HardAssetsInvestor

Written by Brad Zigler  |

March 06, 2009

A New Low - And An Explanation - For Monetary Inflation

Details

Real-time Inflation Indicator (per annum): 6.9% 

I still chuckle when I think about a reader's recent reaction to seeing the numbers in this column's daily inflation update. The puzzled financial advisor wrote: "Inflation at 7.7%? [Note: This was in mid-February] Are you kidding? Where did you get that number?"

You can certainly understand his perplexity. More than likely, if you're not a frequent reader of this column, you share it. After all, the government's much-publicized take on inflation - the Consumer Price Index (CPI) - was last clocked growing at an annual rate of, what, zero?

CPI tracks price inflation at the retail level. Say what you will, it is what it is. It doesn't purport to do anything else. Metering worldwide purchasing power parity isn't the mandate of the Bureau of Labor Statistics.

That's where our number comes in. Our indicator allows you to take the daily pulse of the monetary inflation trend in one quick read. It's derived by comparing the purchasing power of the dollar and the world's other reserve currency, the euro, via a universal monetary standard: gold.

Monetary inflation is the wholest of wholesale numbers. It reveals the gizmos and gadgets at work improving or denigrating the greenback's purchasing power long before the retail price of Coca-Cola rises.

Our bewildered advisor should be forgiven, too, if the subhead number looked stark. There's no context. But that's what the graph, the one so many regular readers of this column have come to loath or love, comes in.

U.S. Monetary Inflation 

A new low was scored by the indicator on Thursday, intimating the disinflationary trend continues. We're still waiting for the reflation trade. Just as the inflation indicator turned down as the heretofore-heralded inflation harbinger, gold, was peaking (see the chart in early 2008), there ought to be early warning of reflation reflected in the red line.

Stay tuned, and have a nice weekend.