The Staggering Levels Of Real “Inflation-Adjusted” Gold And Silver Prices

In economics, a real value refers to any value that has been adjusted for inflation. A nominal value is a value that has not been adjusted for inflation. Inflation here refers to the general increase in price levels.

Many will be familiar with inflation adjustments that are applied to GDP, wages, interest rates, security returns, and of course consumer prices and asset prices. The resulting data is usually referred to as “real (inflation-adjusted)” data.

Economic data is adjusted for inflation so that data measured over time takes into account the inflation rate over that time period, and removes the distortive effect that this inflation would have on comparisons of data points over time. Inflation is measured by calculating the rate of change in the prices of a basket of goods and services, such as a consumer price index (CPI) or a cost of living index (COLI).

However, the critical variable in any inflation adjustment is what inflation rate to use, and whether the calculation of this inflation rate and its methodology and resulting outputs can be trusted. Governments have a vested interest in generating a low inflation rate so that economies appear healthy and that inflation-linked government payouts in the form of pensions, social security, and inflation-linked debt will be minimized.

Central banks have a vested interest in a low inflation rate as it makes the purchasing power of their fiat currencies looks less weak than they actually may be while hiding negative interest rates during low-interest-rate environments.

Is the US, the most widely used calculation of inflation is the US government’s set of consumer price indices (CPI) calculated by the US Bureau of Labor Statistics (BLS). However, these indices are widely lambasted as being fiction in their construction if not an outright lie, the motivation of the BLS being to understate inflation for their political paymasters for the reasons mentioned above.

This is why alternative inflation rate providers such as ShadowStats have emerged to counteract the government version of inflation and to provide a more truthful and factual alternative.

For example, the Bureau of Labor Statistics' latest release, published on 13 January 2021, will tell you that annual inflation based on its flagship Consumer Price Index for All Urban Consumers (CPI-U) for 2020 was a mere 1.4%.

Whereas, the ShadowStats Alternate CPI (1980 Base) in its daily update of 14 January 2021 finds that “annual average inflation was 8.9% in 2020”.

The difference is massive and striking. And when these differences between the increasingly US government massaged CPI numbers and the previous 1980 methodology are compounded over the years, the differences in inflation rates and inflation adjustments is staggering.

ShadowStats explains that its Alternate CPI:

“reflects the CPI as if it were calculated using the methodologies in place in 1980.

In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living.”

ShadowStats also says that:

“The ShadowStats Alternative CPI-U measures are attempts at adjusting reported CPI-U inflation for the impact of a methodological change of recent decades

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