The government’s consumer price index has been stuck above the Federal Reserve’s 2 percent target since March 2021—65 consecutive months. Officially, the latest reading is 3.36 percent. That is the number used to adjust Social Security checks, to argue that inflation is “contained,” and to keep the fiscal books from looking even worse than they already do.
John Williams, who has published an alternate CPI series through ShadowStats since the 1980s, says the official figure is the product of four decades of definitional surgery. Calculate prices the way the government itself did before 1980, and the year-over-year rate is 11.4 percent—eight full percentage points higher.
Listen to this full podcast interview here: John Williams: Real Inflation Rate Closer to 11%
How the Yardstick Got Shorter
Williams tracked the CPI the same way the Bureau of Labor Statistics did until 1980. Then the headline number rose high enough that congressional cost-of-living adjustments threatened to eat into deficit spending. In Williams’s telling, the head of the BLS received a call from Newt Gingrich; the two sides found a mutual interest. If the Bureau could bring the published inflation rate down, more funding might follow.
What followed was a long sequence of redefinitions—Williams estimates about twenty. Substitution (replace steak with chicken when beef soars), hedonics (treat quality improvements as if they offset price increases), and a string of other methodological shifts all pointed the same direction. “Every redefinition they’ve made to the calculation of the different components of the CPI, every single one, has had the effect of reducing the headline CPI.”
Shortly after he began publishing the old-methodology estimate, the BLS gave him a call. He explained that he was simply backing out all the tweaks they were making and using the original. The call, as he remembers it, ended there, and he hasn’t heard from them since.
What People Actually Pay
The official series now fluctuates in a band between roughly 2.3 and 4.2 percent. Williams’s reconstruction currently sits near 11-12 percent—not hyperinflation, he notes, but “bad enough,” and no longer as containable as it once was.
That is the inflation people encounter at the pump, the grocery counter, the insurance bill, and the rent check, he said. A one-bedroom apartment that now costs what a house payment once did is not an anecdote that can be hedonically adjusted away.
Politicians can index Social Security and other outlays to the lower number and spend less than the old formula would have required. Williams is blunt about who absorbs the difference: “They’re bankrupt and trying to avoid bankruptcy on the backs of retired people living on cost-of-living adjustments and Social Security.”
The public is not fooled. “You can fudge a number, but fudging the numbers isn’t going to help you at the polls. The underlying reality is still negative… That’s where the average guy feels it most.”
Already Bankrupt, Still Playing for Time
Williams does not treat insolvency as a future risk. “We already are bankrupt. It’s just a matter of it playing out.” The United States has spent beyond its means for more than forty years. Interest on the debt now exceeds the defense budget. Obligations cannot be met from current receipts. “You can’t do this forever… it’s really to the breaking point.”
The path he sees is familiar from other countries: more money creation, a slide toward much higher inflation, a crisis that forces currency revaluation—and possibly a return to some form of gold standard.
Gold as the Unofficial CPI
Williams did not expect gold to corroborate his series as cleanly as it has. Before the methodological changes, gold and the official CPI moved together. Afterward, gold pulled far ahead of the headline index. Plot gold against his alternate CPI, and the two stay close.
Gold has risen from about $250 an ounce in January 2000 to $4,481 on the day of the conversation—a gain the stock market has not matched. The official CPI, expressed as an index, sits far below that trajectory. “You’re not getting your money’s worth with the CPI. You are with gold.”
His practical advice is unromantic: own physical metal in common-date coins, bought for gold content rather than collector premium. Central banks, he notes, have already drawn the same conclusion; gold has overtaken Treasuries as their largest reserve holding.
Bonds, in this frame, look like the old “certificates of confiscation.” A Treasury yielding 4 percent against 11 percent inflation, with taxes on the coupon, is a guaranteed real loss. Rolling over cheap pandemic-era debt at much higher rates only accelerates the fiscal squeeze.
The official CPI is still useful—for the government that prints it. It trims cost-of-living adjustments, sweetens the growth tables, and buys time on a balance sheet Williams thinks is already insolvent. It does not rewrite the receipt. Rents, groceries, and gold have been compounding on the older yardstick. Voters, he argues, can feel the difference even when the Bureau no longer publishes it.
Comments
Log in or sign up to join the conversation.