When I discuss the CPI with economically minded people and point out that it conceals the costs of food and energy. They respond with the typical “food prices are volatile”. Are food prices actually volatile? I understand that they rise faster than most stuff during inflationary periods, and the gov tries to hide that. Why do they rise faster in those periods anyways?
You’re falling for the same trick. Every period is an inflationary period, as the money supply keeps ratcheting up. “Measuring price inflation” via CPI is a mere shell game by which whatever asset/good (stocks, bonds, real estate, commodities, gold, etc.) is being inflated by the inflow of said money supply (at each particular moment) is purposefully being excluded from the CPI “basket” due to said “temporary volatility”. This way, at every particular time, only “non-volatile” (i.e. currently non-affected) assets/goods are predominant in the index basket, as a reflection of the splendid job our benevolent central bankers are doing keeping “inflation under control”.
I know it’s a hoax I just want to understand the rationale behind it.
I hope I threw some light on the shell game and on the reasoning used for its justification.
Lower order goods like food which are simple to produce with few components/processes tend to show the price effects of inflation faster than higher order goods like automobiles which are more complex to produce and involve many components/processes.
Thanks