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Thursday, July 25, 2013

What's UP with Inflation?

What's UP with Inflation?

There is little doubt that the debate about how to calculate inflation will rage forever - and governments will always manipulate this calculation - and economists and bond markets seem to put the faith of the universe in this completely subjective and arbitrary number's calculation. Why? It is politically convenient - and as long as everyone believes it is the truth; perceptions are then realities, regardless.

So for the most part, we are cynical about this number but do our own calculations based on hard and soft commodity prices (ex-gold,) - because these are the driving inputs of the global economic machine and the numbers are less affected by political allocations and influences. It also ignores the value-added and services included in the CPI, as these items will be less relevant as resource scarcities take hold down the road.Without inputs, there are no outputs - that simple.

In the end, no method is without flaws, but it makes a whole a lot of sense to first, do your own rough calculations and to secondly, calculate the inflation numbers for economic inputs and as well as traditional outputs (CPI),  if you want to minimize the chances of being blind-sided by the Bond market.

One other secret -  preform these calculations based on geo-political regions and include population growth and hard and soft commodity reserves. Then the picture becomes a whole lot clearer. Then you can say to me the next time we meet...

What's up Doc?

Dr Peter G Kinesa
July 25, 2013

What we do not know - Can blind-side us!

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