The idea of ôcoreö inflation was cooked up by Nixon-appointed Federal Reserve chairman Arthur Burns. Burns decided that food and energy prices - whichàgee, whaddya knowàwere making inflation look awfully high in the 1970s - should be excluded from the new ôcoreö number because of their ôvolatilityö. As a result, the Bureau of Labor Statistics [BLS] last month, for example, was able to report that producer prices for finished goods ôother than food and energyö rose just 2.4 percent between February 2007 and February 2008, even though overall prices had climbed 6.4 percent.

Subsequent administrations continued to tinker with inflation calculations, in ever more creative ways. In 1983, the BLS decided that ôowner equivalent rentö was a better way to measure the housing-cost component of the Consumer Price Index, replacing the actual cost of owning a home with an estimate of what the house might cost to rent. In the 1990s, CPI calculations were reshaped to give more weight to services, retail and finance. More recently, CPI has undergone more bizarre adjustments: cheaper products are substituted for ones that have become less affordable (assuming that if you canÆt afford New York strip steak, youÆll buy hamburger instead, and - what a relief - your cost of living hasnÆt increased); likewise, goods and services that quickly go up in price are discounted on the assumption that people are using them less because theyÆre too expensive; and, perhaps strangest of all, certain cost numbers are reduced in order to reflect a supposed increase in value that comes from quality improvement. According to data from ShadowsStats.com, if all the changes since 1983 were undone, newspapers would be sporting banner headlines about 12% inflation, instead of one-column, below-the-fold items reporting 4% annual CPI growth.