Today’s show discusses this week’s Fed rate hike and why it won’t have any effect on inflation. Why monetary policy no longer affects the economy—either inflation reduction or economic growth stimulation—due to long term financialization, globalization and now Trump policies as well. Why the US Treasury market is approaching crisis and needs higher interest rates by the Fed. Why sales of Treasuries to fund the US budget deficit may not occur. Result is deeper US economic crisis and inability to finance rising deficit spending.
Fed Rate Hike & the Financial Crisis of Empire
September 28, 2026 by jackrasmus
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Dr. Jack Rasmus @drjackrasmus
Hi Prof Jack,
I was talking to a colleague about work about how prices seem so high — gas at the pump, groceries, and even a McDonald’s hamburger — but he said inflation is normal at 3%. How do we explain why the inflation rate is normal or low when prices feel so high?
Your colleague clearly is satisfied relying 100% on official government statistics re. inflation. Apparently the PCE index around 3%. The CPI is around 4%. Both low ball the actually inflation rate for consumers by 1-2% at minimum. The PCE partly relies on CPI data and cherry picks that and then estimates the rest by mashing together 20 other price sources. It also uses what’s called ‘chain pricing’. That changes the base period every year, which results in lower inflation.
The PCE is not the result of any actual survey of prices. It doesn’t ask consumers what they bought and prices they paid. It asks businesses what they sold. It starts from business sales revenue and extrapolates back to estimate prices employing questionable methodologies and assumptions designed to low ball prices.
For example, did you know the PCE estimates insurance costs by extrapolating from insurance company profits (which the companies under-report)? That it estimates airline prices not by what you and I pay for a ticket but by passenger miles flown. Or utility electrical services by KW hours or therms? Or that it states that rising prices for PCs, Iphones, laptops and even new cars are consistently falling not rising every month? You and I pay the higher price in fact. Forget that. The government bureaucrats say that rising features and functionality mean that prices have fallen. That’s called hedonic pricing. A bureaucrat’s euphemism to say higher prices are actually lower.
And how about interest rates. That’s the ‘price’ we all pay for mortgages, auto loans, credit cards, student loans, etc. right? And that price is escalating isn’t it? But wait. Interest rates (price for money) is not included in the PCE, or CPI. Nor are rising local government fees and taxes.
How about housing inflation? PCE doesn’t include either rising mortgages or prices of home sales. It also reduces rent costs by plugging into total rent inflation an assumed low rent that home owners pay themselves. In other words, it employs the oxymoron idea that 40 million+ home owners allegedly pay themselves a rent. The plug in number they give is arbitrary and lower than the rent actual renters pay. The two estimates are then combined to get a rent price. That lowers the total denominator for actual rent real renters pay their landlords. So the rent price comes out lower. Also, rents hikes are only counted in a new rental contract. If your landlord raised your existing rent by 20% this year, that’s not counted as a rent hike at all in the PCE or CPI.Moreover, the rent inflation numbers the PCE indicates are lagged from six months earlier, not current actual rent hikes. Rent prices are surveyed only twice a year, not monthly.
Are you paying more for beef hamburgers or steaks? Not as much as you think. The bureaucrats assume to change from beef to chicken when the price of beef get too high. That lowers the price of beef they report as a price hike for beef.That’s one of the 20 other price sources they use to calculate the PCE, called the Paasche substitute price index.
PCE assumes different weights than CPI for which goods and services we buy most. And how about drug prices? Drug companies simply move a particular drug into a higher range of their formulary. You and I pay more but it’s not a price increase per PCE. And price of gasoline at the pump? It’s a national average for regular gas, not the unleaded premium we have to buy.
I could go on with numerous further examples of how the assumptions and methodology in both the inflation indexes are constructed so to reduce the general price level reported.
Tell your colleague who believes what the government tells him to start thinking for himself. Investigate the methods and assumptions in the government inflation indexes and he’ll find some surprising stuff that might change his mind that the government always tells the truth and the mainstream media accurately always reports the same!
Jack,
Is your latest book available and if so where from?
Les . . .
Yes, you can get a copy of Twilight of American Imperialism by contacting the publisher, Clarity Press, directly. You can buy it on their website now. I’m told it’ll be available on Amazon and other sources around October 12 or so.
Yeah – I tried Clarity Press and their website is flagging an access error.
*Regards … Les *
Diana, can you help this guy make a purchsae?