Inflation via the "Big Mac Index"

{Editor's Note: You may not realize this, but there are a plethora of great libertarian writers out there other than ourselves! One such writer is Richard Moyer, who writes at Shades of Thomas Paine. We will occasionally share some of his articles here. He recently took a look at how price inflation is creeping in, despite government reports to the contrary.}By Richard MoyerWhile politicians have been cheerleading a "recovery" that started in 2009 according to official statistics, personal experience is telling everyone that things aren't getting any better, and may be getting worse. While it's accepted that government statisticians have a, shall we say, casual relationship with the truth, the latest Big Mac inflation revelation suggests enormous lies.

But first, why Big Macs?

Nothing beats the price of a Big Mac as a quick, accurate measure of inflation. One little package of labor, materials, advertising, management, transportation, and special sauce on a sesame seed bun tell us everything. In essence, long term Big Mac prices represent the cost of bringing consumer goods to market. Unlike many products, the Big Mac has changed very little over time, making long-term comparisons exceptionally fair.So why not trust the official inflation stats? Because the Feds can understate inflation to make the economy look better, which is extremely beneficial to them. Here's how:Imagine your income in 1925 was $10,000 a year, a small fortune for those days. If your income increased to $20,000 a year by 2010, you couldn't honestly say you were making twice as much money because the dollars aren't the same. If you corrected for inflation accurately, you'd find you were a lot poorer. If you denied inflation totally, you'd find you had twice as much money.Likewise, when inflation is high and the economy is stagnant or shrinking, understating inflation can actually make a bad economy appear to be growing! This practice is conceptually identical to measuring someone's height while they stand on an increasingly tall box.So here's the beef: while Big Mac prices averaged a 6.3% annual increase since the "recovery" started in 2009, official inflation averaged 2.1%. If you believe official inflation statistics, real GDP grew by 1.5% annually, while in terms of Big Macs our collective wealth shrunk by 2.6%.Disturbingly, It seems to be getting worse. Between 2012 and 2013, a roaring 7.8% increase in big mac prices swamped the anemic 3.2% paper GDP gains. The result: GDP lost 4.6% in terms of Big Macs.Read the rest here. Receive access to ALL of our EXCLUSIVE bonus audio content – including “Conspiracy Corner”, “Degenerate Gamblers” and the “League of Liberty Podcast” by joining the Lions of Liberty Pride and supporting us on Patreon!