Inflation: Understanding the Real Story

Introduction to Inflation

The concept of inflation can be complex and often misunderstood. The recent December CPI report has sparked debate about whether inflation is cooling down or remains a persistent issue. The interpretation of these numbers can vary greatly depending on one’s perspective.

Government Data vs. Reality

Instead of getting caught up in analyzing government data, it’s essential to look at the bigger picture. The money supply and the Fed’s balance sheet hold the key to understanding the real inflation story. Since late 2023, the M2 money supply has been increasing rapidly due to the Fed’s aggressive loosening of monetary policy.

What is Inflation, Really?

It’s crucial to understand that an increase in the supply of money and credit is the actual definition of inflation. Rising consumer prices, measured by the CPI, are merely a symptom of this monetary inflation. The Fed’s balance sheet is expanding once again, with the central bank relaunching quantitative easing, which translates to more money printing.

The Bottom Line

The reality is that there is plenty of inflation, regardless of what the CPI data may indicate. It’s essential to look beyond the surface level and understand the underlying factors driving inflation.

Conclusion

In conclusion, inflation is a complex issue that requires a deeper understanding of the underlying factors. By examining the money supply and the Fed’s balance sheet, we can gain a better understanding of the real inflation story. Rather than relying solely on government data, it’s crucial to consider the broader economic context to make informed decisions.