Contact us
CALL US NOW 1-888-GOLD-160

Inflation By Another Measure

  by    0   0

The powers that be insist that inflation is low. In fact, the central bankers at the Federal Reserve tell us that low inflation is one of the reasons they can keep interest rates artificially low. But everyday people who go to the store each week smell a rat. We know our dollar doesn’t stretch as far as it used to. If inflation is so low, why do prices seem to keep going up?

The only logical explanation is maybe inflation isn’t as low as the pundits keep telling us.

And in fact, by one measure, inflation is quite robust.

Before proceeding, I need to point out that I’m using the term inflation in the popular sense of rising prices. In strictly economic terms, inflation is an increase in the money supply. By that definition, there is no doubt that there is rampant inflation due to central bank money-creation.

Rising prices aren’t in-and-of-themselves inflation. They are a symptom of inflation. So far, at least as measured by the government CPI number, price inflation has been muted given the actual amount of inflation created by the central bank. It has not shown up in rising consumer prices. Instead, we’ve seen significant asset price inflation.

But there is consumer price inflation as well – as every shopper realizes. It’s simply been obscured by the way the government calculates the numbers.

The Cleveland Fed calculates what it calls “Median CPI.” And by this measure, price inflation is running hot.

Median CPI takes the standard CPI number and removes extreme price increases and decreases to reveal underlying inflation trends.  WoflStreet explains how this works.

These extremes at both ends of the spectrum, often brought about by temporary factors, skew the CPI and make it very volatile, where it jumps up and down. To obtain a measure of inflation that is not skewed by the often-temporary extremes on either end, and to show the underlying inflation trends, the Cleveland Fed’s Median CPI removes the extremes at both ends.”

In effect, the Median CPI tracks the mid-point (median) of 45 major components of the Consumer Price Index.

Median CPI was up 0.3% in January. That represents an annualized rate of 3.7%. For those of you following along at home, that’s more than 2%.

For the 12-month period, the index rose by 2.9%. Since July, the Median CPI has ranged between 2.9% and 3.0%.

When you look at Median CPI, inflation is running far above the Federal Reserve’s 2% “symmetrical” target. That’s because the CPI calculations the Fed relies on generally tracks lower than any other inflation measure. And this is precisely why the central bankers use it.

As Peter Schiff pointed out recently, the Fed needs to hold interest rates low to prop up the bubble economy and it lacks the “tools” to aggressively fight inflation.

The last thing the Fed wants to have to do is fight inflation because it can’t. The way the Fed is able to justify keeping interest rates as low as they are is by claiming there is no inflation, claiming that we’re below 2%. Well, what happens if we actually get to 4%? Or 5%? How is the Fed going to put that genie back in that bottle? How is the Fed going to take interest rates up to six or seven or eight percent when we have all this debt? They would force the US government into default.”

The notion that our purchasing power shrinking by 2% every year is “good for us” is absurd when you pause even for a moment and think about it. And the ugly truth is price inflation is far more rampant than we’re being told.

Money-printing is good for some people. It’s a boon for those who can afford to invest in appreciating assets. But for everyday folks just trying to make ends meet — not so much.

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Millions of Americans Struggling to Pay Their Bills

We read a lot about the big-picture impacts of the economic meltdown caused by the government response to the coronavirus pandemic. We hear about the millions thrown out of work, the surge in corporate bankruptcies and small businesses shutting down, and the specter of surging inflation. But how has all of this impacted the average […]


Inflation Is Here

The mainstream isn’t worried about inflation. In fact, we’re told inflation is muted. And that’s true, at least by some measures. We haven’t seen the rising consumer price index (CPI) you might expect as central banks inject trillions of dollars created out of thin air into the economy. But just because government numbers don’t reflect […]


The Stock Market Is Completely Untethered From Economic Reality

We’ve been saying for months that the stock market has completely disconnected from economic reality. The markets have hit record highs despite the economic chaos caused by the government response to COVID-19. As Peter Schiff put it in a podcast back in May, the markets are on a Fed-induced sugar high. In a recent article, […]


Ranks of the Long-Term Unemployed Growing

The mainstream spin on unemployment is that things are improving. The unemployment rate is coming down. The number of weekly jobless claims recently fell below 800,000 for the first time since government lockdowns in response to the pandemic went into high gear last March. But there are some troubling signs that undercut this good-news narrative. […]


Rickards: Why Gold?

Why gold? In a recent article, Jim Rickards offers three reasons the biggest gains in gold prices are yet to come.


About The Author

Michael Maharrey is the managing editor of the SchiffGold blog, and the host of the Friday Gold Wrap Podcast and It's Your Dime interview series.
View all posts by

Comments are closed.

Call Now