Matthias Thoma, infovestment
Ever since the Lehman collapse central bankers around the globe have resorted to ever more outrageous money printing schemes to keep the banksters balance sheets afloat while claiming that all this new funny money does not cause any inflation whatsoever.
Big surprise – they lied!
I remember those times 4 years ago when a gallon of milk cost $3.50 . Today it is $4.70. But then again that might be just me and is obviously not very representative nor is it scientific. But how about a study published by the Deutsche Bundesbank? Will that do the trick to convince the public that price stability is a lie?
Let’s see: The Bundesbank looked at car prices from the 1970 and adjusted the price for nominal inflation to see what prices of well known cars would be today. Here is what they found: A VW Golf in the Basic Edition cost 8.000 DEM in 1974. When adjusted according to the CPI and converted to Euro then a VW Golf should cost 10.400 EUR, but here is the thing, it actually retails for 16.800 EUR a whopping 60% higher than official CPI inflation should have lifted it. Not convinced? How about a Porsche 911 then? It retailed for 21.900 DEM in 1964 and adjusted for CPI and converted into Euro it should today cost 42.000 EUR. Well, it doesn’t, instead a brand new 911 retails for 90.400 Euro, which is a difference of over 100% compared to inflation adjusted pricing.
Sure, you can argue that today’s cars have a lot more to offer, however that does nto explain price gaps of such magnitude. The real explanation is simple. While the protectors of the currency keep telling you inflation is between 0 to 2%, businesses and consumers experience much higher increases in cost of doing business or cost of living. And what to businesses do when their cost goes up? They either pass it on to consumers or they close shop.
Central bankers have cooked the statistics for decades. If the inflation is too high, simply change the composition of the basket of goods and services. Things that go up in price are removed while cheap items make up a larger portion of the index. Many electronics have become cheaper over the years, but we can’t eat TVs or MP3 players, nor do toasters or plastic plates fill up the tank.
It is astonishing that in the face of such mind-boggling facts people like Bernanke or Draghi are actually able to sit through a press conference with a straight face when they talk about price stability.
Matt Thoma // www.infovestment.com // www.infovestment.tv
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