Drivers have been suffering "pump shock" at the gas station. Nationally, gas prices are up 30 cents in the past month, to an average of $3.74 a gallon. Prices for food and other consumer goods also are going up.

According to the federal government's consumer price index, inflation in 2011 officially was 3.1 percent. And for the 12 months ending with January 2012, the last update available, inflation was 2.5 percent.

But another way to look at price fluctuations comes from a new report by the American Institute of Economic Research of Great Barrington, Mass., a libertarian-leaning think tank. It developed the Everyday Price Index, which includes common items everybody purchases and excludes items that people can plan for long term, such as appliances and vehicles.

The EPI calculated inflation for 2011 at a staggering 8 percent.

"It makes clear that some prices you have control over in the future, but others you don't," Polina Vlasenko, a research fellow at AIER, said in a newspaper interview. "If you already live in a home and have appliances and new cars, those expenses do exist, but can be preplanned." By contrast, she said, "The EPI includes specific expenditures that are difficult to preplan, such as gas, food and prescription drugs."

On average, she said, about 40 percent of consumer expenditures go for items on the EPI. But it varies. For example, many retirees could spend a larger percentage on EPI items. If they're on fixed incomes, then their purchasing power could deteriorate rapidly. For example, someone with a passbook savings account that today earns close to zero interest would be devastated after several years of 8 percent increases in the EPI. Vlasenko said people are advised to plan ahead so that retirement income has a component that "hedges for inflation in some way."

For us, this also reflect problems resulting from the two bouts of "quantitative easing" by the U.S. Federal Reserve Board that have flooded the economy with more than an extra $2 trillion since 2008 to "jump start" a recovery from the most-recent recession. Perennial federal budget deficits of more than $1 trillion also have dumped borrowed money into the economy.

There had to be a cost, and it is higher prices. Dictionary.com defines inflation as: "a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency."

Eventually, to prevent a recurrence of the runaway inflation that plagued the 1970s, the quantitative easing will have to end, probably causing another recession. That's what happened in 1979-81, when then-Federal Reserve Chairman Paul Volcker choked off money creation and raised interest rates for consumers to double-digit levels. After two bad recessions, inflation was tamed. Combined with President Reagan's 1981 tax cuts, the economy grew rapidly with low inflation, and only modest recessions, for two decades.

After the November election, we hope such sensible policies are restored. Even 3.1 percent, inflation is unacceptable. Eight percent is horrendous.

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