This is why hard assets, like gold, housing increase in price at approximately the same rate that the banks increase the money supply (historically the number of dollars doubles every decade, other currencies are even worse).
If people saw the same increases in consumable prices as hard assets then they would be become aware of the falling value of the currency and the currency would quickly collapse in value as they stored their wealth in other things (hyper-inflation). However, the continuous optimisation of production through efficiencies of technology and associated automation means that consumables take less and less human time/effort to produce and so are going down in value at rate of around -5% year. This offsets the 7% devaluation of the dollar to give an overall price increase of consumables of 7-5 = 2% which is a level that the population finds acceptable without losing faith in their currency.
However, in recent decades the recent struggle and failure to keep devaluation of the dollar at 7%/year means that the official inflation figures need to be massaged, and so hard assets are removed from the basket goods used in the algorithm (e.g. housing related costs) and more consumables that have benefited from increased automation and reduced value are added.
If you run the algorithm used say 15 years ago, you'll find that it produces a much higher inflation figure than the one used today.
Official food inflation numbers put out by the US gov after Covid rocketed up to (a very unflattering) over 11% by mid 2022, and have only very recently gone back down to reasonable numbers, meaning you saw large increases in food prices that have only recently stopped increasing. (I don’t think the current administration would want to put out those numbers before the midterms if they were cooking the books).
If inflation tended to match to wage inflation then the scheme would be valid, but it doesn't. The newly printed money ends up unequally distributed over the economy, tending to end up with asset owners.
I don't understand why people even pay attention to the CPI. There are direct measures of how much money is being created, we can all just use that rate instead.
"you saw large increases in food prices that have only recently stopped increasing" as quickly
Inflation is still happening, just not as fast. It doesn't compensate for the fact that prices are still up significantly from what they "should have been".
Many things, the majority of which are not food.
While I also find grocery prices in the US extremely bewildering/concerning (why are they so damn expensive!?), I think it does make some sense to benchmark more than just food.
For example, consider a hypothetical world in which grocery prices doubled but cost of housing for some reason halved – would you say that that's high or low inflation?
That is grocery inflation and housing deflation. These are just words that mean "the prices are going up" and "the prices are going down" respectively. There's no spiritual or metaphysical meaning behind them, and they don't say anything about the causes of prices going up or down. One can argue why the prices are changing, and maybe some or all of the answer is money supply, but one cannot argue if prices are up "because of inflation" or not -- if prices are up, there is inflation, regardless of the "root" (scare quotes because it's unclear that there can be such a thing as a root cause in something as complex as the global price system, which is a strange loop if there ever was one) cause.
https://www.bls.gov/cpi/questions-and-answers.htm
>The CPI frequently is called a cost-of-living index, but it differs in important ways from a complete cost-of-living measure. We use a cost-of-living framework in making practical decisions about questions that arise in constructing the CPI. A cost-of-living index is a conceptual measurement goal, however, and not a straightforward alternative to the CPI. A cost-of-living index would measure changes over time in the amount that consumers need to spend to reach a certain utility level or standard of living. Both the CPI and a cost-of-living index would reflect changes in the prices of goods and services, such as food and clothing that are directly purchased in the marketplace; but a complete cost-of-living index would go beyond this role to also take into account changes in other governmental or environmental factors that affect consumers' well-being. It is very difficult to determine the proper treatment of public goods, such as safety and education, and other broad concerns, such as health, water quality, and crime, that would constitute a complete cost-of-living framework. Since the CPI does not attempt to quantify all the factors that affect the cost-of-living, it is sometimes termed a conditional cost-of-living index.
