Popular among politicians, media, and central bankers alike is the claim that in spite of all the quantitative easing (QE) and zero-leaning or negative interest rates of current times, inflation is under control. As the statistics show, nothing could be further from the truth. There are some very sly ways governments attempt to mask inflation and these are hidden in plain sight. Should the refusal to look at this ballooning elephant in the room continue, dire economic consequences may become unavoidable.
No Small Problem
The best hiding places are sometimes right out in the open. While central banks like the U.S. Federal Reserve, financial media and global monetary policy groups often point to metrics like the Personal Consumption Expenditures Price Index (PCE) and consumer price index (CPI) as basic metrics for inflation, this approach is argued by many to be inadequate. There are several types of inflation affecting the money supply, as it is not an isolated phenomenon only touching select consumer purchases. In fact, the foundational mechanics of fiat money itself (government issued and mandated money like the U.S. dollar) are inflationary at base, and the issue is compounded outward from there in virtually endless permutations.
Before the advent and widespread use of inflationary paper money by governments and rulers, inflation took the form of monarchs diluting coinage. The value was thus reduced. This practice had serious limits though, and paper currency provided a much more exploitable system. In similar fashion to the mixing of metals, inflation occurs today in hidden places, while prices and face values of the “diluted products” remain the same.
The Fed has set a target inflation rate of 2%,