Webster�s defines inflation as �A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.� The supply of money has grown by a horrific rate over the last year and over the last two decades. The monetary aggregates were growing at rates similar to GDP until late 1994 when the monetary aggregates began to accelerate at an above-average level. Over the last twelve months, they have literally gone off the charts with the money supply growing by an incredible $1 trillion dollars.
Per the Fed itself, currently M1, MZM, M2, and M3 have grown by an absolute 7.2%, 8.4%, 7.7%, and 7.4% respectively over the past year. Yet the government now claims that consumer inflation is merely running 1% to 3%? No way!
Consumer prices simply cannot only be increasing at only 1/8th to 2/5th of the rate of monetary growth, as this is contrary to all of economic history and experience. Yet, the government expects us to naively believe this.
If the 7%ish Fed numbers are more right, general expenses are probably around 31% higher today than 4 years ago on average for the American people. In my own case, and speaking for almost all of my friends and clients that I have spoken with about general inflation, the latter 31% rise over 4 years is much closer to the truth than 13%. The CPI is chronically low-balled for political reasons, but most Americans still instinctively know that the same number of dollars today goes much less farther than it did only a few years ago.
In reality, since consumer inflation is probably running much closer to the 7%+ Fed inflation of the supply of US dollars used to buy consumer goods and services, odds are the real rate is even far more negative now than the graph above indicates. Lying about inflation is useless over the long-term, because it will become apparent to all even if the government tries to claim that it doesn't exist. Trying to hide an elephant under a living-room rug may work for a short season, but soon it will become apparent to all what is really happening in the economy...