This is one of those articles I shouldn’t have to write. The world should be less crazy, I say to myself. People should ignore wack-a-doo conspiracy theories, I insist. And if I spend too much time visiting crazy town, I’ll become crazy myself. Give it a little time, I chant, and it will all blow over.
But it doesn’t blow over. Every single time I write about inflation, the Fed, or monetary policy, I get the same thing: “You don’t actually believe the government numbers, do you? Everybody knows that the government is lying to us.”
I first ran into this phenomenon as a guest on Larry Kudlow’s show on CNBC. It came in the form of John Browne, who writes for the money section of Newsmax. They’d been predicting high inflation for years. And when the predictions didn’t come true, what did Newsmax do? Give up selling $100-a-year newsletter subscriptions at fabulous markups? Or did they find a way to save face? The latter, it turns out.
The way to save face was to simply deny the inflation numbers — to say the government “cooks the books.” Here’s Newsmax’s Browne, telling it like it isn’t one year ago:
In addition to cooking the key inflation measure (CPI), our government has ceased publication of M3, a popular measure of money supply that economists use as a gauge of future inflation.
Government figures have been “doctored” for many years, under Presidents Kennedy, Johnson, and Carter. The former President George H. W. Bush began efforts to lower the reported CPI systematically. Clinton set the stage for a new and lower inflation CPI.
So, our present government is not content to cook just the CPI. Their inflation lie is spreading to other statistics as they try to keep the lid on the real inflation rate and to expand on the inflation “cooking” expertise of President Clinton.
Are we expected to believe that after a night of carousing and intern-pawing, Bill Clinton slipped on down to the Bureau of Labor Statistics and put his unwelcome hands on the spreadsheets as well?
This “inflation lies” thing has gone viral, and now it’s pretty much anywhere unfiltered comments about economics can be posted on the Internet. It’s traveled quickly, but that’s no surprise: Ron Paul supporters are out in droves, and they can post on all sorts of topics since they’re already cruising the side streets of the information superhighway.
But the problems with this theory are as legion as its carriers.
For starters, how does one get so many people to lie about inflation at the same time? Gathering inflation stats is personnel-intensive stuff. I’ve met some of these price-gatherers, and there are a lot of them. They check prices all around the country, and they report to people who report to other people, and the data set is built from the bottom-up. There’s no guy in Washington who gets a call from a mysterious price-underestimating stranger (let’s call him Deep Discount) and then takes out a pen and attempts to make a 9 look like an 8.
And just how is this price secret being kept? Washington in the Bush era isn’t exactly a hostile environment for whistle-blowers. If you can make a remotely plausible claim that you tried to “speak truth to power” and power didn’t listen, you’re practically guaranteed a book deal and a roll-out on 60 Minutes. Don’t you think that would appeal to any of the hundreds of bureaucrats who toil in the CPI salt mines?
The X-File Economists also skip over the fact that multiple inflation measures are in operation today. Along with the department that measures CPI, there are departments for things like implicit-price deflators and PCE (personal consumption expenditure) deflators. Are all these folks in on the lie, too? Not even Karl Rove could exercise this kind of political control.
And what about all the other folks who operate their own inflation surveys? The Federal Reserve runs inflation forecasts, as do its various private member banks. They compile these forecasts in something called the “Beige Book,” which in recent years has described inflation as relatively tame.
I know that citing Fed data probably won’t make the conspiracy mongers any less skeptical, so I’d better mention the completely private surveys. The Institute for Supply Management (which produces the prestigious ISM reports) surveys private-sector purchasers (who may, one would suppose, know a little about how much things cost). These surveys back up the government’s findings: low inflation for goods, and a little higher inflation for services.
Shall I speak of the mighty NFIB and its monthly member survey, or of Moody’s Economy.com Business Sentiment Index? Although there’s some variation in the data, neither of these supports the hyperinflation predictions of the conspiracy theorists.
The biggest problem with the X-File Economists is credibility. They have none. They ask that we take their word about inflation over the analysis of the Bureau of Labor Statistics, the Bureau of Economic Analysis, the Federal Reserve Bank and its 12 regional banks, the Institute for Supply Management, NFIB, Moody’s, and our own shopping experience.
The truth about inflation is out there. Who are you going to believe?