The effective rate of inflation is understated

(this whole post is quoted from

The Fed’s Price Inflation “Shell Game”

Keep in mind that the “official report” on consumer price inflation (CPI) reflects an average of food, energy, and “all items less food and energy.”

Right now, the “official” index increased 1.3% in August. That implies price increases haven’t impacted consumers very much.

But when you look a little deeper, the picture gets much darker. Let’s start by digging in to the food price category:


So, as long as you don’t plan on eating much meat or eggs, you won’t get hit with the 7.1% price increase from that category. Cut back on the milk too, otherwise you’re footing the bill for a 5.7% increase in dairy.

It seems like a major source of price inflation that Powell and the Fed aren’t talking about is hiding right under the “food shell.” But that also begs the question…

What “shell” is the offset in prices hiding under so the 1.3% CPI holds true? All we have to do is dig into energy a bit:

Energy Prices

Prices for fuel oil, gasoline, and other energy-related commodities are all way down.

This is to be expected. After all, airplanes, cars, and factories that rely on fuel have been used far less than normal during the government-imposed restrictions and lockdowns.

Robert Wenzel explains, “What is driving the general index down is declines in goods we are not using anymore, or are using a lot less. Airline fares are down 23.2% and energy is down 9.0%. But the goods people are actually buying are way up.

So the bottom line is, food prices are skyrocketing and energy – which you’re likely using much less these days – is taking an expected price hit. Powell doesn’t seem to want to talk about it that much.

Finally, on the Fed’s decision to keep its main lending rate between 0% and 0.25%, which is likely to further impact price inflation down the road, Wenzel added:

Translation: The mad money printing shall continue. Hug your gold coins.

It could be the case that Powell and the Federal Reserve are officially out of answers. That remains to be seen.

Don’t Fall for the Fed’s Misdirection

As inflation keeps rising at whatever rate the Fed wants to talk about, now is a good time to consider diversifying some of your savings into precious metals like gold and silver.

At least then you’ll be doing everything you can to ensure your nest egg is set up to weather the storm, even if the Fed wants you to believe it’s sunny outside. 2020, bls, cnbc, economic policy journal, federal reserve, forbes, trading economics”

Posted by at September 22, 2020
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