How The Fed And BLS
Cheat You On Cost Of
Living Index
By Marcia Merry Baker
Executive Intelligence Review
(EIRNS) - On Sept. 27, the Bureau of Labor Statistics (BLS) held a press conference to release details on how "a computer glitch" on their part, had caused them to understate the annual rise (year ending August) in the Consumer Price Index by 0.1%. Indeed.
As most people who face paying bills well know, the Bureau's Consumer Price Index annual inflation rate of 3.4%--now increased to 3.5%--is actually far below the real inflation rate, which is well over 10% and rising fast. Prices for health care, energy, housing, and all kinds of basics are soaring. The BLS and the Federal Reserve are blatantly lying.
Apart from the blame-it-on-computers factor (a "software problem," they said), the government's cost-of-living data are grossly understated and manipulated, and have been for years. There are several systematic frauds. One is the "core" CPI, by which energy and food costs {are removed} from what's called the core Consumer Price Index, on the rationalization that food and energy prices are "volatile"! They say the core CPI went up only 2.5% last year!
On Oct. 3, a statement put out by the Federal Reserve Board's Open Market Committee said that today's increase in energy prices is having a "limited effect on core measures of prices today."
But the real doozy of a lie is the "Quality Adjustment Factor." This means that Index statisticians can lower any price rise, on the claim that the quality of the product went up, so {its increased price can be adjusted downward}. If you want to look up the so-called theory on this con game, it's called "hedonics." (Try "Palgrave's Dictionary of Economics," London: Macmillan.)
Lyndon LaRouche blew the whistle on that one over 15 years ago, and the EIR News Service was publishing detailed documentation of the Federal Reserve/BLS flimflam as early as 1983.
On the latest revelations of the Bureau of Labor Statistics' small admission of culpability, LaRouche commented that the BLS practices should "be considered as typical of the way in which willful fraud and elementary incompetence are combined, to shape the current standards of accounting practice adopted by both Wall Street's financial houses and law firms, and the related official functions of the U.S. government." LaRouche is writing a policy document on this fakery.
- LaRouche's 1983 Warning -
In the EIR's Oct. 4, 1983 edition, an article by Richard Freeman reported that the Federal Reserve, in collusion with the BLS, had been concocting such fraudulent factors, and using them to overstate production levels, while the BLS understated inflation, since 1967.
According to examples gleaned by EIR research at that time, one could conclude "that the real inflation rate since 1967, could have been one-third to one-half higher, or double, the `official' rate reported."
In a half-hour TV campaign broadcast on ABC-TV Feb. 4, 1984, Presidential candidate LaRouche presented the Quality Adjustment Factor hoax, plus another called the "Production Adjustment Factor." LaRouche stated that he and EIR had determined that the rate of inflation in 1983 had been faked by as much as three times--and should have been reported as three times higher than the official figures.
The TV show featured this hilarious interchange (LaRouche is speaking):
"We also checked with some key officials at the Federal Reserve itself.... Mary Hiliard, a Federal Industrial Index economist, was infuriated by the mere fact we were investigating the Fed's work. So she said to us:
"'|f we gave you the equations, you could calculate them [Production Adjustment Factors,] but I will not release them. You'd better drop it before I get angry with you. You've already made several people around here very angry, asking about this.'
"We had two conversations with the boss, the Fed's Associate Director for Research and Statistics.... Mr. Helmut Wendel said to us:
"'| told Mary Hilliard not to release the extrapolation equations for the Production Adjustment Factor to you, because they really don't work. Most of what goes into the PAFs is judgmental. The reason we don't release them is that other people would use them, but no one would ever get the results we get.... They would predict [the Index] wrong, and get mad at us.'"
- Bilking People -
Now, if the statistical fraud were this bad under Reagan, do you really think it's better today? People have paid an awful lot for failing to have listened to EIR and LaRouche.
"Lies About Inflation Are Being Used To Loot the Population," is the title of a six-page feature study by Richard Freeman, in a recent (Sept. 29) EIR, on how people are bilked. He gives documentation to show that the annual loss to people--the amount their pockets are picked by this understating of their cost of living--is in the range of $150 to $300 billion. This is the range of money being held back from those with job contracts, Social Security, eligibility for Food Stamps, and other categories, where money coming to them is tied, directly or informally, to a cost-of-living index.
Additional categories directly affected include Veterans Benefits, Workmen's Compensation, Unemployment Insurance, and Medicare. Tens of millions of people are thus robbed.
The admitted "computer glitch" of last week, by itself, has a seemingly small numerical effect, when calculating the impact on one single person. The Bureau of Labor Statistics last week said that each one-tenth of a percentage point rise in the Consumer Price Index is worth about 79 cents a month to an average Social Security recipient, or $9.49 over the course of the year. But think of the gigantic effect when the costs of the whole range of deceit are calculated through. _____
This article was in New Federalist newsweekly, Oct. 9. A free copy of it, PLUS the Sept. 29 Executive Intelligence Review, which includes a detailed 6-page study (with graphs) on this and a big package on "the third and final energy hoax," will be sent free to anyone who calls 1-888-EIR-3258 and says they "saw it on"
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