Inflation and Labor Market Fundamentals
If inflation was purely a monetary phenomenon, certainly the Consumer Price Index (CPI) and other recognized indicators of inflation such as the Personal Consumption Expenditures Price Index or the Gross Domestic Product (GDP) price deflators would be significantly higher than they are now. Many pundits pose a credible argument that inflation measures such as the CPI severely underestimate the real level of inflation.
I can only think of what my good buddy Martin Lysaght and I always say, “It is what it is.”
The CPI is what it is.
The Personal Consumption Expenditures (PCE) Price Index is what it is.
The Import Price Index is what it is.
And the true level of inflation is what it is.
It’s just that the true level of inflation is not necessarily determined by any of the preceding measures. The Bureau of Labor Statistics and the Commerce Department are just as transparent as the Fed, since the ways and means of statistical compilation and calculation are fully explained in the fine print.
I can fully accept these indexes, for exactly what they are telling me. Nothing more, and nothing less.
Besides, inflation is not as important as it used to be.
I am not saying this cannot change. I am merely saying that what I call the “Ladder of Inflation” is already missing a critical rung, without which inflation will have a difficult time staying inflationary.
Without wage-derived income reflation, any inflation in prices becomes more predicated ...

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