January 13, 2022

EVERYTHING IS GOING SWIMMINGLY: Worst US inflation since ’82 is huge underestimate: Government’s CPI says the cost of shelter rose 4% in the past year but home prices and rents are up nearly 20%.

Shelter accounts for about a third of American household expenditure, and the cost of buying or renting shelter is up nearly 20% over the past year. Yet the Consumer Price Index (CPI) for shelter reported Jan. 12 by the US Bureau of Labor Statistics showed an increase of just 4.2 over the past year.

Private surveys conducted by the big rental sites, Zillow and Apartmentlist.com, show increases of 13% to 18% during 2021, and the Case-Shiller Index of US home prices jumped 18% in the year through October.

Who are you going to believe, to paraphrase Groucho Marx – the US government or your own eyes? . . .

Shelter makes up 32.3% of the CPI, so 14 percentage points in the cost of shelter would add another 4.5 percentage points to the headline inflation number.

That’s an additional 4.5 percentage points on top of the 7% annual rate of CPI inflation. In other words, accurate accounting for real-world shelter costs would put consumer inflation in the US around 10% a year. And double-digit inflation would cause a market meltdown.

There’s no sign of relief in cost pressures on business. Transport costs have been rising at an annual rate of 30% to 50% for most of the past year.

None of this is by accident, except for the people catching on before the elections.

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