Calculate the real inflation rate based on actual price changes. Compare official CPI numbers against the reality of your wallet.
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How to Use
Why Your “Personal Inflation” May Feel Higher
You might notice that the official Consumer Price Index (CPI) reports inflation at 3%, but your grocery bill feels like it went up 10%. This discrepancy often comes down to methodology.
The “Shadow” Perspective
Economists like those at ShadowStats argue that changes to how inflation is calculated (starting in the 1980s and 1990s) have artificially lowered the official numbers. Two major changes are often cited:
- Substitution Bias: Old models used a “Fixed Basket” (if you bought steak in 1980, they tracked the price of steak in 1990). Modern models assume if steak gets expensive, you switch to chicken. This lowers the reported “cost of living” but ignores the drop in your standard of living.
- Hedonics: If a new car costs more but has better features (airbags, GPS), the government might say the “price” didn’t actually rise because you are getting “more car.” However, to your bank account, the cash leaving is still higher.
How to use this tool
Use this calculator to bypass official statistics and check the actual inflation rate of goods you buy.
- Example: If a house cost $10,000 in 1960 and costs $500,000 today, input those numbers to find the true annual inflation rate for housing, regardless of what the CPI says.
The Math Behind It
This calculator uses the Compound Annual Growth Rate (CAGR) formula to find the implicit inflation rate required to get from your starting price to your ending price:
$$ i = \left( \frac{P_{end}}{P_{start}} \right)^{\frac{1}{n}} - 1 $$
Where:
- $i$ is the Average Annual Inflation Rate.
- $P_{end}$ is the Price in the Future Year.
- $P_{start}$ is the Price in the Past Year.
- $n$ is the Number of Years between the two dates.