Multiple times in my articles I made that clear that governments all over the world underestimate real increase of prices. Using tricks while calculating inflation they can boast non-existent economic growth or make revaluation of pensions so that the purchasing power lower each year.

To have data back me up I used shadowstats.com and methodology including many substantial factors used by governments since ‘80s.

Recently I got my hands onto something new. Chapwood index. It measures real price increase of top 500 products bought by Americans. There is no magic tricks with swapping different products for their equivalent or changing their packaging for smaller one. It measures what the money is really spent for. Worth noting is that index follows prices in 50 biggest cities.

Why is it so important?

Firstly, confirmation of John Williams statement made years ago. Inflation is 4-5 times higher than officially announced by government.

Because of that instead of celebrated economic growth we actually are in recession. Miserable one.

Source: shadowstats.com

Red color is inflation published by tax-paid, state experts. Blue is the inflation level calculated with this ‘80s method I mentioned earlier. Later on it got changed, differentiated and played with so you can see the result in the picture.

Let’s compare this with Chapwood index data:

Source: chapwoodindex.com

Column on the right shows the real change in price American society pays. Change of the price in each city is different btu average increase for all 50 cities in 2014 equals 9.7%.

Crucial Conclusions:

In the last 5 years the GDP (worth of all produced goods and services) increased in the US by 18.4%. The real, cumulative inflation given by Chapwood index or Shadowstats in the same period equals 47.1%. The difference between the CPI (inflation given by government) and real inflation is 39.9%.

This means that the real US economy shrunk by over 21%!!!

Source: zerohedge.com

Stock exchanges in the US are breaking new records just like levels of debt. Unemployment measured with tools that we use in Europe is at 23.1%, and speed of monetary velocity (being the real mimic of the economic health) is around minimums seen last during II World War.

Source: FED

The US economy is diminishing at the rate of 7-8% per annum. Europe is in marginally better situation but policy of saving bankrupted failures at the expense of efficiently and reasonably managed entities will soon be the doom of the continent.

Underrepresenting inflation or in general manipulating with all kinds of statistics take place all over the world. In China the real growth hovers around 2-3% rather than the official 7% proudly announced by its leaders. Since 2008 global economy is knee-deep in trouble and there are no changes visible on the horizon.

Summary

I do not write this to install fear in your head. My goal is to show you the mechanism and give you tools with which you can measure reality by yourself for your own good. Just like Mark Twain said: There are “lies, damned lies and statistics”.

Those words are the best description to what politicians and state agencies employed to collect, manufacture and publish data are doing.

Last but not least I want you to think by yourself. Whether in the situation of long depression when economy is losing 7% each year, it is more possible to rise the interest rates (rumors in the US during last 12 months) or rather kick-starting printing machines with quantitative easing especially that there is a deficit of 1 trillion USD?

 

Trader21