"I'm as hawkish and worried about inflation as anybody," said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut and one of the top forecasters of CPI over the last two years in Bloomberg News surveys. "But the idea that inflation is 10 percent is not a proper reading of the data."

One Critic

One such critic is John Williams, the author of Shadow Government Statistics, a newsletter that he has run since 2004. Williams says the federal government understates the level of inflation to keep increases in Social Security payments and other costs down.

"The reporting system increasingly succumbed to pressures from miscreant politicians, who were and are intent upon stealing income from Social Security recipients, without ever taking the issue of reduced entitlement payments before the public or Congress for approval," Williams says on his website, shadowstats.com.

Williams's alternate measure of inflation was 10.3 percent for the 12 months through March, compared with 2.7 percent for the Consumer Price Index. He calculates unemployment at more than 20 percent rather than the official 8.2 percent in March. His assessment of gross domestic product has clocked negative economic performance in every quarter since 2005. The Department of Commerce's measure turned negative in 2008 and 2009, recording the worst recession since the Great Depression. The economy is nearing "hyperinflationary Great Depression," he says on his web site.

Taking Issue

Williams takes issue with statistical methodology adopted by BLS since the early 1980s. The first is "substitutability," which accounts for people buying cheaper goods as prices increase. If the cost of two types of chicken breast rises, the BLS assumes consumers buy more of the less expensive one, giving it somewhat greater weight in the index.

The second is "quality adjustment," which seeks to measure how goods change over time. For example, as ever-more- powerful computers are available for the same price, the BLS records this as a type of deflation. As the amount of fabric in clothing shrinks (think skinny jeans) that is noted as a type of inflation.

The third is "owner's equivalent rent" which replaces the cost of owning a home with what it would cost to rent it.

Price Level

Had the BLS not altered its statistical practices over the years, Williams says, inflation would be reported about 7 percentage points higher each year, enough that the price level will quadruple in a little over a decade.

David Fuller's view I certainly do not consider myself a conspiracy theorist but if I ponder the question: do governments have a vested interest in understating the true rate of inflation, the answer is overwhelmingly yes.

The value of people like John Williams, mentioned above, is that they hold the Bureau of Labor Statistics' (BLS) feet over the proverbial fire, which helps to keep them more honest than might otherwise be the case. Call it the value of freedom of speech.

The people who know the most about inflation are those who do the family shopping and pay household bills. In the UK they certainly know that prices are going up and this is hardly a surprise given all the QE that has occurred.