Faking Lower Inflation: How Governments Cheat the Numbers

1. How Governments Cheat the Numbers

A. Changing What’s in the Shopping Basket

• Governments calculate inflation by tracking the price of a “basket” of common goods and services (like food, fuel, rent, etc.).
• Trick: They can remove or replace expensive items (like meat, fuel, or housing) with cheaper ones (like vegetables or public transport). This makes it look like prices aren’t rising as fast as they really are.

B. Hedonic Adjustments (Saying “New is Better”)

• If the price of a TV goes up, but the new TV has a bigger screen, the government might say, “The price didn’t really go up—you’re getting more value!”
• Trick: They adjust prices for “quality improvements,” even if you don’t care about the extra features and just want the old, cheaper version.

C. Substitution (Switching to Cheaper Stuff)

• If beef gets expensive, the government might say, “People will just buy chicken instead,” and use the price of chicken in their inflation calculation.
• Trick: They assume you’ll switch to cheaper options, so they don’t count the real rise in the cost of what you actually want.

D. Ignoring “Volatile” Prices

• Governments often exclude food and energy prices from “core inflation” because they say these prices jump around too much.
• Trick: If food and fuel are getting way more expensive (which hurts regular people the most), they just leave them out and say, “See? Inflation is low!”.

E. Shrinkflation (Smaller Packs, Same Price)

• Companies keep the price the same but give you less (like a smaller chocolate bar or fewer chips in a bag).
• Trick: The government might not count this as inflation, even though you’re paying the same for less.

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2. Faking Higher GDP Growth: How Governments Make the Economy Look Better

A. Cooking the Books (Just Making Up Numbers)

• Some governments simply lie about their GDP numbers, especially if they’re under pressure to show growth.
• Example: China and Greece have been caught inflating their GDP figures to attract investors or get better loan terms.

B. Building Useless Stuff

• Governments can boost GDP by spending on big projects (like roads, bridges, or buildings), even if they’re not needed.
• Trick: These projects create jobs and spending in the short term, making GDP look good, but they don’t help the economy in the long run.

C. Cherry-Picking Data

• Governments might compare GDP to a really bad period (like a recession) to make growth look bigger than it is.
• Example: If GDP grew 2% last year but only 1% this year, they might say, “We grew 1% from last quarter!” instead of admitting growth slowed down.

D. Counting the Wrong Things

• GDP counts all spending, even if it’s wasteful or harmful (like cleaning up after a natural disaster or spending on war).
• Trick: Governments can include unnecessary or even bad spending to make GDP look higher.

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3. Other Sneaky Tricks

A. Hiding Inflation in Assets

• If the government prints lots of money, it can cause prices of houses, stocks, and gold to go up—but these aren’t always counted in official inflation numbers.
• Trick: Regular people see their daily expenses rise, but the government says, “Inflation is low!” because they’re not counting asset prices.

B. Underpaying Workers and Pensioners

• If inflation is officially low, the government doesn’t have to increase wages, pensions, or benefits as much.
• Trick: They save money by keeping official inflation numbers artificially low, even if real costs are rising.

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Why Does This Matter?

When governments fake these numbers, it hurts regular people:

• Your money buys less, but the government says inflation is under control.
• Your wages don’t go up because “official” inflation is low.
• The economy might look strong, but it’s built on lies and wasteful spending.

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Final Thought:

These tricks aren’t just numbers on paper—they affect your wallet, your job, and your future. The next time you hear “inflation is only 0.5%  2%” or “GDP grew by 5%,” ask yourself: Are they counting everything? Or just what they want you to see?