If the Fed allowed the true inflation rate to be publicized, and consequently bond buyers demanded interest rates that offered a “real,” inflation adjusted rate of return, it would be virtually impossible for the government to finance its deficits. From Matthew Piepenburg at goldswitzerland.com:
Despite a penchant for double-speak that would make a politician blush, the Fed tells us that its primary focus is unemployment not inflation.
Let me remind readers, however, that an openly nervous Mr. Powell came out in the summer of 2020 with a specific, as well as headline-making, agenda to “allow” higher inflation above the 2% rate.
This “new inflation direction” ignored the larger irony that the Fed had been unsuccessfully “targeting” 2% inflation for years before changing verbs from “targeting” to “allowing.”
Such magical word choices reveal a critical skunk in the Fed’s semantic wood pile.
If, for example, the Fed was honestly “targeting” inflation to no success for years, how could Powell suddenly have the public ability to then “allow” more of what he failed to achieve before, as if inflation was as simple to dial up and down as a thermostat in one’s home?
Dishonest Inflation Reporting
The blunt answer is that the Fed, in sync with the fiction writers at the Bureau of Labor Statistics (BLS), reports consumer inflation as honestly as Al Capone reported taxable income.
In short: The Fed has been lying about (i.e. downplaying) inflation for years.
As we’ve shown in many prior reports, the Consumer Price Index (CPI) scale used by the BLS to measure U.S. consumer price inflation is an open charade, allowing the BLS, and hence the Fed, to basically “report” inflation however they see fit—at least for now.
If, for example, the weighting methodologies hitherto used by the Fed to measure CPI inflation in the 1980’s were used today, then US, CPI-measured inflation would be closer to 10% not the reported 2%.