Wednesday, 28 April 2010

US Consumer Price Index (CPI) Inflation – April 2010 Update

The above chart shows the US Consumer Price Index (CPI-U) to March 2010 courtesy of the US Bureau of Labor Statistics. Year on year US CPI inflation has risen from 2.1% in February 2010 to 2.3% today. Annualising the last 6 months has inflation at 1.5% and annualising the last 3 months has inflation running at 3.1%. Have the US government succeeded in kick starting some good ‘healthy’ inflation? Many developed countries around the world are in my opinion craving this to help them erode both their debts and those of their reckless population who gorged themselves on easy credit.

I have taken the liberty of dividing the chart into two sections. The first red section runs from 1871 to 1932 and the second blue section runs from 1933 to present day. I chose this break point as during 1933 the US officially ended their link to the gold standard. I think this chart demonstrates a point that government will always choose to inflate debt away at the expense of savers if given the chance. They could not do this under the gold standard.

To demonstrate this arithmetic mean inflation rates have been:
1871 to 1932 CPI = 0.5% with deflation being a regular occurrence.
1933 to Present CPI = 3.7%

The CAGR CPI from 1871 to present has been 2.1%.

As always DYOR.

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