Fed (and feds) keeping inflation secrets

Simple math and history show economy’s dire straits

Dr. Richard Ek is a retired Chico State University journalism professor and department chairman who contributes regularly to the Chico News & Review.

When we read about inflation, we find Federal Reserve Chairman Ben Bernanke assuring us it’s “tame” or “not a concern.” He adds that, while inflation remains a threat, it is so far being contained. Well, that’s so much horse pucky.

The honest rate of inflation the country is now undergoing is the most fearsome fiscal monster we have ever faced. As I write, crude-oil futures contracts are being signed for more than $135 per barrel, meaning oil deliveries to refineries at that price will take place in a month to six weeks. When that price percolates and ripples through the economy as inflation in several months, it will inflict awesome damage.

Look at the facts. When the last energy crisis, the OPEC oil embargo of 1979, drove President Jimmy Carter from office in 1980, the peak price of crude oil stood at $37.42 per barrel, the equivalent of $94.50 per barrel today when adjusted for inflation, and yielded a 13.8 percent inflation rate, by far the highest in U.S. history. Oil at $135 per barrel today translates into a true inflation rate of 19.3 percent. That’s ruinous.

Our trusty leaders learned from Carter’s fate. They put a spin on the inflation rate by taking food and energy (oil) out of what they now call the “core” inflation rate because they are “too volatile.” Remember that in theory the Consumer Price Index (CPI) reflects the costs of basic life necessities. What could be more basic than food and oil, both of which have intrinsic value?

We all know that oil is refined into gasoline, jet fuel, diesel fuel, and home heating oil, but fewer of us know oil is an essential ingredient in all plastic products. Food in our grocery stores arrives by way of 18-wheel diesel trucks.

To downplay the inflation threat, the government has given us the following core inflation figures: 2.83 percent for 2001, 1.59 percent for 2002, 2.27 percent for 2003, 2.68 percent for 2004, 3.39 percent for 2005, 3.24 percent for 2006, and 2.85 percent for 2007.

The American public may be, as H.L. Mencken said, the booboisie (boob-wah-zee), but the booboisie is not that stupid. Our inflation comprises one of those “everybody knows” things, meaning everybody knows it’s far higher than the official lies would lead us to believe.

Aside from politics, the government lies about inflation to protect itself from large cost-of-living adjustments in the federal workforce and the armed services. The biggest and most expensive of these is Social Security, where a 0.5 percent rise in the CPI is worth billions of dollars.