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CPI Smoke and Mirrors Hides Decade Long REAL Inflation PAIN!

Economics / Inflation Sep 02, 2023 - 09:05 PM GMT

By: Nadeem_Walayat



Firstly understand that inflation is by DESIGN, the last thing your masters want is for the slaves to stop working so one of the primary mechanisms used to keep the slaves working is inflation because it destroys the purchasing power of earnings and savings so that most folks are kept running on the work hamster wheel into their graves where their lifetime of savings have been eroded away by INFLATION, or stolen by the banking crime syndicate, financial con men and through a myriad of modern day scam artists, run a mile from fund managers! They are all scam artists! If you think UK and US inflation is high take a look at the poor souls in Turkey (where I will soon be taking a trip, Istanbul), 58% inflation against which the depositors are thrown scraps of a 15% TAXED interest! Yes that's right, you get TAXED on the interest that FAILS to keep pace with inflation! Same in the UK, fake inflation of 7.2%, savings rates typically of 4.5% to 5.5% and the lemmings appear on broadcast news happy that they are in receipt of a sub inflation pittance, this after TEN YEARS of STEALTH theft of the purchasing power of their savings! At least the risky stock market gives ordinary folks a good chance to avoid the stealth theft, money in the bank is guaranteed to be systematically STOLEN! Yes we can play the fixed rate game which can temporarily work, but money in the bank in the UK over 10 years will lose between 1/5th and 1/3rd of it's value!

The narrative right now is that inflation is falling and thus so should interest rates follow inflation lower. And yes US CPLIE inflation has fallen, it's now just 3%! Fed's Job done, clear blue sky's ahead, just 1 more rate hike and we are all done and dusted.

Wait a minute, if the war against inflation has already been won by the Fed Transitory brigade then why another rate hike?

Politicians and MSM economists fall into one of two camps -

1. They peddle propaganda, are vested interests in a narrative.

2. They are econofools who don't even understand about that which they write reams and reams of gobbledygook.

Repeatedly they mis report falling inflation as falling prices!

Don't be live me, here listen to Morgan Stanley's Mike Wilson where he likens falling inflation to prices coming down.

"Inflation is coming down.... there is a very important feature about inflation that people don't appreciate, when prices come down it hits your revenue line."

No prices are not coming down! Falling INFLATION IS NOT PRICES COMING DOWN!

If Inflation was a stock I would NEVER SELL! Falling Prices indeed! And this is on the CPLIE measure which under reports REAL Inflation by X2 to X3! For instance UK CPI LIE has now 'fallen' to 7.9%! REAL Inflation is more like 18%! Whilst lemmings in the US are jumping for Joy at CPLIE of 3%, have these fools not heard of the base effect? That's when rampant inflation of a year ago LEAVES the annual indices which the econofools then run with to imply this that and the other...

Inflation reality even on the CPLIE measure is much better understood on the 10 year rate of change which is STILL RISING! This makes a mockery of what you are going to witness over the next 12 months were sticky CPI at best nudges a little lower, whilst at the same time the 10 year rate continues to climb higher! Which will reflect the REAL INFLATION pain that folks in the US will experience that the econofools will be completely blind to as it is not even on their radar! They DO NOT SEE IT! CPLIE lower, 10year CPILIE higher = MORE INFLATION PAIN just as I was warning a year ago would transpire is now coming to pass and which will have societal consequences, we already see it with the rampart shop thefts taking place across the United States prompting many stores to close down.

The Inflation reality is that the US has systematically manipulated the inflation rate lower over the decades to make it meaningless where according to shadowstats the real US Inflation rate is triple the official rate based on 1980's methodology which makes a mockery of all that which passes for economic analysis as the econofools don't even realise that the official inflation measure is FAKE! Real inflation as experienced by most in the US is nearer to 9% than 3%!

And the same is true for the UK where UK CPLIE is about HALF REAL inflation that ordinary folks experience as they go and do their weekly shops! Grocery prices in the UK have DOUB;ED over the past 3 years! That's more than TRIPLE the official rate of UK inflation!

Whilst the annual rate of UK inflation will continue to come down, especially following release of October data in November that will see a large drop in CPI due to the base effect to something like 4.6% from the current 7.9%, with perhaps further falls for November and December to end the year near 4%. However all of this is a big con trick on the public because the 10 year inflation rate that illustrates the INFLATION PAIN ordinary folk experience will continue to climb ever higher! And thus a huge disconnect between what the econofools state about falling inflation which will be set against the reality of the RISING 10 year inflation rate. The people are NOT going to feel the drop in CPI LIE, instead for most the PAIN of rising prices will just keep getting worse!

The bottom line is that the inflation indices are FAKE! REAL inflation is at least TWICE CPLIE which means in the US it is 6%, and in the UK 16%! Now do you understand why interest rates are rising and why they are not going to come down any time soon! Why the Fed cannot cut short end interest rates until CPLIE falls to BELOW 2%, it's because CPI IS FAKE! They have fiddled with it to such an extent to have made it worthless on the annualised measure that virtually all focus on. Fools are basing their interest rate expectations on a broken FAKE measure of inflation!

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Targeting 4600 Mid Summer 2023 Top.

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By Nadeem Walayat

Copyright © 2005-2023 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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