Accounting Gimmicks Hide Facts that Actual Inflation Rate is Much Higher than Reported

EquityBuild News -- CPI, which prior to 1981 had used the same approach to measuring inflation that had been used by governments and economists for centuries – the cost of maintaining a constant standard of living – has been reconfigured several times in the US in order to hold down cost of living adjustments to Social Security and reimbursement rates to doctors by Medicare.

consumer inflationThe disparity between the government’s CPI statistics and inflation’s real impact on American wallets has grown wider over the last 30 years. The shortfall has been no lower than 5.1% each year since 1999.

Given that annual inflation rates reported during the period 1999-2011 have ranged from -0.4% (2009) to 3.8% (2008), the missing 5.1% misstates the impact of inflation by nearly double in the “best” of years, and at worst by a factor of nearly 10. This is why consumers desperately feel themselves losing ground, despite such low reported inflation rates.

Bottom Line: The inflation that Americans actually experience feels a lot more like 10% than the 0.3% monthly/2.0% annualized CPI increase reported by the US Bureau of Labor Statistics today, May 15, 2014 (the highest gain in 10 months).

CPI, which prior to 1981 had used the same approach to measuring inflation that had been used by governments and economists for centuries – the cost of maintaining a constant standard of living – has been reconfigured several times in the US in order to hold down cost of living adjustments to Social Security and reimbursement rates to doctors by Medicare.

The disparity between the government’s CPI statistics and inflation’s real impact on American wallets has grown wider over the last 30 years. The shortfall has been no lower than 5.1% each year since 1999.

Given that annual inflation rates reported during the period 1999-2011 have ranged from -0.4% (2009) to 3.8% (2008), the missing 5.1% misstates the impact of inflation by nearly double in the “best” of years, and at worst by a factor of nearly 10. This is why consumers desperately feel themselves losing ground, despite such low reported inflation rates.

Bottom Line: The inflation that Americans actually experience feels a lot more like 10% than the 0.3% monthly/2.0% annualized CPI increase recently reported by the US Bureau of Labor Statistics (the highest gain in 10 months).

investing analysis - what does this mean for EquityBuild?

If the incredibly low inflation rates that have been reported during past several years could be believed, then investments in government bonds might be defensible. Had 0.4% deflation really occurred in 2009, any investment guaranteeing a 1-2% positive rate of return would be prized.

However, as described above, CPI statistics intentionally and dramatically under represent the out-of-pocket cost of inflation. This means investors must realize returns of 5-9% just to break even. T-bills and municipal bonds don’t even come close, tax-free status or not.

Our strategy for defending against this news is stable, innovative, direct real estate investments with a track record of double digit returns and up-front cash flow. EquityBuild arms investors with the “expert edge,” that streamlines every facet of the real estate investing process and maximizes returns instead of accepting the market status quo.

Stability is important. EquityBuild’s investments meet the heightened oversight and closely regulated performance standards of government pension and retirement funds, and are approved by HM Revenue & Customs for Self Investment Pension Plans. And unlike even the US Government’s so-called Treasury Inflation Protected Securities (TIPS), real estate is a truly protected asset class, in that it always has value – it never drops to zero.

For more information about EquityBuild Visit: https://www.equitybuild.com