“There’s this wild disconnect between what people are experiencing and what economists are experiencing,” says Nikki Cimino, a recruiter in Denver.
“There’s this wild disconnect between what people are experiencing and what economists are experiencing,” says Nikki Cimino, a recruiter in Denver.
Apparently inflation went down bigly in the 1980s when they decided to stop counting the cost of housing. NPR last week had a report about people advocating to put that back in so that we can have a better idea of what is going on.
Well, the official Inflation is used in the calculation of the official GDP were it acts as a deflator (i.e. the more the inflation the less the GDP) to correct the Nominal GDP (which is in present day currency terms) to make the Real GDP (which is supposedly free of Inflation and hence comparable between years) aka the Official GDP.
If the official Inflation understates the real Inflation, what happens is that the increase is the Nominal GDP that comes merelly from inflation rather than from any actual growth in wealth, is not fully offset when the Real/Official GDP is calculated, so the resulting “real” GDP number is bigger than reality and proud government politicians can come out, compare it to last years’s GDP (which it should’ve been comparable with, if both were done properly) and claim that it was their steering of the Economy that made such a difference to last year’s GDP, i.e such high GDP Growth.
Hence the is massive political pressure to understate Inflation, i.e. to lie, so that ultimatelly larger GDP Growth figures can be posted and boasted about.