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Headlines, Headlines, Headlines

For those that wait each month on pins and needles for the latest CPI numbers, look no further. This week, Powell came out and told the world that 'inflation was flat month on month,' or no increase in inflation from September. Unfortunately, we live in a society that generally misses the forest for the trees and is short term oriented. So of course, headlines started popping up that looked like this:

These type of headlines intentionally mislead the reader. The real CPI was an increase of 3.2% from November 2022. Down from 3.7% the prior month. The key here is that the rate at which inflation is increasing is slowing down. Prices are still increasing over 3% year on year, just a little less so. You would think by this headline and others that inflation is not increasing; yet it is still increasing just not at the same rate.

We've explored here how CPI is misleading and how it doesn't truly represent the increase in prices that average people feel in their day to day. If you are new to receiving these emails, the link above is a great place to start to understand how the official CPI can be misleading when it comes to prices.

Step Back

It's politically popular to declare victory upon the nearest sniff of inflation coming down but take a step back. CPI has never meaningfully gone down in the history of our country. Why? Because currency erosion is a bipartisan policy decision intended to be a hidden tax so that we can finance our collective overconsumption. Below I've included data from the Federal Reserve from 1947 post Bretton Woods to view what official CPI has looked like over time:

Up and to the right. This will continue to be this way so long as we spend more than we earn as a country. Inflation by definition is a monetary phenomenon through which too many pieces of paper chases too few goods and services. Prices don't go up, the value of the currency goes down.

Untethering from the gold standard in 1971 caused CPI to go parabolic in historical terms:

The lack of accountability and the ease at which the reserve currency can print money makes it all too easy to keep spending. Making hard decisions is politically unfavorable, and the slow death by papercuts to the taxpayer is then felt by low and middle income classes over generations.

So when you see a headline that says "Inflation was flat in October from the prior month, core CPI hits two year low," you can take a step back and know that this is misleading and is a part of a broader trend of CPI increasing. You can point to data sources from the BLS and Federal Reserve itself and know that inflation goes up forever.

What do we do about it? That will be a topic for next week.


Please take 2 minutes and contribute your personal inflation rates that you've experienced year on year. I'm starting to crowdsource real price data to include in our weekly emails in addition to official CPI and Truflation's data.


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