Interesting & VERY TELLING Inflation chart. 2008-05-19

Monday 19th May 2008 11;00 p.m. Interesting & VERY TELLING Inflation chart.

Gold has mounted a nice rally past $900 since late last week, with decent up moves, especially last Friday and today. Current spot market price shown on Kitco is Bid/Ask = 905.10/905.90.

Now to an article by the highly instructive and perhaps more 'mainstream' writer John Mauldin, entitled The Fed at the Crossroads. His fairly extensive articles are an interesting read because they don't contain the invective that often comes in gold bug type writings but they can sometimes paint a telling picture of the situation from someone I would view as being pretty much unbiased.

In the section 'Accounting for Inflation' he shows a graph taken from data originally published by Walter John Williams' http://www.shadowstats.com/ website and drawn by Matt Perry of the Union Tribune (according to the graph) showing annualised inflation figures from 2001-2008, according to the opre-1983, pre-1998 and present methodolgies. If you ever had the slight suspicion that governemt statistics were perhaps a little bit out of touch with the reality of wildly rising prices, take a look at that graph! Similar home truths might be found if a serious economist (one not financed by government grants to a university but a real world private economist) looked at UK inflation data.

Current inflation calculation method gives 4.0% annual inflation on the CPI, pre-1998 method gives 7.3% and pre-1983 method gives 11.6%! Of course, the pre-1983 method was the one that gave those 20% figures on a couple of occasions during the 1970-1980 period, especially around 1973-74 and 1979-81. The figure of 11.6% is well on the way to 20. And it shows inflation as being over 8% for almost all of the period 2001-2008, even while the Fed was talking of the danger of 'deflation' in 2001-2002.

I remember UK inflation being about 8% in 1978. That was about the low for the mid-'70s between the spikes to 20%+ in 1974 and 1980 or thereabouts.

It looks like we are in the 1970s all over again, without the rising wages, as I have mentioned in previous articles, such as that of Wednesday 31st October 2007: Wage-Price Spiral, without the rising wages!