Why you shouldn't believe low inflation numbers

From an article in the Wall Street Journal:

... the official inflation numbers should be taken with a fistful of salt. Over the past 30 years, the federal government has made a lot of changes to the way it calculates inflation. It's taken place under presidents of both parties...

... if we still calculated inflation the way we did when Jimmy Carter was president, the official inflation figures would look about as bad as they did when ... Jimmy Carter was president. According to Mr. Williams's calculations, if we counted inflation under the old system the official rate wouldn't be 1.5%. It would be closer to 10%...

Under the official calculations, if steak prices boom, the government just assumes you buy cheaper hamburger instead. Presto—no inflation!

Or consider the case of Apple computers... The cheapest Mac laptop today costs $999. A few years ago, it also cost $999. So the price is the same, right?  Ha. Not according Uncle Sam. Using a piece of chicanery called "hedonics," Uncle Sam calls this a price cut. His reasoning? You're getting more for the money. Today's $999 Mac is lighter, fancier and faster than last year's $999 Mac. So the government calculates that the "real" price has actually fallen..

... look at raw materials. Around the world prices are skyrocketing, from copper to cocoa. The United Nations Food Price Index has just hit a new record high. Oil's back near $90 a barrel. Wheat prices have nearly doubled since last summer... Sooner or later this is going to show up in your supermarket, or at the mall, in higher prices...

We are flooding the world with extra dollars. The Fed simply invents as many as it likes. In the past couple of years, to try to keep the economy out of a tailspin, it has more than doubled the size of the so-called monetary base...

The first argument - about unreliable inflation data - was explained at more length in an article in Harper's, which I highlighted at this link.  Highly recommended reading for those interested in this subject matter.