Shrinking Inflation
The Lower the Better
Welcome to Financial Lies. My name is Iron, and I'll be your guide through this series of articles and videos aimed at expanding your understanding of finance and the economy. Throughout our content, we'll address common misconceptions, distractions, established theories, and occasionally, the odd equity analysis. Today, we'll focus on why the inflation number is intentionally kept low and the downstream impacts this has.
In our previous video and article, "CPI-The Consumer Price Illusion," we revealed several calculations and assumptions that lead to the Consumer Price Index (CPI) being misrepresented as lower than it actually is. We didn't cover them all but would encourage you to google "Owners Equivalent Rent", if your blood has stopped boiling. Today, "Shrinking Inflation" will delve into why this number is suppressed by design. We’ll explore "Shrinking Entitlements," inflating the GDP number, and hiding the loss of your purchasing power. After all, inflation is a tax just by another name.
Shrinking Entitlements. Lowering your entitlements benefits the government at your expense while reducing theirs. Every year, you pay your taxes, right? Have you ever wondered how those deduction limits are calculated, how your retirement entitlements are adjusted, or how your pay raises are determined? Let's keep it simple shall we? The lower the inflation rate, the lower your deduction calculation increases. The lower the inflation rate, the less your entitlements increase annually. The lower the inflation rate, the less your pay needs to rise to keep up with the cost of living, or so we are told. Remember, this is just a short list we could go on and on. In many countries, residence receive deductions or entitlements per child, through their property taxes, and payroll deductions, yep, you guessed it, they are all linked to inflation in a round about way. It’s the perfect tax because it’s one they don’t explicitly have to raise, vote on, or fully disclose to you. Essentially, the lower the stated inflation rate, the less they have to give you, and the more they get to keep.
Inflating the GDP. Suppressing inflation significantly boosts GDP figures, and in a future publication "Healthcare and Insurance are a Sunk Cost", we will cover how non productive spending is used to pad the GDP number further. Back to suppressing the inflation... I mean let's stop and think about a simple example. If you sell 100 dollars worth of goods one year and 110 dollars worth the next, but inflation was 10%, did you make more money? No, of course you didn't but now let's run that 10% rate through the CPI calculation, it might drop to 5%, magically creating an extra 5 dollars in profits. This is excellent for your government, they can claim higher GDP growth with a 5% inflation rate rather than a 10% inflation rate, remember from above? Those generous governments now get to tax you more because of the deflated inflation value.
You don't think it works like that? Well wake up it sure does, and they actually out due themselves by crafting an even lower inflation rate than the CPI. So for obvious reasons they had to name it something completely different and completely backwards to fool as many of you as possible. Please join me in welcoming the next government statistic: The GDP Deflator, and, it does exactly, the opposite of it's name. It does this by reducing the inflation rate calculated from the CPI, lowering it further, which in turn, pushes up the rate of GDP by not accounting for all that pesky inflation! Let's take a quick look at this simplified example to demonstrate the downstream impacts of these numbers. In this example, country, B, gets to tell its citizens that it has a better handle on inflation than Country A, that its economy is stronger, and it gains additional tax revenue without having to vote to increase taxes! Many of these also have a compounding effect, as they are calculated with year over year changes. Start with bad data, compound the bad data, that's one slippery slope. This same slope is also used by companies in a very similar way, ever heard of the retail sales figure, yep affected by similar shenanigans...that's for another time I guess.
Last up, Hiding Loss of Purchasing Power. By the shrinking of the true inflation value, it helps to mask the amount of purchasing power you are losing to inflation. At the end of the day, inflation is a tax because it's taking away your purchasing power and benefiting the balance sheet of the government. If the government can run high levels of real inflation while collecting additional tax revenues, and paying out less benefits, which explained prior; they can in fact inflate the debt they hold away. Lucky you, you get to pick up the tab without even realizing it as they pinch pennies from several aspects of your expenditures and benefits. Best part is inflation is compounding, heard, of compound interest right? how about compounding inflation!? Who cares if the inflation rate falls back to 2%, it's inflating 2% on top of the nearly 10% we had just a few years ago. I hope you remember that duel mandate we talked about in, CPI-Consumer Price Illusion; I am going to ask again are stable prices, prices that are ever increasing at 2%? If we had nearly 10% inflation prior don't we need to have more than negative 10% to get back to even?
Of course not because shrinking inflation perceptions, is the cover, for higher inflation, which is the underlying goal. At just 2% compounding inflation, prices double after 35 years or looking at it another way, that's cutting your debt levels in half every 35 years because you need twice as many of those dollars for the same purchase. Remember, this compounding is affecting all entitlements and liabilities linked to the CPI rate... whether they are for your benefit or not. We have to remember that governments do not produce goods or services and their income is derived from tax revenue, inflation (which is Money Printing or Financialization), and the manipulation of interest rates or real rates are the leavers they control. We will cover this more in an upcoming publication "Government, We are in the Wrong Business".
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Note: This article was not AI-generated.
If you enjoyed our content there are many contributors with similar ideologies we would recommend learning from: Lynn Alden, Adam Taggart - Thoughtful Money, Luke Gromen, David Collum, George Gammon, Wallstreetsilver, Wall Street Silver, Liberty and Finance, Bill Holter, Charles Nenner, Catherine Austin Fitts, Martin Armstrong, John Rubino, Chris Martenson, Greg Hunter - USA Watchdog, Ed Dowd, Peter Schiff, David Morgan, Craig Hemke, Andy Schectman - Miles Franklin, Tom Bodrovics - Palisades Gold Radio, Danielle Dimartino Booth - Quil Intelligence, Nobody Special Finance