Everyone knows that I hold the CPI in contempt. As far as I'm concerned, it is nothing but a piece of political rhetoric that the government manipulates at will in order to yield whatever result is politically expedient at the time. It certainly doesn't reflect what's actually happening in the stores and our ability to make ends meet.
And while I view GOLD as a great long-term indicator of what's happening to our money, I agree with most people that its price doesn't actually reflect the cost of living. Up 5-fold in ten years? The cost of a new suit certainly hasn't changed like THAT. Maybe the cost of cotton or health insurance, but not the cost of MOST things.
Changes in the price of gold just take too long to be reflected as comparable movements in the prices of everything else. There are also some powerful political reasons to manipulate the price of gold... though such efforts ultimately must fail in a remotely free society.
So, if the cost of living isn't fairly measured by the CPI, and it isn't fairly measured by the price of gold, how best can it be judged?
Well, nothing is perfect, but I think oil is probably about as good a gauge of inflation as we can hope to find. Especially right now.
Oil is $98.50 today. It's been bouncing around that level ($100) for months. $100 is a nice, round number -- easy to remember as a baseline.
What's more, oil feels neither particularly cheap nor particularly expensive right now. It seems fairly priced. IMVHO, of course. Feel free to disagree.
Finally, it's obvious that - although oil can go through some wild short-term gyrations - its long-term price trend is pretty stable. And oil does have an obvious influence on the cost of nearly everything else.
So, let's just watch oil and judge for ourselves what sort of inflation we're experiencing.
All we have to remember is that at the start of 2012, oil was about $100/barrel.
Now just wait and see. (I predict $200/barrel oil at least briefly within 3 years.)
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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