Wonk Alert - Want to understand why you're spending so much more for the same goods and services, but the CPI inflation rate remains tame?

Well, here you go

This article by Jim Puplava in Financial Sense, from a year ago, spells it out. It's a good Sunday morning read - I'd recommend taking the 10 minutes of your life and reading the whole thing, as what the author covers will affect your life more than anything else you'll read about today. Here's the crib notes.

And yes, I'm looking to pick up some more gold this week...

One way to lower entitlements would be to bring the inflation rates down, which would translate into lower Cost of Living Adjustments (COLA). The way to do this was to bring down the rate of inflation. However, this was not done by natural means, but artificially through statistical manipulation.

The rise in money and credit would mean higher inflation rates. Higher inflation rates would mean higher COLA adjustments, which would lead to bigger deficits. The solution was to change the way inflation is measured.

Substitution also plays a role in reducing the CPI. In place of exploding real estate prices, the Bureau gave more weight to the price of rents, which were falling as more households bought homes. Rents were given more weight even though 69% of households own a home versus the 31% that rent.

then, for how it will all go down:

As the US debt burden increases with each passing month, the Fed has only one option, which will be to print money. In effect, the US is exporting its inflation and it will ultimately result in deflation in the rest of the world, which is heavily laden with overcapacity and hyperinflation in the US when foreigners no longer finance our deficits

What we can say now is that the US is experiencing real inflation in the economy that is much higher than what is reported (6-8%). In addition to real inflation in the economy, the US has experienced hyperinflation in the financial economy—first in the stock market (the tech bubble between 1995-2000) and then in the mortgage, bond and real estate markets since 2000. If inflation continues to increase as I suspect in the real economy, I can guarantee you it will never show up in the CPI and PPI. Real inflation will be removed statistically through the magic of hedonics, geometric weighting, substitution, and seasonal adjustments.

The truth is that we are experiencing real inflation rates of 6% in the real economy and hyperinflationary rates in the financial economy in bonds, mortgages, and real estate. When the next downturn comes, it will most assuredly alert investors to keep a sharp eye out for the next asset bubble to hyperinflate. Will it be stocks as occurred in the Weimar Republic, Japan and the US? Will it be hard assets such as gold, silver, and other hard commodities as has occurred throughout all of history when governments inflate?