John Williams for several years has been publishing Shadow Government Statistics. While his full analysis is subscription based, he publishes many free charts. One of the most interesting is what the CPI is as reported, and what it would be if still measured the way it was when before Bill Clinton’s appointees changed the formula for calculating CPi.
For example, during the housing bubble, in 2005, the reported CPI rose to a little over 4%, even while housing prices rose at double-digit rates. Calculated the old way, the annual inflation rate would have been over 7%. In 2008, with gasoline over $4 a gallon in many parts of the country, reported CPI was over 5%, while Williams calculates that CPA really was rising at a 9% rate.
Many others, such as Peter Schiff, have mentioned this. This arises from the government not using at homeownership prices in the CPI, but instead uses the rental equivalent of the housing. So as America overbuilt the housing stock, and speculators would put tenants in a house at any rental price just to have some cash flow before flipping the house, rent levels were suppressed, which dampened the inflation numbers.
The irony is that if rents rise, reported inflation will rise even though housing prices will be falling.
