As we noted in Part 5, the CPI has lost its anchor to the windward. Not only are durable goods prices rising rapidly after 25 years of relentless deflation, but the CPI for energy has also taken a big reversal. So doing, it reminds one and all that the groupthink besotted denizens of the Eccles Building have been reciting their ritual incantations about “lowflation” for so long that they have lost track entirely of the inflationary storm they have fostered.
Consider the 3.35% per annum rise in the CPI for energy since January 2000. By any common sense definition of the term, a more than doubling of the price of a commodity over just two decades is inflation in spades.
But as we have also noted that came in two broad phases, and the Fed has chosen to ignore the first phase while whining about the second in a totally context free and misleading manner. To wit, during the eight years through the July 2008 blow-off top, the energy index was up by nearly 11.0% per annum, while since the Fed adopted inflation targeting in January 2012, it has declined by about -0.53% per annum.