CPI Is Lying To You. $8 Trillion Says So

The argument over whether CPI came in at 2.7% or 3.1% is downstream of the actual question. CPI is a basket of consumer goods. It was designed to measure demand-pull inflation, which is the kind that shows up when too many dollars chase too few groceries. It was never designed to measure the unit of account itself losing value when the money supply expands faster than the productive economy.

Look at 2020. CPI printed 1.2%. M2 grew 24.5%. Both numbers were considered official. The 23-point gap did not vanish. It went into housing, into equity multiples, and into the ownership gap. Anyone who bought a home in 2020 already knows where the inflation went. The asset price was the receipt.

Roughly $8 trillion in new M2 has been created since January 2020. The total money supply at the start of 2020 was $15.4 trillion. Five years roughly equals the first 200. Mises and Hayek warned about this a century ago. Mainstream commentary kept calling it transitory. One of them was right.

None of this requires being a goldbug or a Bitcoin maximalist. It only requires understanding that CPI is a partial measurement of a partial phenomenon, and the part it misses is the part that actually compounds.

I write more on this at Digital Capitalist Research if anyone is interested.