gainspainscapital.com / Graham Summers / October 11, 2017
The Fed is dramatically understating real inflation.
As you know, I’ve been very critical of the Fed’s inflation measures for years. The official inflation measure (Consumer Price Index or CPI) does a horrible job of measuring the actual cost of living for Americans.
I have long stated that this is intentional as the purpose of CPI is to hide the true rate of inflation so the Fed can paper over the decline in living standards that has plagued the US for the last few decades.
The Fed isn’t doing this out of ignorance, either. Back in 2002, Fed researchers actually reviewed the usefulness of its CPI metric for forecasting inflation.
The results were not pretty. In fact, the Fed discovered that its official measures of inflation (CPI and PCE) do a horrible job of predicting future inflation.
So what does predict future inflation accurately?
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