Roche goes on to say in further edited (and in some places paraphrased) excerpts:
First, let’s just glance at a few of the independent inflation gauges [for the inflation situation in the U.S.]:
1. The Billion Prices Project
The Billion Prices Project is actually showing inflation a bit higher than the BLS. Inflationists aren’t satisfied with the BPP because they say it only shows online prices and doesn’t account for other factors.
2. ECRI Future Inflation Gauge
So what about the ECRI, another independent view? Again, similar story – their Future Inflation Gauge is showing just a 1.8% rise in prices:
3. The 10-year Break-even Rate
Not satisfied? Okay, what about a market gauge? If we look at the 10-year break-even rate we see a similar story. The 10-year break-even is at just 2.26%:
Other Data Points to Consider
Still not satisfied? How about some common sense.
If the CPI is much higher than the BLS says at 1.8% then that means real GDP is that much lower so, for instance, if the CPI is REALLY at 5% as ShadowStats claims, then that means real GDP is -2% and it basically means the economy has been contracting for the entirety of the last 5 years. Does that make any sense at all?
If you believe the above then it also means that all of the following data points are wrong:
ISM Manufacturing at 55 (growing).
ISM Services at 56 (growing).
Markit PMI at 53.2 (growing).
Non-farm payrolls at 160K (growing).
ADP Private payrolls at 200K (growing).
Industrial Production at 99.05 – just shy of its highest reading since 2008.
There are plenty of other indicators showing similar trends. The point is, many of these indicators are privately issued and clearly showing consistent expansion.
If you believe that the rate of inflation is higher than the BLS reports then it must mean that:
the government is not only lying about the CPI, but they must also be lying about nominal GDP or
all of these private companies are in collusion with the government to make it appear as though the U.S. economy is growing when it’s not.
It’s fine if you believe that, but don’t expect anyone to take you seriously.
Below is a good chart putting the global inflation story into perspective. In short, there just doesn’t appear to be much inflation anywhere. For all the worry about rising interest rates and the end to tapering, this bigger picture story doesn’t say that much has changed at all. Inflation, much like the muddling global economy, has been essentially flat for the last few years:
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
On the surface, policy settings around the world look very inflationary with large fiscal deficits and aggressively easy monetary policies yet it is hard to see inflation gaining any traction [with] global activity so weak and the monetary transmission process so impaired in many countries. There is more of a deflationary than inflationary tone to the economic environment and it does not look as if this will change any time soon. Read More »
Are we headed for rampant inflation or crippling deflation? I believe that we will see both. The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis. [Let me explain why I think that will unfold.] Words: 1025 Charts: 3 Read More »
A look at the trend in prices of the Big Mac clearly shows that investors are being penalized with higher inflation, lower income from bonds and certificates of deposit and being led to believe that the economy is growing better than it really is. [Let me explain.] Words: 1012; Charts: 2
Inflation is a significant measurement for the economic health of countries around the world but rates are often reported weeks after data is collected. To address this problem, two professors at MIT Sloan School of Management have launched the Billion Prices Project which is the first website to publish daily price indexes and provide real-time inflation estimates around the world. Words: 825
Many investors are treating inflation as a certainty because the Fed has expanded its balance sheet to unheard of levels through its quantitative easing strategy. Some have even gone so far as to say that this program will utterly destroy the U.S. currency. To demystify this conclusion, I’m going to explain quantitative easing and why the Fed is using this monetary strategy. Afterward, I’ll explain why gold is still positioned to rise even if inflation continues to be low. Words: 786
Global investors are now being violently whipsawed by the decisions of central banks, as they switch between inflationary and deflationary policies. The choice governments now face is to allow a deflationary depression to finally purge the worldwide economy of its imbalances, or try to levitate real estate, equity and bond prices by printing massive quantities of their currencies.