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>Deconstructing and Debunking Shadowstats - Mish - Global Economic Analysis
I was under the impression that the inflation stats on his site were, as he explained them: one set is "official government inflation", and the other is "inflation, assuming the government is correct about why it made a change."

See, the government changes how it measures inflation, on a fairly regular basis. When it makes a change, it justifies it, eg, "we're making this change because the current rules overstate inflation by 1%."

So, pre change inflation is 6%, and post-change inflation is 5%, for example.

Thing is, every single time government changes the word "inflation", the new "official" inflation numbers go down. Every time, which is statistically unreasonable. That said, I'm sure, at least coincidentally, the government IS correctly justified in making a change.

Anyway, what you see on the front page of Shadowstats is simply "what inflation would be, had government made all the changes, and assuming the government is telling the truth". That's all, no more, nor less. It's what he says, and do note the two lines are simply copies, one translated higher--the total of all the differences in the rules changes.

Now, I'm more than willing to concede that this chart overstates "real" inflation, whatever that is, but realize even in your example of the prices of certain cuts of meat not changing, you're missing some details: factory farming has grossly reduced the cost of meat by dramatically raising the efficiency of such production. Alas, all those improvements give no benefit to the consumer, it's all slurped away by inflation.

By comparison, note how the cost of high quality steel dropped well over 95% in price in the 19th century as manufacturing techniques improved. We don't see that anymore, since inflation slurps up every improvement. Inflation is not a simple concept at all, and it should be obvious that the chart on the first page of Shadowstats is a very simple representation of but one aspect of one measure of inflation.


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Beginning of the headline :An interesting article came my way today courtesy of a friend "BC". The article is Deconstructing ShadowStats. Why is it so Loved by its Followers but Scorned by Economists? by Ed Dolan. Mish readers likely know that I believe inflation to be understated, and that I also believe Williams' ShadowStats is wildly on the high side. For example, please consider GDP, Real GDP, and Shadowstats "Theater of the Absurd" GDP. I have also mentioned food inflation on many occasions. While food prices (espe... Read More
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