Suche
Mein Konto
US Inflation May Be Higher Than Officially Reported - New Study Reveals
Learn how former U.S. Treasury Secretary Lawrence Summers shows in a new article that official inflation rates in the U.S. may be much lower than the real costs Americans must bear. Read how Summers argues that measuring inflation before 1983 gives a more realistic picture and why this finding has implications for the current cost of living. Plus, learn how rising interest rates and higher borrowing costs are affecting housing costs and why consumers are struggling with the impact. Read the full article here.
US Inflation May Be Higher Than Officially Reported - New Study Reveals
Summary
Former US Treasury Secretary Lawrence Summers and other authors have published a new paper examining the impact of high interest rates on the American consumer. In doing so, the paper aims to provide an alternative and more accurate view of inflation by incorporating economist Arthur Okun's pre-1983 method of measuring inflation. This method takes into account personal interest rates and costs of financing housing. Summers and the paper's authors argue that today's Consumer Price Index (CPI) provides an inaccurate picture of inflation in the U.S. because these metrics were removed from it after 1983.
Using the pre-1983 method to measure inflation shows that the CPI rose by about 18% in November 2022 - in contrast to the official government figure of 4.1%. These new numbers paint a grim picture of the inflation Americans face to date, and the paper argues that the pre-1983 method paints a more concerning picture of current inflation than the official inflation numbers.
context
The realization that inflation was likely much higher than reported could explain the discrepancy between the official figures and the rising costs of everyday expenses such as food and housing. Summers also points out that personal interest payments, which are not included in the state CPI system, increased by more than 50% in 2023.
Higher borrowing costs have created a “deep pain point” for consumers by sending the real estate market into a “standstill,” according to Summers and the paper’s co-authors. Homeowners are being discouraged from selling because their mortgage payments on their next home may be higher, while disappointing price declines are failing to attract new buyers.
Possible effects
These new findings could help close the gap between official inflation figures and the real costs of everyday life. Consumers could better understand why their everyday spending is rising even though official inflation appears low. Additionally, this could have implications for monetary policy, as accurate measurement of inflation is critical to the Federal Reserve's decision-making.
Table of relevant information
| Theme | inflation |
|---|---|
| Official inflation rate | 4.1% |
| Pre-1983 method of measuring inflation | 18% |
| Increase in personal interest payments | Over 50% in 2023 |
Historical facts
Pre-1983 Method of Measuring Inflation: The pre-1983 method, developed by economist Arthur Okun, took into account personal interest rates and housing financing costs when calculating the inflation rate. However, these metrics were removed from the Consumer Price Index (CPI) after 1983.
Conclusion
The new paper by Lawrence Summers and other authors reveals that inflation in the US was likely much higher than officially reported. Using the pre-1983 method to measure inflation shows an increase of about 18% compared to the official government figure of 4.1%. This result could explain the discrepancy between the official figures and the rising costs of daily life. The findings could inform monetary policy and give consumers a better understanding of the true impact of inflation on their cost of living.
This information can help readers make their personal financial decisions and better understand the impact of inflation on their daily lives. It remains to be seen how these findings will influence public debate and potentially policy decisions.