i read an article about how the us gov't manipulates inflation, how does that affect in terms of accounting?

Question

i read an article called "exposing the inflation lie- the us government has been manipulating the offical inflation rate for more than a decade". the title pretty much says it all. what i need to understand is in terms of accounting, what does this inflation means? can someone help?

Answer 1

The one to study is Actuarian. They do a lot of crunching numbers and do mathematical studies to always perfect the filed of study: actuarian.

Answer 2

Well, the article you read was kind of wrong. The US government does not do anything to affect inflation - the US Federal Reserve (which is not run by the government) does things to affect inflation. What they do is raise or lower the interest rate that banks are charged when they borrow money. If inflation is getting out of control they will raise the interest rate in order to slow the growth of the economy - which will hopefully lower the rate of inflation.

As for lying about the numbers.... the rate of inflation is figured out by economists - not the government. What they do is take a set of goods and look at the price for them during a control year (say 2004) then look at the prices for the same set of goods at the present time... the inflation rate is figured out by how much the average cost of these goods has increased. Some say that the set of goods that the government looks at doesn't include what it should - but most economists seem to think it is a fairly good indicator of inflation. In my opinion the actual rate of inflation is probably a little LESS than what the government reports when you look at middle class families. The price of electronics and high tech goods has gone down for the past 20 years or so - and this is barely even noted in the inflation rate.

Lying about the real inflation rate would be a pretty stupid thing to do since only economists look at these kinds of things - and it would make it very hard to figure out what to spend in our nation's budget... plus most of the public doesn't really understand or care about the inflation rate - so lying about it really doesn't benifit anyone.

Answer 3

Effectively, the government does control the inflation rate by controlling the federal funds rate, which (in the long run) controls all of the interest rates that banks charge. The whole idea is that the government can control inflation by controlling spending, and they can control spending by controlling the interest rate.

If interest is really high, people won't borrow money because it costs too much so they spend less. Spending less means buying less, which means that more products are available for sale, which means that merchants are selling less and in turn making less money. In order to make money, merchants might have to sell for lower prices, which then curbs inflation.

In terms of accounting, another way that the government can control inflation is to raise taxes. Same thing--people have less money (because they're paying more taxes) so they spend less money, so they buy less, etc. etc. etc.

Hope this helps.

Answer 4

Yes, they keep two sets of books. The real one and the one they present to the public.

Answer 5

I would put nothing past this Government