Kevin Phillips, once a conservative and now their scourge, writer [American Theocracy; American Dynasty and recently Bad Money] and thinker has a post at HuffingtonPost called “Washington’s Great No Inflation Hoax” If you keep track of your grocery bill, or clothing bill and wonder at the claims of little or no inflation pushed out by the statiticians you might want to read this.

Americans are now beginning to understand that this indicator [CPI - Consumer Price Index] has its own share of gimmicks not unlike a sub-prime mortgage or the six pages of fine print that accompanies your credit card agreement.

… the federal minimalization and misrepresentation of inflation, pursued statistically over the last 25 years, has been the main buttress of Washington’s over-favorable and self-serving portraiture of the U.S. economy.

Distortions aplenty have followed. Some of the most pernicious include the shortchanging of federal pension and Social Security obligations and cost of living increases, a parallel shortchanging of cost-of-living increases in wage contracts tied to the federal CPI, the suppression of equitable interest payments on bank accounts and certificates of deposit…

And of course, it’s not just about you.

…John Williams, who runs an organization called Shadow Statistics, contends that if Washington still used the CPI measurements applied back in the 1970s, inflation would be in the 10 percent range. My own analysis, set out in much more detail in an article in the May issue of Harper’s, comports with that of the cynical foreign investors.

Therein lies the danger. If the current inflation rate is really 6-9 percent instead of the 2-3 percent claimed by government and most U.S. money managers, then Washington’s official estimates that the economy still grew at a rate of some 0.6 percent in the first quarter of 2008 become nonsense. Subtracting a 6-9 percent inflation rate from nominal GDP growth would identify an economy that was deteriorating and shrinking, not growing. Concerned foreign dollar-holders would become even more concerned.

In theory, a vigilant Congress might want to hold hearings, but in practice I suspect not. Democratic presidents (notably Bill Clinton) have been involved in the numbers game along with Republican administrations. Neither party has clean hands. Far more likely that any serious investigation will be mounted clandestinely by central banks or sovereign wealth funds in places like China, Singapore and Saudi Arabia as part of their ongoing study of just how much longer they can continue to support a deteriorating U.S. dollar. It is not a happy prospect.