nsumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.” The value placed on the basket of consumer goods is determined by “using hedonic quality adjustment methods.” Or rather the basket is composed of When talking about defense against inflation, there is reason to have a solid strategy of protection against the enemy. But what exactly is the enemy? How does the enemy operate? Why is the enemy inflation? How can wealth be defended against it?

When inflation is reported in mainstream media, lots of numbers are spewed forth and acronyms like CPI are often made reference to. What is the CPI and is there truly an accurate measure of inflation? Lets start with a working definition of inflation.

True inflation (referred to as monetary inflation) is an increase in the money supply. This includes: the increased printing of fiat currency, any bank loaning money it does not currently have possession of (either to another bank, a country, or an individual), and simply by paying interest on these loans with money that has been printed for this purpose. U.S. Federal Reserve measures monetary inflation by what’s called monetary aggregates, or M1, M2, and M3 – M3 being the most inclusive measure of the actual money supply.

The U.S. Federal Reserve uses the CPI as the measure of inflation as given to the public. According to the U.S. Department of Labor’s Bureau of Labor Statistics, “the Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.” The value placed on the basket of consumer goods is determined by “using hedonic quality adjustment methods.” Or rather the basket is composed of c

ots of numbers are spewed forth and acronyms like CPI are often made reference to. What is the CPI and is there truly an accurate measure of inflation? Lets start with a working definition of inflation.

True inflation (referred to as monetary inflation) is an increase in the money supply. This includes: the increased printing of fiat currency, any bank loaning money it does not currently have possession of (either to another bank, a country, or an individual), and simply by paying interest on these loans with money that has been printed for this purpose. U.S. Federal Reserve measures monetary inflation by what’s called monetary aggregates, or M1, M2, and M3 – M3 being the most inclusive measure of the actual money supply.

The U.S. Federal Reserve uses the CPI as the measure of inflation as given to the public. According to the U.S. Department of Labor’s Bureau of Labor Statistics, “the Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.” The value placed on the basket of consumer goods is determined by “using hedonic quality adjustment methods.” Or rather the basket is composed of

ncludes: the increased printing of fiat currency, any bank loaning money it does not currently have possession of (either to another bank, a country, or an individual), and simply by paying interest on these loans with money that has been printed for this purpose. U.S. Federal Reserve measures monetary inflation by what’s called monetary aggregates, or M1, M2, and M3 – M3 being the most inclusive measure of the actual money supply.

The U.S. Federal Reserve uses the CPI as the measure of inflation as given to the public. According to the U.S. Department of Labor’s Bureau of Labor Statistics, “the Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.” The value placed on the basket of consumer goods is determined by “using hedonic quality adjustment methods.” Or rather the basket is composed of

tion by what’s called monetary aggregates, or M1, M2, and M3 – M3 being the most inclusive measure of the actual money supply.

The U.S. Federal Reserve uses the CPI as the measure of inflation as given to the public. According to the U.S. Department of Labor’s Bureau of Labor Statistics, “the Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.” The value placed on the basket of consumer goods is determined by “using hedonic quality adjustment methods.” Or rather the basket is composed of

nsumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.” The value placed on the basket of consumer goods is determined by “using hedonic quality adjustment methods.” Or rather the basket is composed of categories of goods and the lowest priced good in a particular category is used in the calculating of the CPI.

For example, if meat is the category and chicken and beef are the goods in the meat category and chicken is the least expensive, then only the price of chicken will be a part of the current month’s CPI. If the following month, beef is the cheapest, only the price of beef will be used. Thus the CPI could change 3% over a period of time, and the price of chicken could increase 9% over the same period. According to the CPI chicken increased 3% but according to your pocketbook, the price of chicken rose 9%. Because true inflation is the increase in money supply, an increase in the price of chicken and not beef is due to supply and demand, not inflation.

The most common method the Federal Reserve utilizes to increase the money supply is by lowering the federal funds rate. This is the interest rate at which the Federal Reserve loans money to private banks. When the interest rate is low, there is more incentive for banks to borrow from the Federal Reserve then loan the newly acquired funds to businesses and individuals.

The Federal Reserve is able to create the money available