With inflation nearing double digits this year, so called “experts” have been crawling out of the woodwork to proclaim the Death of the Dollar and how they always said inflation would kill us all.  Most of these people make claims with no regard to reality, inflation is bad today and they say it will kill us all.  But 10 years ago when inflation was miniscule they also said inflation was bad and would kill us all.  The facts don’t matter, only the hatred of inflation.  Inflation is high?  We’re all gonna die.  Inflation is low?  It’s actually high.

I can understand the feeling of course, it doesn’t feel good knowing that year after year your money loses value.  But that feeling doesn’t translate much into reality, most Americans gained wealth in real terms from 2010 to 2020 (a trend only reversed around 2021).  So when your feelings of inflation conflict with the reality of inflation, what do you do?  If you’re Ed Butowsky (inventor of the Chapwood Index), you declare reality to be wrong.  You instead make up your own basket of goods (the Chapwood basket) and send open ended surveys asking people to track the changes in those prices.  And if your basket is unusually weighted towards such things as golf club memberships and financial planner’s fees, then yes you could show some strangely high inflation between 2010 and 2020 as the price of those things went up.  But the much larger and more representative basket from the Federal Reserve showed enough price drops in other things that it evened out into low inflation.

In the last decade you might have repeatedly heard calls about how the Fed and the Government are lying about the true rate of inflation, how everything is getting more expensive by double digits and how it’s destroying American wealth.  In the same breath these people probably tried to sell you gold, but that’s neither here nor there.  The point is that many people have tried to argue that the Federal Reserve is lying about the economy and that everything is going to hell in a handbasket, only “secretly” so that none of us plebs realize it.  This year as the economy has actually been rocked by inflation, those voices have been completely overwhelmed, because it’s very clear that genuinely high inflation feels nothing like the low-inflation period that characterized the last 10 years.

Basically the Chapwood Index (and indices like it) was designed to “prove” the point that America had super high inflation, to the tune to 10%, yet the index was completely ridiculous on the face of it.  If America experienced double digit inflation from 2010 to 2020, and if the nominal GDP numbers were accurate, then we would have experienced a real GDP decrease of around 50%.  That means 50% less total everything produced by the economy, 50% less cars, vegetables, and doctor’s appointments.  Yet this flies in the face of actual evidence showing a moderate increase in American production over that time frame.  Simple put, the evidence isn’t consistent with a prolonged decrease in real output.  Again, compare this to 2022 when America is experiencing actual inflation: nominal GDP is up by near double digits, but since inflation is also up by nearly that amount, the total American economy may have contracted slightly by the end of the year.  Super high inflation has been coupled to super high nominal GDP, and it’s still an open question as to whether inflation or GDP will win the year, but it’s clear that this year feels different than all the years from the last decade when people screamed about hidden inflation and buying gold.

Basically what I’m saying is inflation isn’t really missable, if it’s there it’s there and people know it.  Everyone knew the price of goods was increasing in 2021, but the Fed and the government acted slowly because they predicted the increase would be small and “transitory.”  But when inflation jumped to 4% and now nears 8%, it was obvious and didn’t require creating a whole new index just to see it.