Actually Greenspan thinks CPI overstates inflation.
He says he does...the Fed's been saying it for years...and, over the last 10 years, they've successfully lowered the inflation rate as measured by the CPI by making, what the Feds call "hedonic adjustments."
But, of course, the Fed and the federal government have an interest in keeping the CPI low...the Bureau of Labor Statistics website states:
The index affects the income of almost 80 million people as a result of statutory action: 47.8 million Social Security beneficiaries, about 4.1 million military and Federal Civil Service retirees and survivors, and about 22.4 million food stamp recipients....Since 1985, the CPI has been used to adjust the Federal income tax structure to prevent inflation-induced increases in taxes.
Its why the CPI does not account for food costs, energy costs...or the biggest expense for most Americans...the price of homes and the accompanying mortgage payments. So the CPI reports that inflation is historically low...but we've seen housing prices more than double in some parts of the country over the last 5-10 years...but no worry...CPI tracks average rental costs instead...convenient because when money is loose and interest rates are kept low (and housing prices accordingly rise), rental prices stay low (people buy rather than rent)...as does the CPI
Greenspan is doing the bidding of the elitists once again (as he did when he sold out on the gold standard).
The CPI is substantially understated. The *real* rate of inflation is anywhere from 6% to 10% depending on who you ask.
They started tweaking with the CPI in the 80s to make the economic numbers look better. Then in the 90s, they totally changed the way they computed it by using hedonics, substitution, and other games.
This was a stealth tax increase on Americans. Democrats knew they could not raise taxes and get re-elected. Republicans realized they couldn't cut benefits and get re-elected. So they took the path of least resistance, which was to inflate the money supply relative to the increase in federal benefits. But the clowns still can't manage to balance the budget even after cheating the people.
Also, understating CPI makes the GDP numbers look much better than they really are since the numbers are adjusted for inflation.