This morning, the U.S. Bureau of Labor Statistics announced last month’s Consumer Price Index (CPI) was up 7.9%. As we’ve pointed out multiple times in multiple forums, this number is complete nonsense.
The increase in shelter (housing) prices was listed at 4.7%. As we’ve noted in the past, this is due to a change made to the CPI in the late ’90s which substituted actual cost of housing for a measure called Owners’ Equivalent Rent which regularly understates the increase in the price of housing. The most recent increase in the Case-Shiller U.S. National home Price Index is about 19%. At almost 1/3 of the CPI, that takes our 7.9% official number to about 12.5%.
The official CPI also shows the cost of food up 7.9%. That’s about 1/3 of the worldwide increase in food prices. Americans tend to eat a high-cost diet with a lot of meat, chicken, and pork. We don’t believe that U.S. food prices are up only 1/3 as much as the rest of the world, nor have we spoken to anyone who’s been inside a supermarket recently who believes that either.
We continue to believe the real inflation number is in the mid-teens.
Finally, as James Davolos of Horizon Kinetics noted in our recent interview (linked above and available here), last month’s inflation number was adjusted in 70 different ways, and we don’t think those adjustments were to make inflation look lower. This month, there were 72 adjustments. Our conclusion is that the official inflation number we’re seeing is a made-up number used to keep people from either panicking or getting angry.
As we’ve pointed out to DKI subscribers and in a coming newspaper article, the sanctions on Russia are going to lead to more inflation in the U.S. We continue to maintain a large inflation hedge in our portfolio which is available to subscribers here.