
Bonus Video
******Compacted animal turds?******
Big Mac, you mean?
And no, I'm not implying Big Macs are vicious with that question.
Posted by: Morocco Bama | 03/23/2011 at 10:11 AM