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[RT] Fw: Inflation (MUCH) Higher Than Reported

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<P><FONT face=Arial size=2>September 27, 2000<B></B></FONT> <BR><B><FONT 
face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Jam is key ingredient for jelling performance preserves</FONT></B> </P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Overnight, the Japanese market hit a new low for the</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
move, and our futures were pretty quiet. In the wee</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
hours this morning, the futures staged their</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
traditional morning rally and by the time the market</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
opened they were smoking to the upside. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
What great news caused this? No, it wasn't news</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
from the auto industry as Daimler-Chrysler (DCX)</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
announced a loss. It wasn't the Internet, as Priceline</FONT> <BR><FONT 
face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
(PCLN) pre-announced disappointing results -- that</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
stock was split nearly 2-for-1 the hard way, the fallout</FONT> <BR><FONT 
face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
from which also put enormous pressure on Yahoo</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
(YHOO). It wasn't a rally in Microsoft (MSFT) based</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
on the Justice Department news, as that stock was</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
down in the early going. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Buy now, ask questions never. . . The reason for today's early explosion was a 
good old</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
end-of-the-quarter "bleep"-it rally, as the boys tried to jam prices higher in 
marking up their</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
portfolios. This is so commonplace and so well known, it even gets described on 
bubblevision. It's</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
a little bit like what Gretchen Morgenson was talking about in The New York 
Times article the</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
other day, how Jonathan Lebed got himself in trouble with the SEC for doing the 
same kind of</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
thing that Wall Street analysts and portfolio managers do all the time. 
</FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Granted, this is an old refrain of mine, but there was no reason from any 
fundamental standpoint</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
for the explosive rally we saw today other than it was time to mark 'em up. I 
guess if I wanted to be</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
courteous I could make the case that the market has been down a bunch and 
"pre-announcement</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
season" is over. That's what the bulls would say, but it's quite a reach. 
</FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
The initial rally was sold, followed by another rally that was sold. All told, 
there were about five</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
rallies followed by sell-offs in the first couple of hours, but we ended up 
trading down to the lows of</FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
the day. At the lows, the S&amp;P and the Nasdaq 100 were flat. From there, 
the</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
never-say-die-mark-'em-up boys proceeded to jam the tape again. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
In about half an hour we saw the Nasdaq 100 explode about 100 points back to the 
highs, but the</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
S&amp;Ps didn't quite get there. An enormous amount of energy was expended in 
the first few hours.</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Given that so many momentum types own chip stocks, it was not a great shock to 
see the Sox</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
index hitching up as the sled dog du jour, up about 3 percent in the first three 
hours. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
They shall be redeemed. . . From there we went sideways for awhile and they made 
one more</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
push higher, then the market started to leak. The "leaking" was accelerated when 
a story passed</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
on Bloomberg that Janus was on pace to report a monthly outflow for the first 
time in three years. If</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
a big fund group like Janus experiences outflows, that could potentially change 
the psychology. I</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
have been musing that the final-hour selling in the last couple of days looked 
like redemptions.</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Folks have long ceased to worry about such things, but at some point we will 
feel their force</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
again. When that begins, the market will be under relentless pressure for quite 
some time. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
What appears to have happened with Janus's outflows is that the painters had 
their hopes</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
dashed and the tape fell apart. There were still some stocks that were green, 
and some that were</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
nicely green, but by and large there was far more damage than anyone would have 
expected on a</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
mark-up day like today. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
You don't have to tell us twice. . . At about that same time, Dell (DELL) 
announced on the tape</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
that it had initiated price cuts of 12 to 47 percent, depending on the product. 
That impacted</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Gateway (GTW) and IBM (IBM), as well. But the biggest disappointment for the 
bulls certainly had</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
to be the fact that Microsoft closed right around the $60 level, basically on 
its lows for the year,</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
even after getting what it wanted from the Supreme Court yesterday. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
All in all, when one connects the dots and puts a summation sign in front of 
today's action, it was</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
net-net very, very ugly and ominous. I don't think I can remember a time when we 
had such a brutal</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
jam like we had this morning totally fall apart like it did this afternoon. 
</FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Away from stocks, the euro was both red and green on the day and settled 
essentially unchanged.</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Oil also changed its colors during the day and did the same, closing down about 
4 cents. Fixed</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
income was under pressure, with the long bond down about half a buck, for 
reasons I'm about to</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
describe (which appear to have put a bid in under the precious metals). Gold and 
silver were up a</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
percent, plus or minus. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Please, not in front of the children. . . What, might you ask, could change the 
psychology and</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
knock bonds down and metals up? I know this is going to come as a shock to 
regular readers, but</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
lo and grab hold, it turns out that -- maybe, just maybe -- the BLS has 
understated inflation. In an</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
article in this morning's Washington Post, John Barry, who has long been 
considered the source</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
that the Fed uses to ooze information into the marketplace, revealed that 
inflation is actually</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
higher than what the BLS has reported. I would like to share a few paragraphs 
from this very</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
important article: </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Consumer price inflation has been slightly higher over the past year than 
officially</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
reported because of a calculating glitch at the Bureau of Labor Statistics, 
government</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
sources said. . . </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
BLS statisticians discovered the glitch some time ago, but it has taken quite 
awhile</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
for them to re-run the mountains of price data collected each month to determine 
its</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
impact on the overall index. Government sources did not disclose when the 
problem</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
first began to affect the index. . . </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
The current problem involves the agency's effort to assess how much of the 
change in</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
an item's price is due to an improvement in its quality -- for example, when the 
price of</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
a certain new car is compared with last year's model of the same car. 
</FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
If the new model of an item includes improvements, such as when an option on a 
new</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
car becomes standard equipment, that is taken into account in deciding how much 
of</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
the price increase represents inflation and how much is a quality improvement. 
</FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
The error appears to have occurred from accidentally double-counting some</FONT> 
<BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
allowance for quality improvements, sources said. [emphasis added] </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Since there are relatively few quality adjustments for food and energy items, 
the</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
upward revision is likely to affect the core portion of the CPI as much as the 
overall</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
index. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Later in the day, the BLS confirmed that changes will be forthcoming. I think 
this is going to be a</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
major inflection point, because it will foster a change in psychology as people 
realize what a farce</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
the numbers have been. I believe most folks are not aware of the shenanigans 
that Jim Grant (and</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
we) have been discussing for some time. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Folks had expected that the non-fiddled ex food and energy part of inflation 
would drop down to</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
the lower level of the core rate. Instead, the core rate is going up to meet the 
nonmanipulated food</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
and energy complex is. At the end of the day, it should be a catalyst for people 
to open their eyes. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
They must think pi is a real kick in the pants. . . This article points out a 
number of things, but</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
most importantly it clearly shows the capricious and subjective nature of the 
government's attempt</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
at measuring quality improvements. Calculating these indices out to one decimal 
point tells one</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
nothing other than that perhaps some of the people who come up with these 
numbers have a</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
sense of humor. It would be reasonable to surmise that whatever forthcoming 
change is made to</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
get the numbers "more correct" could easily be wrong as well. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
As we have tried to illustrate in the Inflation Chronicles, there has been a 
steady supply of</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
anecdotal evidence to show that inflation is alive and well in the real world. 
As we have often</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
remarked, anyone who is sentient knows that the inflation numbers are a joke. 
The quality</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
improvements fall under the heading of the "hedonic price deflator," and they 
are also the reason</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
that productivity numbers and GDP growth is overstated. Maybe the folks at 
GrantsInvestor.com,</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
who have been spearheading the effort to get this out in the open, had a hand in 
forcing the</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
government's hand. This is a victory for all of us who would like to see the 
inflation statistics at</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
least approach reality. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Based on a reader's suggestion, we have decided to change the name of the 
Inflation Chronicles</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
to the Stagflation Chronicles. We have shared plenty of stories about inflation, 
and the last few</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
have really been more about profit and wage squeezes (and with the BLS 
announcement its time</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
to "declare victory" on this subject and move on). From here on out, the stories 
will be more along</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
the lines of margin squeezes, assuming we have stories to share. </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Stagflation Chronicles. . . Another reader in the medical field sent this story 
in about the inflation</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
squeeze related to malpractice insurance: </FONT></P>
<P><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
I'm a member of a small surgical specialty group with a fairly low risk surgical 
practice.</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
Despite our excellent claims history, our malpractice premiums were just hiked 
30</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
percent from $10,000 to $13,000 per physician. These become fixed costs, and 
the</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
cost is borne by the physician. It's practically impossible to pass these 
higher</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
malpractice costs through to the patient because the third party, health 
insurance</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
companies reimbursement rates are already set, as well as the patient co-pay. 
Costs</FONT> <BR><FONT face=Arial 
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
are rising across all aspects of health care -- get used to it! </FONT></P>
<P><FONT face=Arial 
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<P><B><FONT face=Arial>Inflation Higher Than Reported 
(washingtonpost.com)</FONT></B> <BR><FONT face=Arial size=2>By John M. 
Berry</FONT> <BR><FONT face=Arial size=2>Washington Post Staff Writer</FONT> 
<BR><FONT face=Arial size=2>Wednesday, September 27, 2000; Page E01&nbsp; 
</FONT></P>
<P><FONT face=Arial size=2>Consumer price inflation has been slightly higher 
over the past year than </FONT><BR><FONT face=Arial size=2>officially reported 
because of a calculating glitch at the Bureau of Labor</FONT> <BR><FONT 
face=Arial size=2>Statistics, government sources said.&nbsp; </FONT><BR><FONT 
face=Arial size=2>&nbsp;</FONT> <BR><FONT face=Arial size=2>The bureau is 
preparing to revise upward the change over the last year in </FONT><BR><FONT 
face=Arial size=2>its consumer price index, the nation's most closely watched 
measure of </FONT><BR><FONT face=Arial size=2>inflation and the one used by the 
government to calculate cost-of-living </FONT><BR><FONT face=Arial 
size=2>adjustments in Social Security payments, veterans benefits and federal 
</FONT><BR><FONT face=Arial size=2>pensions.</FONT> <BR><FONT face=Arial 
size=2>&nbsp; </FONT><BR><FONT face=Arial size=2>For the 12-month period ended 
last month, consumer prices rose 3.4 </FONT><BR><FONT face=Arial 
size=2>percent--partly as a result of surging energy prices--while the core 
</FONT><BR><FONT face=Arial size=2>CPI, which excludes energy and food items, 
rose 2.5 percent.</FONT> </P>
<P><FONT face=Arial size=2>The revision, which could be announced before the end 
of this week, is </FONT><BR><FONT face=Arial size=2>likely to result in an 
official inflation rate that is higher by about </FONT><BR><FONT face=Arial 
size=2>0.1 to 0.3 percentage points for the past 12 months, the sources 
said.</FONT> </P>
<P><FONT face=Arial size=2>A revision of this magnitude won't please either 
Federal Reserve officials </FONT><BR><FONT face=Arial size=2>or investors, 
because to some extent both have been unhappy with the </FONT><BR><FONT 
face=Arial size=2>acceleration this year of both the CPI and the core portion of 
the index.</FONT> </P>
<P><FONT face=Arial size=2>Fed policymakers are widely expected to leave their 
target for short-term </FONT><BR><FONT face=Arial size=2>interest rates 
unchanged when they meet next Tuesday, and the revision </FONT><BR><FONT 
face=Arial size=2>probably won't affect that outcome. But it won't be welcome 
news for those </FONT><BR><FONT face=Arial size=2>investors who have begun to 
anticipate that the next Fed policy change would </FONT><BR><FONT face=Arial 
size=2>be a rate reduction.</FONT> </P>
<P><FONT face=Arial size=2>The difference will mean a bigger January increase in 
the government benefit </FONT><BR><FONT face=Arial size=2>payments received by 
roughly one in five Americans.</FONT> </P>
<P><FONT face=Arial size=2>Last year, the Social Security cost-of-living 
adjustment was 2.4 percent, </FONT><BR><FONT face=Arial size=2>which was 
determined by the increase in the CPI average for the third quarter 
</FONT><BR><FONT face=Arial size=2>of 1999 from the average for the third 
quarter of 1998. The adjustment </FONT><BR><FONT face=Arial size=2>boosted the 
program's average monthly benefit by $19, to $804.</FONT> </P>
<P><FONT face=Arial size=2>That meant that each increase of one-tenth of a 
percentage point in the CPI </FONT><BR><FONT face=Arial size=2>was worth 79 
cents a month to an average Social Security beneficiary, or </FONT><BR><FONT 
face=Arial size=2>$9.49 over the course of this year.</FONT> </P>
<P><FONT face=Arial size=2>An upward revision in the CPI also will mean a bit 
less federal tax revenue, </FONT><BR><FONT face=Arial size=2>and hence a 
slightly smaller budget surplus, because the CPI is used to index 
</FONT><BR><FONT face=Arial size=2>numerous provisions of the tax code, such as 
the size of personal exemptions </FONT><BR><FONT face=Arial size=2>and the 
points at which income tax brackets increase.</FONT> </P>
<P><FONT face=Arial size=2>The CPI also is used in the private sector to adjust 
for inflation in a </FONT><BR><FONT face=Arial size=2>variety of ways, including 
some rents and labor contracts.</FONT> </P>
<P><FONT face=Arial size=2>This will mark a break in the BLS's policy of not 
revising the CPI once it </FONT><BR><FONT face=Arial size=2>has been published 
because of the widespread ramifications of such a change </FONT><BR><FONT 
face=Arial size=2>for both the government and private sector.</FONT> </P>
<P><FONT face=Arial size=2>When asked, Katharine G. Abraham, commissioner of 
labor statistics, declined </FONT><BR><FONT face=Arial size=2>to comment.&nbsp; 
BLS officials notified the White House of the problem earlier </FONT><BR><FONT 
face=Arial size=2>this week.</FONT> </P>
<P><FONT face=Arial size=2>BLS statisticians discovered the glitch some time 
ago, but it has taken quite </FONT><BR><FONT face=Arial size=2>a while for them 
to rerun the mountains of price data collected each month </FONT><BR><FONT 
face=Arial size=2>to determine its impact on the overall index. Government 
sources did not </FONT><BR><FONT face=Arial size=2>disclose when the problem 
first began to affect the index.</FONT> </P>
<P><FONT face=Arial size=2>The CPI is compiled from data on the changes in the 
prices paid by consumers </FONT><BR><FONT face=Arial size=2>for a hypothetical 
"market basket" of certain goods and services. The current </FONT><BR><FONT 
face=Arial size=2>problem involves the agency's efforts to assess how much of 
the change in an </FONT><BR><FONT face=Arial size=2>item's price is due to an 
improvement in its quality--for example, when the </FONT><BR><FONT face=Arial 
size=2>price of a certain new car is compared with last year's model of the same 
car.</FONT> </P>
<P><FONT face=Arial size=2>If the new model of an item includes improvements, 
such as when an option on a</FONT> <BR><FONT face=Arial size=2>new car has 
become standard equipment, that is taken into account in deciding 
</FONT><BR><FONT face=Arial size=2>how much of the price increase represents 
inflation and how much is a quality </FONT><BR><FONT face=Arial 
size=2>improvement.</FONT> </P>
<P><FONT face=Arial size=2>The error appears to have occurred from accidentally 
double-counting some </FONT><BR><FONT face=Arial size=2>allowances for quality 
improvements, sources said.</FONT> </P>
<P><FONT face=Arial size=2>Since there are relatively few quality adjustments 
for food and energy items, </FONT><BR><FONT face=Arial size=2>the upward 
revision is likely to affect the core portion of the CPI as much 
</FONT><BR><FONT face=Arial size=2>as the overall index.</FONT> </P>
<P><FONT face=Arial size=2>Errors occasionally have been detected in the past in 
some of the raw data </FONT><BR><FONT face=Arial size=2>that are used to 
calculate the CPI, but apparently they have never been large </FONT><BR><FONT 
face=Arial size=2>enough to affect the overall index.</FONT> </P>
<P><FONT face=Arial size=2>Economists have debated for years whether the CPI 
accurately measures </FONT><BR><FONT face=Arial size=2>inflation, and whether 
the BLS's methodology should be changed. Based on its </FONT><BR><FONT 
face=Arial size=2>own research and recommendations from outside economists, the 
BLS has made </FONT><BR><FONT face=Arial size=2>changes in recent years to 
improve the CPI.</FONT> </P>
<P><FONT face=Arial size=2>Correcting the current error is a technical matter, 
and will not change the </FONT><BR><FONT face=Arial size=2>BLS's overall method 
or approach for making quality-improvement allowances.</FONT> </P></BODY></HTML>

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