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Steak, Hamburger and Dog Food: How the Government Lies About the Real Inflation Rate

More experts are saying what most Americans have suspected for years - the real inflation rate is much higher than the government is willing to admit.

Officially, the U.S. Bureau of Labor Statistics (BLS) says the inflation rate, or Consumer Price Index (CPI), for 2011 was 3%.

But a report issued last week by the non-profit group American Institute for Economic Research (AIER) says the U.S. inflation rate for 2011 is far higher - 8%.

AIER used criteria based only on common daily expenditures to more accurately reflect how inflation affects consumers. Their index excluded less-frequently purchased items, like automobiles.

Economic consultant John Williams, an outspoken critic of the government's economic statistics, contends things are even worse.

Using the government's old methodology from 1980 - before politicians started to monkey with the formula - he calculates the real inflation rate is north of 10%.

That's more than triple the government's figure.

Among the few in government who see this as a problem is Republican presidential candidate Rep. Ron Paul, R-TX.

"You know this argument that the prices are going up about 2%, nobody believes it," Paul bluntly told U.S. Federal Reserve Chairman Ben Bernanke during a hearing last week. "People on fixed incomes - they're really hurting, the middle class is really hurting because their inflation rate is very much higher than the government tries to tell them and that's why they lose trust in government."

Changes to the Real Inflation Rate

Over the years, the government has made a series of adjustments to how it calculates the CPI, ostensibly to make it more accurate.

However, critics like Williams say the inflation rate formula has been changed to serve political ends.

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