CPI has been unusually low for the last decade
From 2010 to 2019, CPI (the Consumer Price Index, a popular measure of ) averaged 1.73%. That's a historically low rate. Since 1913, CPI has averaged about 3.1% per year. The Federal Reserve's target rate is about 2% per year. The last decade's low CPI rate puzzled economists and gave rise to a new economic theory called "Modern Monetary Theory," which argued that the US government needed to increase its deficit spending in order to hit its 2% target. According to MMT , the limit on government spending is , not revenue.
In times of crisis, CPI can get much higher
During certain historical periods-- usually periods of crisis, such as wartime-- CPI got much higher. In the WWI / Spanish Flu decade it averaged nearly 10%, and in the WWII decade it averaged nearly 5%. In the Vietnam War decade the average exceeded 7%. High during times of national crisis seems to result from "loose" and enormous deficit spending. When gets this high, the typically has to "tighten" in order to control it. That means raising taxes, raising interest rates, and reducing deficit spending. "Tight" can cause prolonged recessions. It took over a decade of high interest rates to get Vietnam War-era under control.
Could the massive deficit spending and loose of the Covid-19 crisis usher in a new era of high CPI? Presently, economists don't expect it. The forecasts about 2.5% this year, to fall to 2% in 2022. But the Fed also doesn't have good models of , so to some extent these projections are a shot in the dark.
Is CPI a broken measure?
CPI includes several components, including food, energy, apparel, and rent. Several factors have conspired to keep CPI low. Thanks to technological changes such as automation and renewables, apparel and energy costs have trended downward over the last couple decades. And rents are kept artificially low in many areas of the country by rent controls that limit how much landlords can increase rent. Purchase prices for single-family homes are not included in CPI , and purchase prices have grown much faster than rents:
Obviously CPI also doesn't include stocks, bonds, and other investment assets, which have inflated to pretty astronomical levels. It also doesn't include the cost of healthcare, which grew about 3.7% per year over the last decade and are projected to grow nearly 5% per year over the next decade. So there's a case to be made that "real" in the economy may actually be higher than the CPI numbers suggest.
Ben Bernanke once said that "inflation is always a monetary phenomenon." If so, then CPI isn't a very good measure of , because CPI is influenced by all sorts of non-monetary phenomena like shocks, technological changes, price manipulation, and government regulations. CPI is a crude approximation at best, and at worst a broken metric.
What if there's not just one rate?
The reality is that different categories of prices "inflate" at different rates. For instance, large increases in the money supply often cause in asset prices, but not in consumer prices. It's partly a function of how the newly created money is distributed. If it goes into the pockets of the wealthy, they will use it to speculate on stocks and real estate. You will see asset price , but not consumer price . But if you put it into the pockets of regular people, then you may see consumer prices start to rise. And even within the broad categories of "consumer goods" and "assets," there are loads of subcategories. During a pandemic, socially distanced assets (like suburban housing and food at home) will be in high demand, while non-socially distanced assets (like urban housing or commercial real estate or restaurant food) will not. Thus, urban home prices might deflate even as suburban home prices inflate.
Once you start to see as lots of different numbers rather than as a single number, you will start to recognize new investment opportunities. You want to own asset categories where will run hotter than CPI , not asset categories where it will run cooler than CPI . It's extremely valuable to understand the forces that influence some categories to inflate faster than others, and to be able to recognize turning points where a category's rate will change. That's how fortunes are made.
Big Macs haven't changed much, so they don't need to be hedonically adjusted. The Case-Shiller home price index is similar. It doesn't need to be hedonically adjusted because it looks at repeat sales of homes that haven't undergone major renovations or deterioration.
So in theory, the Big Mac index and Case-Shiller home price index should be comparable to CPI if economists are doing their adjustments right. But that's a big "if," and the reality is that it is not an apples-to-apples comparison between the Big Mac index and CPI. There are other ways that CPI data get massaged besides just hedonic adjustment. Decisions are made about what to include and what to exclude, and data are often "trimmed" to exclude the categories of goods whose prices have changed the fastest.
Here's more of an apples-to-apples comparison between two food and recreation consumer price indexes that use the same methodology. Unfortunately the scales on this chart are a little wonky, and TradingView won't let me change them. The platform seems to struggle a bit with these percentage-wise comparisons. But the long and short of it is that food is up about 27% since 2009 while recreation is up about 8% since 2009 according to these particular indexes.
Ethereum does not have any sound monetary properties to be a form of sound money.. that doesnt mean it doesnt have value just not as a sound money. you are comparing something like apple ios to gold. to very different things mate! The fact eth rolled back in the DAO hack, broke the rules of the protocol, broke decentralisation - have people forgetton about this or many haven't done there research!
(edit) - They explain the change of goods by looking at the data. "no one buys beef anymore, we need a better metric" conveniently ignoring the fact that beef is too expensive for most people.