First things first – I hope you’re having a splendidly festive time with your friends and family.
I recently enjoyed a holiday party with my colleagues at Money Map Press, one highlight of which was a vigorous conversation with Shah Gilani about the impact of Trump’s tax cuts on the markets. I have deep respect for Shah’s analysis (and his excellent track record). He actually has an uncanny knack for finding bearish trades in a bullish climate, which the contrarian in me appreciates, and his writing is always incisive and entertaining.
However, on this issue, he is a confirmed bull, while I am a confirmed bear.
We enjoyed our argument immensely.
Then – after taking a bit of a break for some eggnog – I visited my comments section on Sure Money and lo and behold, a smart reader named Jesse had asked me the very same question…
Kismet! It was meant to be.
So without further ado, here’s my response to Jesse (and to Shah), followed by several other incisive reader questions as a nice holiday round-up.
Confusion about inflation abounds in mainstream media reporting. That confusion is a result of the fact that mainstream economists and the Fed solely focus on narrowly defined, arbitrarily constructed measures of the prices of consumer goods only. If you only look in places where there’s little inflation, or use indexes that are not standardized to measure the same goods over time, you end up ignoring the things that are inflating, and understating the inflation that does exist in consumer prices.
The Fed is largely to blame for the confusion. It has targeted a 2% inflation rate. But it uses a benchmark, the core PCE, that is the most understated of inflation measures. It ignores actual housing prices and only includes personal consumption goods. To make matters worse, when an index component is rising faster than cheaper substitutes, the index formula reduces the weighting of the goods that are rising fastest.
The thing is, the Fed is perfectly aware that it’s underreporting inflation.
I’ve uncovered a smoking gun – well, anyway, a chart that proves they know the real numbers.
The question is – why the cover-up?
Click here to continue.