The authorities have finally discovered a way to banish inflation forever. They simply ignore it’s existence, or to be more exact, they ignore the key elements of overall inflation measurement that are rising sharply, and pretend the remaining slow inflators are what really matter.

The key to this legerdemain is something called the "core rate" of inflation, or, as it’s usually rendered these days, the "closely followed core rate." This is the inflation number tracked by the consumer price index (CPI), excluding food and energy costs.

The very name "core rate" is a flagrant and deliberate misnomer. It suggests that what is maintained in this core is essential, while what is excluded is peripheral. But clearly—and here I mean clearly even to an economist or statistician—nobody lives in their mislabeled core world. No one can exclude food and energy from his or her daily existence. When you exclude food and energy from your inflation thinking you aren’t left with the basic elements of life. You are ignoring life as it is actually lived.

A more accurate rendering of what is now termed core rate would be "non-volatile" inflation rate. This was, in fact, the original, the plausible reason the core rate measurement came into existence. It was supposed to eliminate the monthly sharp spikes and dips that have traditionally appeared in both food and energy markets.

Alas, this arguably valuable approach bears no relation to the way the core rate (or should I say the closely watched core rate) is now used by the vast army of financial industry spokespersons and government officials who have a vested interest in pretending inflation is under control. Energy prices have been rising steadily for many months, and are now more than double what they were a year ago. There’s no great volatility. It’s a steady increase.

The pattern here is so obvious and so easy to track in simple numerical terms that one wonders how even a Wall Street analyst can fail to blush while ignoring it. The CPI was 1.7 percent for all of 1998. It was 2.7 percent in all of 1999. It was 4.2 percent for the first six months of 2000, or if one wished to use a trailing 12-month measuring stick, 3.7 percent for the 12 months ended June 30, 2000.

There it is: 1.7 percent; 2.7 percent; 3.7 percent. Not a terribly difficult progression to understand. The underlying reason for this rise is also no mystery. When oil was dirt cheap, inflation was very modest. As oil prices have risen to more natural levels, inflation has followed. Throw in huge recent increases in housing, sharp increases in health care costs, the recent past and likely future boosts in tobacco prices that go into the larger food and tobacco category, along with early hints of higher labor costs, and you know where inflation is heading.

Mark Twain used to speak about "lies, damn lies and statistics." One can play the numbers game a lot of different ways to prove lot of different—and often contradictory—things. When it comes to real word inflation in these United States circa mid-2000, however, the numbers are crystal clear: 1.7 percent, 2.7 percent, 3.7 percent. Thus, core rate madness now fits squarely in a realm Twain defined as well beyond lies and damn lies.