Thursday, August 14, 2008


The government wants to keep the inflation figure low since its fixed expenses are tied to the inflation figure. I believe that this is why they have come up with the term ‘owner’s equivalent rent’ (‘OER’) and tied 25% of the inflation figure to it.

OER inflation is supposedly rising at 2.6%. Reported month-over-month inflation is running at about 10% on an annual basis. If you took OER inflation out of the equation, the inflation would be:

10% times (10% / (10% - 2.6%)) = 13.5%

OER inflation, I suspect, is just part of the creative accounting that is used to keep the inflation figure low. Most of my spending goes for food and gas. Grains are reportedly up 15%, dairy is up 10%, and gas is up 26%.

Since tax revenue is already pretty much maximized, the only way for the government to gain more money is to deflate the currency. Which is what they are doing.

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