No. of Recommendations: 12
During the last run of inflation, it was regularly complained (as well as pragmatically demonstrated) that the government's model of reporting inflation was significantly under=reporting it.
This isn't really true. The inflation numbers are damped (mostly by spreading instantaneous housing inflation across a period of time*), but over time they are correct, well, as correct as the overall methodology** (aside from damping) can provide. Basically (and very roughly) instead of reporting a quarter of 12% inflation, we reported a quarter of 8% inflation and spread the remaining 4% across the next few quarters.
* Damping housing inflation makes perfect sense as housing inflation is something experienced in step functions rather than continuously. You buy a house every 7-10 years on average, you sign a new rental contract every few years, and your rent usually goes up only once a year or two, etc.
** Taking into account improvements in products as the years go by is very problematic, but it somehow has to be accounted for. The 1970s Cadillac Deville isn't anywhere near as good as the 2025 Lexus LS500.
Of course, gold (which was illegal to own in the US back then) was $35 an ounce and is now over 100X that price.
It doesn't make sense to look at gold in that case. Because you couldn't buy gold at $35, nor could you buy a gold ETF. Maybe you could have bought a basket of gold mining stocks, but they haven't (I'm pretty sure) gone up anywhere near 100x since then. You perhaps could have bought gold jewelry, but it was far more than $35 an ounce.
While I-Bonds and TIPs will outperform cash or standard government bonds during times of inflation, the US government by overtly lying about the rate of inflation will keep their pound of flesh.
Lying about the rate of inflation won't help much. That's because:
1. A VERY small amount of treasury debt is inflation linked.
2. All treasury debt today, without exception, is continuously rolled over into new debt, and interest rates are determined at auction, not based on reported CPI, but instead based on supply and demand.
