19 April 2006

U.S. Government Won't Reveal About

Bloomberg.com: Bloomberg Columnists: "April 17 See even Bloomberg acknowledges that the US CPI figures are worthless(Bloomberg) -- There's a great scene in the movie ``A Few Good Men'' in which a Navy lawyer is grilling a U.S. Marine officer played by Jack Nicholson.
``I want the truth,'' the lawyer insists. ``You can't handle the truth!'' Nicholson's character barks. I hear this dialogue in my head whenever there's a question on whether the government's Consumer Price Index, or CPI, is an honest gauge of living costs.
I'm convinced there's a much more insidious story that needs to be told as the bond and precious-metals markets gyrate daily over perceived inflation threats.
If the full impact of consumer-price increases were accounted for, investors would have a lot more to worry about, and you should prepare for a threat that's much greater than Labor Department reports indicate.
The government has a vested interest in keeping official inflation measures low. Everything from Social Security cost-of- living increases to marginal tax rates is adjusted annually to this all-important gauge.
The total cost of what we are paying for big-ticket items is much higher than what's reflected in the CPI.
Take housing costs, for example. The Bureau of Labor Statistics, or BLS, the U.S. Labor Department's agency that calculates the price index, estimates housing costs by figuring ``owners' equivalent rent,'' or a proxy of what homeowners would pay in average rent increases.
The CPI Lie
As the largest component of the CPI at 23 percent, housing represents a huge portion of the overall cost of living. Yet the Labor Department's indirect measure vastly underestimates actual housing costs since it doesn't reflect home-purchase prices, financing, maintenance or property taxes. Done any roofing, remode"

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