Inflation — A Misnomer
<p>Another important fact about “inflation” is how under-reported it is. Items can be added and removed, and their weight in the consumer basket adjusted at will to show an artificially lower number than what people experience. This not only serves to calm the public and investors by sending the message that things are not nearly as bad as they seem, but to show an increase in consumption and thus in GDP growth. Take groceries, for example. If your shopping bill goes up by 30% but only 10% is reported as inflation, then the remaining 20% increase in money spent on food can be attributed to growth. Should overall consumption (in real terms) fall as a result of this extraordinary price hike by say 10%, the government could still see an “economic” growth of 10%, despite all metrics indicating that the contrary is true. This is how the economy could be growing while average folks just get poorer and poorer. Is it any wonder that nobody talks about falling purchasing power, only economic growth?</p>
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