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The Inflation CPI Lie : BLS Posers…

The Inflation CPI Lie: BLS Posers…

Below we look at the lies and distortions in inflation CPI   reporting by the Bureau of Labor Statistics, or  BLS.

Everyone Has a Nonsense-Detector

If you spent decades dedicated to any endeavor, be it golf or basket-weaving, baseball or billiards, horseback riding or horse-shoe throwing, you inevitably acquire a certain set of skills. Those skills include mastery of the hobby itself as well as a discerning eye as to those who have not so mastered your trade…

Anyone, for example, who spent a lifetime mastering golf can spot another ringer with just a glance at his/her swing.

And any expert golfer watching me tee off would know within a tenth of a second that I am no ringer…

In fact, the only thing more comical than my opening drive would be any attempt at pretending otherwise.

So when someone skilled at a certain hobby, sport or profession sees a poser blabbing about their authority in the one area that he/she knows well, it takes no time to silently call them out and shake one’s head. In short, no one likes to be played…

We’re Shaking Our Heads

Well, here at Signals Matter, we may not be the next Arnold Palmers, 10-goal polo champions, or Nobel-Prize winning novelists, but after 50 combined years of trading securities, practicing security law, managing hedge funds, family offices and big-bank wealth advisory teams, we can calmly admit to a certain expertise, a decent “market handicap” that is…

This is not because we are smarter; we’ve just put in the time on those market fairways and don’t like being played. And we’re here to say we’re being played…

The BLS is Playing You Too

And as such we can say without pretense, bravado or any tactic of “shock and awe” that the economic data regarding inflation coming out the Bureau of Labor Statistics, the Federal Reserve or the Ken & Barbie financial media (left or right) contains, with all due respect, a large amount of dishonesty…

Or stated otherwise, there’s a lot of cheerleaders posing as truth tellers who have has much authority when it comes to market candor as we at Signals Matter would have trying out for the Yankee infield or the Augusta Masters…

As we look at just the topic of inflation below, it becomes fairly clear (fairly quickly) that the official numbers out of the BLS are distorting market truth with a financial propaganda machine that would make the Soviet era Pravda reporting seem a step up in transparency and blunt-speak.

In a world buzzing with headlines of fake news, real patriots vs non patriots, left vs right, black vs white, rich vs poor, East vs West, Trump vs the NFL etc., we have no interest in joining this sad circus nor in authoring theories of discord or dark markets.

Instead, we just want to talk about what we do know—boring stuff like inflation…

Inflation—Seems Boring—But Candor Here Really Matters

Yet when it comes to the seemingly boring (but in fact profoundly important) topic of inflation, we feel obligated to sprinkle some basic facts and figures so that our readers, whatever their political stripe, economic acumen or world view, can at least take a moment to pause and reflect without feeling played…

We think what you’ll find below is but one of many disturbing examples in which there is an unethical divide between the economy reported and the economy as it really is.

What is “Inflation”?

Without a long detour into the dusty pages of Milton Friedman, money supply metrics and the business-school definitions of inflation, let’s just keep this as simple and accurate as possible.

In a nutshell, inflation is when the price of goods goes up, and deflation is when the price of goods goes down.

The measure of inflation is thus the price measure of a basket of goods. This carefully controlled basket of goods is called the Consumer Price Index, or CPI, and it is authored here in Washington DC by the Bureau of Labor Statistics.

We can thus think of the CPI as the bathroom scale upon which the cost of American goods is measured or “weighed” each morning.

For many years, that CPI “scale” has been reporting inflation (i.e. the rising cost of goods) at around 2% a year, give or take 20 to 30 basis points here and there.

The Official Story?

The Fed has made a valiant public effort at feigning concern about this unusually low CPI figure. In fact, not a day seems to go by when some FOMC player mentions their concern about not hitting a higher “target inflation” rate.

This quest for target inflation has been the official excuse/justification made by the FED during the last 9 years for cranking down interest rates (ZIRP) and quintupling the US money supply (QE).

The Real Story?

We think that story is bunk for many reasons (infra), akin to telling your parents you were throwing a keg party in order to target a greener lawn and fertilize it with beer. In short, the real reasons lie elsewhere.

         a. Prioritizing Wall Street Over Main Street

And one real reason the Fed is using the “target inflation” meme to justify the asset bubble created by QE 1-3 and the Zero Interest Rate Policy (ZIRP) is that such a policy phrase looks better than admitting to the truth, and the truth (supported by evidence below) is this: The Central Bank is about stimulating the markets, not a targeted CPI.

The Fed has a long history, by the way, of confusing the American economy with the American securities market.

Anyone from the the fly-over states knows they’re not receiving much “trickle-down” effect from the Fed’s role in the current fortunes being made on Wall Street—from which we at Signals Matter have admittedly benefited.

As fellows born in fly-over states and blessed by the Wall Street wealth effect, we can say without smugness that we’ve seen both sides of this policy coin, and can’t deny it’s largely two-headed.

Main Street just isn’t getting real help or real disclosure from certain corners of Wall Street or the Eccles Building.

As most seasoned portfolio managers admit over drinks, Bernanke & Yellen were never aiming for a higher “target CPI” to stop their post-08 QE/ZIRP keg party; instead, they’ve been coyly fudging the numbers of a bogus CPI to make it appear much lower than it really was.

Or put more bluntly: the CPI is a canard and the “target inflation” meme a smoke and mirror pose… The real policy objective was to save the S&P not the corner shoe store…

Furthermore, the Fed is afraid of higher inflation, not “targeting” after more of it. Here’s why:

b. The Fed is Terrified of the Real Inflation Rate and Makes Up a Bogus One…

Bluntly put, most insiders recognize that the Fed and BLS are fictionalizing the CPI numbers to temporarily save their own hind-ends.

But why? Why are they pretending to seek more whiskey while secretly pouring the bourbon onto the bar room floor?

Because they know that inflation, like hard liquor, is hard for an addicted market to control.

As anyone who looks at the balance sheet knows, the US is broke. Our national deficit, fattened by debt-addicts from both parties in the White House over the past decades, is now at a staggering $20T.

As our recent blog on National Accounting shows, this number is just the tip of the debt iceberg toward which our Titanic market/economy is steaming…And one way to stave off the inevitable collision is to keep perceived inflation down and bond yields up.

This is no easy task. In fact, it requires a little CPI fudging–diluting the whiskey so to speak…

The Debt Economy

Because America is broke and increasingly unable to actually produce real income (US GDP annualizes at around 1.9% and US manufacturing output has been shrinking at a 0.41% annual rate for the last decade), our pinched government has been doing what anyone with a Ferrari appetite and a bus-boy salary does: borrow, over-spend and eventually burn out.

In short, since we’ve lost the ability as a nation to produce goods (Netflix, Tesla, Amazon and Facebook do not a robust economy make…), we have become a nation that goes deeper into debt.

The US therefore issues more Treasuries each year in the same way a broke college kid applies for more MasterCards to pay last month’s Visa bills…

Like any addiction–be it debt or drinks–it’s actually pretty sad.

The US, having slid since World War 2 from the status of world’s greatest manufacturer and creditor to one of the world’s weakest producers and greatest debtors, is in an embarrassing pickle…

Debt Economies Need to Issue Debt—I.E. Sovereign Bonds

Sadly, because US now survives off debt, this also means we survive off Treasury bonds. Read that again:

“Because the US now survives off debt, this also means we survive off Treasury bonds.”

Given this unfortunate reality, the Fed, along with the US Treasury, and of course the BLS, can all agree on this: they need to make those Treasury bonds look good–or at least not look bad…

And Nothing Makes Sovereign Bonds Look Worse than High Inflation

Currently, the 10-Year US Treasury produces a woefully modest yield of around 2.2%, which as pathetic as that may seem, is still relatively better than the flat to negative yields around the rest of Europe, Japan and elsewhere.

The US Ten-Year is therefore like the best horse in the international glue factory…

But here’s the rub, if the US 10 year is producing a paltry yield of 2.2%, and reported inflation, as of today’s CPI projections is only around 2%, investors are barely scraping an inflation adjusted return.

Needless to say, the Fed wants to make sure such figures don’t get any worse. God forbid if the market lost faith in our US bonds… God forbid if the inflation got too high and thus the inflation adjusted yields of our Treasury bonds got too low.

After all, if no one buys our bonds,  we’d have to come up with a national economic plan that considered economic growth rather than issuing more debt to stay alive…

Moreover, if faith in our bonds sinks, then bond prices would sink, which in turn means our interest rates would rise, placing a massive (and unsustainable) burden on the US government’s cost of borrowing—the one thing it does best…

So if there ever came a day when honestly reported US inflation rates were higher than the yields of the US 10-Year, the demand for that bond would sink faster than the Titanic, and with it, our entire US economic house of cards…

In other words, there’s a lot at stake.

And when there’s a lot at stake, agencies, like people, do desperate things. Or as one German finance minister admitted from the ECB: “When the data gets too bad, we just lie.”


Our government is trying very hard to avoid that day of economic reckoning when inflation rates surpass bond yields, and they achieve this by, again: fudging the numbers…

Given how critical US Treasuries are to keeping our debt ship afloat, and given what a threat a high CPI/Inflation number would be to the entire fantasy of the US economy, the fiction writers at the FOMC and BLS will do “whatever it takes” to make inflation appear lower than it really is.

So It’s the Government’s Job to Put Lipstick on an Inflationary Pig

But how do they fake the inflation numbers? Well, it’s fairly easy: they just remove the embarrassing truth and replace it with fantasy fiction. After all, if you erase the warts, even a witch can look pretty…

For example, since 1999, even the BLS reports show an 87% increase in medical costs, an 80% increase in energy costs, a 51% increase in food costs, a 53% increase in housing costs and a 115% increase in the costs of a college education. Meanwhile, US median household income is below 1999 levels.

That’s all pretty bad inflationary news. Solution? Ignore it…

So if you are asking how the price of the American “basket of goods”—i.e. our CPI—can be hovering below 2% for years on end, when the above prices are skyrocketing at high, double digits, the answer is it can’t. So the BLS is forced to do some fudging…

And those PhD’s in Washington are so clever… They can make 2+2=1 with a simple tweak of their CPI input screen—the equivalent of making the scale at your local fat camp go down for every pizza and beer you consume.



Government agencies like the BLS upon which the public so blindly relies purposely under-report the massive increases in the foregoing costs in order to reduce the reported level of inflation.

Specifically, the BLS is leaving out the costs of certain goods which they feel are of “lesser importance” when weighing the living costs of average Americans, you know: silly, extraneous goods like medical care, housing, food, education, or heat…

Think of the BLS figures (and thus the CPI) as a Weight Watchers camp in which you omit the daily calorie intake of pizza, beer, pasta, chocolate, or pastries when reporting your daily calorie count. As you get fatter, your official calorie count actually goes down. In short: pure nonsense.

Yet it’s precisely this kind of nonsense that characterizes our CPI math: we omit reality to present fantasy.

Of course rigged inflation, like a rigged fat-camp, can only work for so long. Eventually the pizza clan can’t hide their growing bellies any more than the BLS can hide from us the obvious fact that life just costs more regardless of our bogus CPI or Calorie Count.

Even for those who don’t have time to skim through the highly manipulated components of CPI, just ask yourself each time you pay a tuition bill, medical invoice, mortgage payment or trip across the GW Bridge into NYC: Does life really seem less expensive to you each year?

We all kinda know the truth, just as we know two pizzas a day and a mirror can tell you more about your waistline than a broken scale.

So do you really think the BLS can con you into thinking living costs are rising at a measly 2% when everything we need, from our cars to our children’s educations, are up over 70% since 2000?

The Scary Truth About Real Inflation

The fact is, inflation today, using the more honest CPI scale of the 1980’s, before it was “tweaked” by the current fiction team at the BLS, puts the real figures (see SGS alternative CPI) at well above 7%, not 2%.

This means our US 10-Year Treasury bond is producing significantly negative inflation-adjusted returns and thus not worth the fiat paper behind it…

This is scary. Which is why it’s completely ignored in the MSM, the FOMC meetings or by the advisor down the street.

We are not here to stir up fear, but deliver candor. Our peers in the space, the ones who have traded securities and managed risk for decades, including folks like Jim Rogers, know that these figures—and thus these dangers—are real.

If you still aren’t sure, do a little more digging. Or better yet, just ask yourself again: is annualized life really only 2% more expensive than 10 years ago? Sometimes common sense is the best scale of all.

To us, the BLS is like that smug fancy lad bragging about his golf game at the cocktail party but shooting an 11 on the first tee. In short, it only takes a few minutes to know when you’re being taken in by nonsense. And over at the BLS, the nonsense is teeing off day after day after day…

All we can do now in the face of this distorted and dishonest bond market (and broken economy) is shout “FORE!”

Be safe out there.




3 thoughts on “The Inflation CPI Lie : BLS Posers…”

  1. When you say someone from the ECB (I guess Schaeuble?) says “Or as one German finance minister admitted from the ECB: “When the data gets too bad, we just lie.” ” , the link you gave doesn’t have anything about that. I didn’t read it all but didn’t find that exact quote, or even the words ‘lie’ or ‘data’ or ‘bad’. What gives, did you make this quote up or link to the wrong article? I can’t find any reference to this quote anywhere.

    • Nate, thanks for your note. I am actually a big fan of Wolfgang Schauble in particular, and of the more conservative criticism many German ministers and financiers have openly made against ECB policies in general, as my later report “German Lessons” makes known. You are correct that the link in the above post does not make or provide a direct quote by Schauble, so the link is not correct and more importantly, misleading. In fact, the quote about a German finance minister admitting to “lying” when the data is bad was not meant to imply the Schauble himself was “fudging the facts,” but more likely that he’s seen it done before and was making a snide observation about certain peers in the EU and ECB. That said, you pointed out a fair inaccuracy and although this report was written back in October of 2017, I tried to locate the source of the reference and “voice” behind the quote as well. I strongly believe it was in a column written by David Stockman, but frankly can’t find the source either. I did find other references to direct dishonesty by government and bank agencies regarding deliberate “skewing of the data” outlined by Stockman here:, as well as here and again here , however none of those sources pinpoint the specific reference you caught above, which after 2+ years, I can’t find myself. Nevertheless, your clarification is noted, but I will defend that such a phrase was indeed made, I simply no longer have the notes on it. I do think it is important, however, to recognize your point and to further underscore that I by no means was trying to imply the Schauble himslef was guilty of dishonesty as to data, which I don’t believe he is or was–to the contrary, I respected his role in helping Germany through many difficult circumstances. My link, as you noted, makes this unclear and is regretted.

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