A fascinating, recent report by the Devonshire Research Group, whose recent work on Tesla was featured here one year ago, has moved beyond the micro and tackled on of the most controversial macroeconomic topic possible: what is the true rate of inflation. What it finds is that, like others before it most notably Shadowstats and Chapwood, the accepted definition of inflation, or CPI, is dramatically understated for various reasons, both political and economic.
For those unfamiliar with the “alternative” explanations of inflation measurement, and the implications if CPI is indeed drastically underestimating true inflation, the report is a real eye opener.
Devonshire sets the scene by noting that a wide variety of Price Indices are used to adjust for the effects of Inflation on the economy. These adjustments are widely applied to derive a number of common measures and underlie many critical economic and asset management concepts
Price Indices: the Consumer Price Index (CPI), the Producer Price Index, the GDP Deflator Economic concepts: the Standard of Living, Real Income and Output, Real Economic Growth Asset Management concepts: Real Interest Rates, the Risk-Free Rate of Return, the Cost of Capital
This post was published at Zero Hedge on May 9, 2017.