Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Is the CPI Telling Us the Full Story on Inflation?

Economics / Inflation Apr 03, 2015 - 06:16 AM GMT

By: DailyWealth

Economics

Dr. David Eifrig writes: You can't fully trust economic statistics...

As I explained in yesterday's essay, measuring the economy is difficult. Very difficult. And in a sense, there are no "real" numbers.

But the official measures of inflation, gross domestic product (GDP), or employment aren't the result of some conspiracy agenda. And a close look at GDP data confirms the economy is still slowly recovering from the financial crisis.


Today, I'm going to take a deeper look into the "official" story on inflation. And more specifically, I'm going to see if one of the most controversial government statistics – the Consumer Price Index (CPI) – is telling us the full story.

Let's get started...

Inflation is supposed to reflect the overall change in consumer prices. But it depends on your perspective whether you think the number is "real."

The number most people refer to when discussing inflation is the CPI, calculated by the U.S. Bureau of Labor Statistics. The CPI is designed to reflect the price of a basket of goods and services, including transportation and housing.

Some people claim that the CPI has been systematically altered to make it seem tamer than it is.

Well, the Billion Prices Project – an economic research initiative from the Massachusetts Institute of Technology (MIT) – took an entirely new approach and tried to get a "better" picture of the price of nearly everything. Its results matched the CPI almost perfectly. (Take a look here.)

No one is monkeying with these numbers...

The real challenge when talking about inflation is trying to figure out how much more expensive it is for people to live. That's a hard question to answer.

For instance, a home computer in the mid-1990s cost $3,000. Today, you can get one that is 50 times faster for one-sixth the price. Is that deflation? How do you account for the progress in technology?

Or let's say that beef prices rise and shoppers switch to chicken. Is that a rise in the cost of living? (The Bureau of Labor Statistics tries to account for these things with one of my favorite economic numbers... what's known as a "hedonistic adjustment.")

But no matter how you slice it, inflation today remains extraordinarily low.

Don't believe me? Here's a chart bank of different inflation-related numbers. For each, we'll provide a long-term view so that you can see what used to happen when inflation was at normal levels...

We've already discussed the CPI... Here you can see it's at its lowest point since the 2008-2009 financial crisis. You can see the index declined 0.7% in January.


Now, take a look at what commodities prices are doing...

Here's a chart of the All Commodities section of the Bureau of Labor Statistics' Producer Price Index. As you can see, commodity prices also fell – the growth rate dropped below zero – in January...


You can see the same trend in the Bureau of Labor Statistics' index of the prices of goods (other than fuel) coming into the U.S. Again, the prices fell in January...


These inflation stats show that things are not heating up.

Overall, no inflation means no intervention from the Fed. Which means cheap money and continued rising asset prices. That's why I'm still confident this bull market isn't over yet... and why I'm recommending that my readers continue to buy quality blue-chip, income-producing stocks.

Tomorrow, we'll look at another hotly contested government statistic... unemployment. We'll see if the official employment numbers are to be trusted... and check in with my "Cabbie Index" for a real-world view on the job market.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig

P.S. With commodity prices near their lowest point since the financial crisis, it's a good time to buy one of my favorite forms of portfolio insurance... silver. And using a special trick I've discovered, you can get real, hold-in-your-hand silver from nearly any FDIC-insured bank in the U.S... for FREE. You can learn about this loophole and many others in my new Big Book of Retirement Secrets. Learn how to order a FREE copy right here.

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2013 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules