Unfortunately Goodhart's law has rendered official inflation measures borderline useless, as anyone who has been shopping for food for the last decade can tell you.
Taking your example in good faith: Gold is four times as expensive today as it was at this time in 2015. Has food seen a 4x increase? No, right? So gold is volatile on a level way beyond inflation. QED.
Are CPI measurements difficult? Sure. It takes a bunch of expert eggheads and a lot of shouting to come to consensus. Still better than trusting some kind of magical commodity market to tell you.
> Gold is four times as expensive today as it was at this time in 2015
easy to explain. Gold has a supply constraint. More demand causes prices to rise. When you have a currency following a heavy inflationary trend, people buy Gold, so the price of Gold goes up.
You don't even need to trust CPI alone when looking in history, where things have evened out a bit: we have historical short-term bond yield data, even the yield curve: people bidding on short periods with the safest debtor expecting changes in nominal value.
Not to suggest CPI is redundant, there's a reason why central bankers read it after all. For one, it's the most timely data they have. But it's impossible to nudge it year after year -- accumulative error -- without it become obviously decoupled from other data, including the long-term bond market data. It just so happens commodities are the wrong yardstick.
ajross|2 months ago
Are CPI measurements difficult? Sure. It takes a bunch of expert eggheads and a lot of shouting to come to consensus. Still better than trusting some kind of magical commodity market to tell you.
ekianjo|2 months ago
easy to explain. Gold has a supply constraint. More demand causes prices to rise. When you have a currency following a heavy inflationary trend, people buy Gold, so the price of Gold goes up.
fdr|2 months ago
Not to suggest CPI is redundant, there's a reason why central bankers read it after all. For one, it's the most timely data they have. But it's impossible to nudge it year after year -- accumulative error -- without it become obviously decoupled from other data, including the long-term bond market data. It just so happens commodities are the wrong yardstick.