Yesterday the US Labor Department reported a 6.2% yearly increase in the consumer price index (CPI) – a basket of products ranging from gas and healthcare to groceries and rents.
This figure didn’t really come as a surprise, even if it has sent a small shockwave across the markets. Since the Fed started its Covid-related money printing in March’20 its balance sheet has swollen from $4.1Tr to $8.5Tr, which is more than twofold ? (source: St.Louis Fed)
6.2% inflation is bad, but it is a modest consequence for such massive monetary creation, and we can’t help but wondering if this figure accurately reflects the reality.
The first thing any statistics must have right is methodology, but the way CPI is calculated is changing constantly. So while adding new categories like the Internet could indeed justify these changes, this opens the door for massive numbers manipulation. Shadowstats calculated inflation using the same methods within the whole timeline from 1980 till today, and the resulting inflation rates are almost 3 times higher – which seems more in line with the increasing cost of living that people are experiencing in real life.
Whatever the actual figures are, the future outlook for the dollar, and most other fiat currencies is not bright. The Central Banks continue printing money, calling the inflation “transitory” and blaming all on “supply bottlenecks”. However even their speech patterns transpire an upcoming drama.
Take the Fed and the recent addresses of its officials:
April’21. Jerome Powell warned of the “upward pressure on prices from the rebound in spending”, adding that “these one-time increases in prices are likely to have only transitory effects on inflation”
August’21. Christopher Waller: “There is a general concern that this is going to last longer. Supply bottlenecks that we’re seeing are not unravelling as fast as we thought they would, we’re seeing a little more wage pressure, starting to come through.”
November’21. Fed statement: inflationary pressures are not “transitory” but “expected to be transitory”. Jerome Powell: bottlenecks can last “well into next year” before fading.
The way it’s going it is not impossible for the Fed officials to continue exercising in reassuring yet increasingly worrying linguistics, all while the inflation goes haywire…
Luckily, there’s a better alternative to fiat money, available to everyone, scarce and free from politics. Bitcoin is the future of money.