Episode summary
Is Inflation Manipulated? What You Can Do About It
Summary
The episode argues that the latest Bureau of Economic Analysis changes to the personal consumption expenditure index are suspicious because they appear to affect areas where inflation has been high, especially portfolio management services, while leaving other measurement issues untouched. The host says inflation statistics are inherently subjective, with government statisticians making judgment calls across thousands of items, but he does not think U.S. numbers are blatantly fabricated.
He traces modern inflation measurement back to the 1996 CPI commission and explains why substitution bias, outlet bias, quality changes, and new products led economists to treat inflation as a cost-of-living concept rather than a fixed basket of goods. He also argues that inflation is driven by money supply growth, spending speed, and supply constraints, with recent AI infrastructure spending and the post-pandemic expansion of money supply adding price pressure.
The practical message is that investors should focus less on official inflation prints and more on personal resilience: growing income, improving skills, delaying purchases, and using inflation as a reminder that fiat currency loses value while human capital becomes more valuable. For retirement, the host says the key metric is a personal inflation rate, not the headline CPI.
Key takeaways
- The host thinks the BEA's PCE methodology changes are “a little suspicious” because they target portfolio-management inflation after a prior political critique.
- He says U.S. inflation is not massively manipulated, but the measurement process is subjective and can bias numbers lower.
- The host argues inflation comes from money supply growth, spending velocity, and supply constraints, not just one factor.
- He says the best defense is raising income and skills, because wages can outpace a debased currency over time.
- For retirees, he says the important number is personal inflation, since a 4% rule becomes harder to sustain if personal costs rise faster than expected.
Notable quotes
“And so yes, is inflation manipulated? Well, of course it is because it's so highly subjective”
“What causes it? It's how much money is there and how fast is that money supply increasing”
“what we care about is our personal inflation rate”
“the fact that you know min vinegar inflation I guess would impact me but the services to have a plumber in this case I've saved because and I my skills increase”
How the episode opens
I recently got an email from one of our plus members and he wanted to know whether the upcoming revamp of the inflation gauge by the Bureau of Economic Analysis is that legit or is it a political move to massage the numbers? Now, I hadn't heard of the change. Apparently, it was announced last month in June 2026.
just a couple of paragraphs and they talk about improvements to the personal consumption expenditure index, the PCE. Now, that's different than the consumer price index. Consumer price index measures it's a cost of living index.
We'll get to more of that. But the personal consumption expenditure is what is used to take GDP, gross domestic product, the monetary value of what is produced and to deflate it, the nominal numbers into a real number. And they're making a change.
The BEA announced the changes, what they call improvements to their methodology, and there wasn't a whole lot of information about it. They talked about changing how they measured portfolio management services. If you pay an asset manager, they they typically have used revenue of asset managers.
So if you're paying 1% of your your portfolio value to an asset manager, a financial advisor, then if the stock market goes up, you're paying them more money. They're not providing more services. It's a price increase because your assets went went up.
They're not I used to be an asset manager. We loved when the market went up because we made more money and we didn't have to do more work. We didn't have to go to more meetings because a client had more had more money.
And so this is one of the changes. Now, here's what's curious. Back in December, uh, Federal Reserve Governor Steven Moran, appointed by President Trump, he used to be Trump's economic advisor, he pointed out what he didn't like about how portfolio management services were incorporated into the personal consumption expenditure because it had added almost 0.2% 2% a little bit more to the PCE because the stock market had gone up over that year.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- inflation manipulation
- pce calculations
- cpe changes
- ai buildout
- retirement inflation strategy
Watch the episode
Watch “Is Inflation Manipulated? What You Can Do About It” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Money For The Rest Of Us, this episode and its artwork belong to J. David Stein. Octagon is not affiliated with the show; this page is an independent summary.
