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ShadowStats' John Williams: Why inflation now is really 13.5% and will get higher

Kitco News

Using the same data collection and calculation methodologies as the Bureau of Labor Statistics used in the 1980s, John Williams, the founder of ShadowStats, determined that headline inflation should be much higher than 5.4%, the latest June release.

In fact, speaking to David Lin, anchor for Kitco News, adjusted inflation should be closer to 13.5% and is only going to get higher.

"Where the government's number was 5.4%, my estimate is up around 13, 13 and a half percent," Williams said.

In the 1980s, the government realized that they were overstating inflation and so revised their measurement methods.

Williams said this was done to lower their social security payments based on cost-of-living adjustments.

"It reduces the cost-of-living adjustments and with that, the budget deficits. If they could keep down the cost-of-living adjustments it would give them a better reading in terms of their shortfall and spending. If the costs of living goes up substantially, that was more the government had to lay out and you'd get a greater deficit," he said. "It was shameful, politically. That's the only reason changes were made."

For information on how Williams calculates inflation, as well as his adjustments for the gross domestic product (GDP) and unemployment, watch the video above. Follow David Lin on Twitter: @davidlin_TV.

To read part 2 of this interview, click here.

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