The Bureau of Labor Statistics of the Department of Labor publishes the Consumer Price Index (CPI)

Those at the BLS claim the CPI is "the most widely used measure of inflation,"  that anyone can use the CPI as a deflator "to translate ... (economic data) into inflation-free dollars." 

Sadly, those at the BLS claim over two million workers must suffer through collective bargaining agreements, which tie their wages to the CPI.

Humorously, those at the BLS claim "the CPI is an indicator of the effectiveness of government policy."

Of course, the CPI cannot measure inflation. Never in its history has the CPI translated any dollar measures into "inflation-free" dollars.

Inflation is a consequence of banking. In the fiduciary monetary system of centralized bank notes, inflation is merely the growth of the circulating media — cash, which is evidence of past deposits circulating in perpetuity and bank credit in the form of checkable deposits.

The damaging effect of inflation becomes revealed when the growth of credit outstrips the growth of output owing to credit being priced too cheap. 

Edwin Walter Kemmerer was known as "the money doctor." This is what he had to say about inflation:


Kemmerer goes on to say:

All prices adhere to the one, true, infrangible law for all of trade — the Law of Prices. The Law of Prices of holds the winning bids of purchase and sale for what is on offer set the price.

Producers get constrained by the great Axiom of Profit. The Axiom of Profit holds the sum of sales must at least equal the cost of production otherwise producers go to ruin.

The prices set by winning bidders determine the sum of sales for producers. At whatever price winning bidders set, those producers whose costs are higher than their sales get forced out of production. 

Prices reflect buying power and willingness to bid. Even if bidders have more credit in their hands in the face of what is on offer and but are unwilling to bid more, prices shall not rise. 

Establishing a market basket of goods fails to measure inflation. Producers come and go depending upon efficiency of production and capital formation. Consumers tastes change as innovation replaces products altogether, e.g., the MP3 player replaced the portable CD player, even more so than improvement leads to brand switching.

Though some dispute the current numbers collected to calculate the CPI, such as John Williams at, most, including Mr. Williams, believe the idea behind the CPI as measure of inflation is right when in fact the CPI never can measure inflation.

All the CPI can measure are random changes through time for prices of specific goods with prices driven by specific market situation for each good.

No one can even use the CPI to project to a universe of prices the way random sampling with a suitable sample size can project to a universe of observation.

The CPI has been one of the biggest con jobs since the advent of the Federal Reserve.

To better understand inflation, check out INFLATION REVEALED! "REAL GDP" AND FEDERAL RESERVE BANK UNITS.

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