The CPI isn’t a perfect indicator, but it’s decent.

It doesn’t model rural areas well, becuase it’s an index based on common items purchased in an assumed average urban household. This isn’t too big a deal, though, since the majority of population in the US is now urban or sub-urban.

As for gaming the system, it’s not impossible, but a company couldn’t do it all alone becase it’s a cross-section from various sectors. It’s sort of like buying Index funds like the S&P; You can lose in some sectors, but since it’s a cross-section, you typically don’t take a bath.

The Bureau of Labor Statistics could conceivably game it, but I’d be very suprised if they did. Call me naive.

If I had to guess at the apparent dis-connect, I’d say that they really need to say that the CPI is falling. The current power-holders are democratic and liberal (not name calling, just stating). They are typically Keynesian economics believers. So in a recession, they will want to increase government spending, thereby increasing GDP (since government spending is a componant of GDP) to get out of it. This kind of expansionary fiscal policy usually works to combat stagnation.

A problem with this is that you need money. For a recession this big, you need Lots of it! You can get it by

• Increasing Taxes – Political Suicide, especially during a recession, but I believe it’s the only way to do it.
• Borrow Money – China is sick of us digging into their pockets
• Print Money – Er, sorry, Quantitative Easing. (See Zimbabwe, Weimar Republic)

The other problem is that we have stagnation at the same time we have inflation. Keynesian economics doesn’t work as well during these times where we experience this. The Carter administration found that out. So if they admit that there is inflation, then people will play the “Carter Card”.

I have to say that the reason nobody (I’m looking at you, GOP!) is offering a viable solution is that there really isn’t one. We (USA) were stupid and overspent, took risks, denied reality, etc. Not all of us, but enough of us (I’m in the middle. Stupid enough to hurt, but not disasterously so).

There’s no way to prop up our current economy because it’s based on crap. So things are going to get really jagged for a while, and people are going to lose jobs and homes. We will re-adjust our notions of want and need and what is important and come out stronger and better people for it. (I hope)