nnection to what I was being told by the mass media actually exists out there, none of it added up.

For example, last year at this time I was paying about a $1.70 for a gallon of regular unleaded now the price is $2.30; I’ve done the math and that is about a 35% increase. Home prices where I live in southern Arizona have been rising steeply, more than 20% annually for several years. In the state I formerly lived in Nevada, they shot up 36% just in 2004. In my experience over the past five years every time I go shopping, whether for food, gas, clothing, etc, I do not see nearly stable or slightly rising prices.

I see prices of everything moving up quite steeply.

So I have been wondering, how is it that the government economists, the people crunching the numbers have come up with such low Consumer Price Inflation numbers in recent years? This is what has been confusing me. I put gas in my car, pay attention to the real estate section of the newspaper, go the doctor, buy all the stuff that everyone else does; I swear that prices have been rising across the board; and rising much higher than 3 percent. But no, the ‘experts’ tell me that I am wrong.

I finally decided that this represents a slap in the face to logic and commonsense. I decided to get to the bottom of the situation because there are two things I will not permit other people to do 1) insult me to my face and 2) lie. No matter how you slice it that is what is going on here. Government economists are telling the citizens of this country that inflation is low when at the same time we are directly experiencing the prices of everything rising and not by a mere 2-3 percent.

If you do not believe it let us examine the facts together.

Early this year, the Office of Federal Housing Enterprise Oversight reported that home prices rose 13 percent in 2004, almost 5 percent of that in the final quarter. That is a very large increase by historical standards. Nonetheless, some areas have seen much bigger jumps as noted above. Over the last five years, prices are up 107 percent in the District of Columbia, vs. 48 percent nationally.

Buying a home is the largest purchase any consumer makes and the numbers do not lie, new home price inflation has run at about a 10 percent annual rate for the past 5 years. In 2000 a barrel of crude oil cost $30 dollars, in recent months the price has hovered around $50. That is about a 65% increase or roughly a 12% annual rise over the 2000 level. The average price of a gallon of gas was $1.46 in April 2000 and $2.30 in April 2005. Not surprisingly, those numbers too reflect a little more than a 12% annual rate of increase.

If we turn to basic commodities what do we find? The price for an ounce of gold in 2002 was about $300, we would have to pay $420 today. Once again, annualized, instead of a mere 3%, we find a 10% rate of increase. Silver was about $5 an oz. in April 2000 and about $7 in April 2005, about an 8% per year rise. The prices of industrial metals have risen just as sharply, in fact copper was up similarly and steel prices rose sharply from 2003 to 2005.

To this point, we have tallied a roughly 10% annual rate of increase for home prices, gasoline, and metals. Another basic expense is energy for home heating. We find that home heating oil was $1.20 in January 2000 and $1.97 in January 2005. Once again we discover a yearly rise of above 10 percent when we average the 67-cent jump to annual rate of increase. Just stop for a moment and consider whether your utility and phone bills have gone up or down over past 2, 3 and 5 years.

You and I both know the answer, when crude oil prices goes up, so do utility rates because the utility companies tell us that is why they must raise their rates. Since crude has gone up more than 60 percent utility bills have also gone up. Now, I hope that you are starting to really wonder if you too have missing something or maybe have gotten dumber than you use to be. But if the price of everything is going up by 10% and more, year after year, then is it possible that the Consumer Price Index has only risen by about 2-3% annually since 2000 as the government insists?

Let us go back over the basics, we have examined home prices, gas, crude oil, metals, and heating oil prices. Once again a simple comparison between the prices of 2000 versus 2005 tell the story. It does not take a PhD in economics to figure this out, all you need is basic math skills and commonsense. Are we as a nation, so uneducated and misinformed in this dumb-down era that we can no longer perform these simple calculations? I am honestly beginning to wonder and in fact these economic realities only dawned on me recently. What the hell is going on?

The average price of a new car in 2005 is about $24,000 that is up from an average of about $11,500 in 1995. At this point, are we surprised that this jump is equal to about a 10% annual rate over a ten-year period? Then we turn to another area of major expense, health care. The mass media and insurance companies have been wringing their collective hands over exploding health care costs for a decade, the average annual rate of increase they tell us, about 10 percent…what a shocker.

Wait a minute, if the costs of all of these basic goods and services have been rising at roughly a ten-percent annual rate, then why aren’t we being told the truth? If you and I are paying more for our homes, gasoline, utilities, doctor bills, etc. (and we have been every year), then how can the government economists cook the books in plain view and get away with claiming a 3 percent or less average CPI rate? Good question.

The fact is you had gone out and bought a new home in 2000 then sold it and bought another in 2005, you’d be paying about 50% more for it. The same is true of our other basic items whether an ounce of gold, a gallon of gas or heating oil, a dental bridge, health or auto insurance etc., etc. So why don’t our brains scream, “this does not compute” when the ‘experts’ falsify the data and challenge our direct experiences? Another good question.

Remember when Bush I ran against Ronald Reagan in the Republican primary in 1980 and criticized the “Gipper’s lower taxes and raise defense spending strategy as “Voodoo economics”? Well, we shall call what Allen Greenspan and his breed of professional economist has concocted, ‘smoke and mirrors economics’. They know that Americans would panic if they realized that the annual inflation rate has been running at about 10% for the past 5 years, so let’s tell them it is just 2 or 3 percent.

Amazingly, the simple strategy of lying through teeth, using cleverly manipulated statistics worked.

Apparently our government managers realized several things about the citizens of this great, if somewhat naïve land, as we moved to the threshold of the 3rd Millennium. The American people are 1) not paying enough attention to really notice the difference between three and ten percent and 2) they have already been dumbed-down to the point they can no longer figure out what the numbers really mean and so they will not bother to question them.

What a revelation for politicians whose livelihoods depend on convincing the public that 1–1 =2 since we have no money to defend our own borders but billions to pour into rebuilding and defending Iraq. Duh…well, if you say so boss. Could it be that our masters have figured out how to make their shell game work so that ‘we the people’ never find the pea? Yes, they have. It goes by various aliases, the deficit, the trade imbalance, the national debt, the credit system, the current account deficit and so on.

It can all be reduced to a single word: DEBT.

It is a familiar game. Buy today; pay tomorrow. Remember those now quaint terms, thrift and frugality, are they even in the American lexicon circa 2005? What about the principle of saving money until one can actually afford to buy that new house, car or trip to Bermuda, is that too old school for our “new economy”? The favorite Republican attack against democrats is the familiar cliché that characterizes them as members of the ‘tax and spend’ party. Well, the Republicans have become the ‘spend and deficit’ party, the party that has made us a DEBTOR nation.

Neither strategy is welcome at this point in our history. However, the latter is more insidious because it fits hand in glove with a ‘smoke and mirrors’ economic game. Debts are postponed as long as possible, who cares if the national debt is 4 trillion and the trade deficit is x billion today and counting, as long as we do not have to pay it off right now. The same is true of personal credit card debt. As long as I can afford to pay it off over time I will keep buying and living beyond my means or at least I once did.

However, while the day of reckoning can be postponed it cannot be delayed forever as millions of Americans are discovering. We all have credit limits including, believe it or not, the US government. At some point discipline will be imposed upon us externally, if we fail to exercise restraint ourselves. One simply goes to buy that next item only to learn that the credit card issuer has denied the purchase. That happens to nations as well. The World Bank, and other countries, are already warning US officials about the federal and trade deficit levels.

Picture this: You are blowing up a balloon and though you cannot tell exactly when it is going to pop you feel it is getting close. The balloon is stretched taut and with a few more hard breaths it pops. Our credit system has often been compared to an ever-expanding bubble. Do you think the laws of physics are going to prevail and impose a limit on the expansion of that bubble? Yes, well so do I; the pop is coming in the next 2 years.

Part of the government’s shell game, the way they hide domestic inflation, is to let the dollar collapse overseas. That is another way of postponing the explosion from occurring in our faces today. You’d now how much weaker your dollars are if you traveled to Europe, that will rebound to our shores very soon.

They are not going to be able to hide inflation much longer. Of course you can decide whether to stay in denial, that comfort zone of 3 percent inflation and we will keep muddling through, or you can wake up as I did. ‘Official reality’ comes at a cost from a war in Iraq begun under false pretenses, to giving up your street smarts and falsifying your own daily experience because some ‘expert knows better…in the end it’s your choice.

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