Reprinted from FEE.org
The Wall Street Journal offered a cute news scoop that ice cream is more important than bacon when tracking what has come to be known as inflation. Sarah Chaney was stalking the U.S. Department of Labor Blog and stumbled on the post “Ice Cream vs. Bacon.”
No doubt, those on the paleo diet would be stunned to know “the average dollar amount per year that all U.S. households spent on ice cream was $54.04, while the average amount on bacon was $39.07,” claims the department’s post.
Why Does the Price of Bacon Matter?
Why this matters to number-crunchers at the labor department is “the more people spend on an item, the more inflationary changes to its cost will affect the total inflation rate,” explains Department of Labor blogger Steve Henderson. And in this case, “bacon has increased in price almost 32 percent over the past 10 years while ice cream went up 21 percent over the same time period.”
There are inflation indexes for most everything and are all rolled together into the Consumer Price Index (CPI) to form a market basket.
Of course, Mr. Henderson and his fellow workers believe they are doing “God’s” work at the Labor Department. He emphasizes:
“Policymakers, researchers, journalists, government bodies and others use the CPI to make important decisions that directly affect American citizens.”
Yes, but as I related in “Garbage In Garbage Out at the Federal Reserve,” the collection of this precious data is, well, somewhat suspect.
A price ninja for the Bureau of Labor Statistics (BLS) told Grant’s Interest Rate Observer that he couldn’t always locate the item he was to find and report on. For example, one week the prepared salad he was supposed to price was absent from the shelves, so he substituted pieces of prepared fruit instead.
However, his immediate supervisors at the BLS did not appreciate his in-the-field initiative, for lack of croutons and nuts. They gave him another item to chase down. As Grant’s elegantly writes, “But we wonder about the margin for conceptual error in the processing of the statistics so carefully gathered.”
Ludwig von Mises foresaw this problem years ago. In Planning For Freedom, he explained what the term inflation really means: an increase in the supply of money and money substitutes.
However, government, the benefactor of inflationary policies, for its own purposes, instituted “The semantic revolution which is one of the characteristic features of our day has obscured and confused this fact.”
“What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation.”
So, instead of blaming government for the rise in the price of ice cream or bacon, the public focuses its incriminations on dairy products producers and pork farmers. As Mises wrote there is no longer a term for the increase in money. “It is impossible to fight an evil you cannot name.”
Inflation Feeds the War Machine
To speak out against money creation and the inevitable increase in prices that ensue, educators, and politicians can’t simply condemn “inflation,” but must go into a detailed discussion of how price increases occur, leaving most of their audience glassy-eyed. “As you cannot name the policy increasing the quantity of the circulating medium, it goes on luxuriantly.”
Politicians make matters worse with legislation addressing the effects of inflation and not the root cause. If ice cream or bacon became expensive enough to incite public outcry, lawmakers would propose price ceilings that would create shortages and exacerbate the problem or offer subsidies, as in the case of healthcare, which “in fact brings about more inflation.”
Mises’s assertion,“This semantic innovation is by no means harmless,” is more prescient than he could have imagined. BLS supervisor Henderson goes on at length about the importance of the CPI:
“Census Bureau analysts use CPI data to adjust the official poverty thresholds for inflation, and it’s one of several factors the Federal Reserve Board considers when deciding whether to raise or lower interest rates. Employers may use it to determine whether to give cost-of-living increases, and policymakers use the CPI when considering changes to allotments for things like Social Security, military benefits or school lunch programs.”
What the BLS does is construct and massage the CPI data to make sure “Inflation is the true opium of the people,” while nearly $50 million worth of missiles and bombs were fired at Syria and dropped on Afghanistan in just a week’s time. “Inflation has always been an important resource of policies of war and revolution and why we also find it in the service of Socialism,” Mises wrote in The Theory of Money and Credit.
The public is blissfully ignorant: We pay more for bacon and ice cream so the government can bomb and murder.