The official inflation rate in July was 1.24%. This rate is based upon the Consumer Price Index (CPI), compiled by the Bureau of Labor Statistics (BLS).

According to the BLS, the same basket of basic goods that cost you $218.01 in July 2010 cost you $215.35 in July of 2009 and $219.96 in July of 2008. I’d love to hear from anyone who thinks that these numbers have any resemblance to the truth. The reality that everyone I have spoken with sees is that prices are rising while incomes are falling. It looks very strongly like the government is “cooking the books” on inflation.

With unemployment at 9.6% and consumer demand at very low levels, there is little motivation for businesses to provide wage increases to improve employee retention. If you quit, your job will either be given to a person who has been unemployed for an average of 33.6 weeks or it will be sent overseas to a nation with a less oppressive tax system.

Consumer demand is dismal because American consumers are facing unemployment, underemployment, reduced compensation, and increased taxes. Worse, the costs of complying with hundreds of thousands of pages of bureaucratic regulation makes American business uncompetitive internationally. Even in this deep recession, we are still importing far more than we are exporting. We are not only not competitive, but the government has no current plans to improve our competitiveness. It simply is not a concern for them.

Reduced consumer demand should force prices lower, as business compete harder for fewer and fewer customers. Perhaps that will happen if this recession continues for several more years. At this point, I am not seeing it.

What about you? Are you seeing prices rise, hold steady, or fall?