Fed’s CPI data trounced by robust independent study

Bernanke….”How big?”

The famed Massachusetts Institute of Technology (MIT) last night released its latest inflation data for the US. They show that prices there have jumped 2% in the last six weeks.

On an annualised basis, this would give America a banana-republic inflation rate of 17.3%. And MIT (while non-Federal) has a robust methodology for measuring inflation in all major markets around the world.

Its data are collected every day from online retailers, using software to scan the underlying code in public webpages and stores for the relevant price information in a database. The resulting dataset contains daily prices on the full array of products sold by these retailers. The figures also include information on product descriptions, package sizes, brands, special characteristics (e.g. “organic”), and whether the item is on sale or price control.

In short, it’s a lot more thorough than the Fed’s CPI. And importantly, a lot more objective.

The full chart comparing MIT to the CPI can be viewed at the Zero Hedge site. The CPI says inflation is flat, but the average US consumer has felt for months that this doesn’t reflect reality.

Washington has poo-poohed the data, but the acclaimed Seeking Alpha site rips into this denial as ‘shooting the inflation messenger’. Says the site:

‘The fact that there is a percolating global inflation is a surprise to no one except, perhaps, Ben Bernanke. The Chairman appeared before a House Budget Committee hearing Wednesday and, despite the increasing alarm about how inflation metrics appear to have bottomed virtually everywhere and commodities-based indices are flying, responded to a question about a future QE3 by saying that if the economy is still stagnant in June when QE2 is done, “we would have to think about additional measures.”

More complacency from Ben the Banker. Watch that 30-year bond yield keep on edging towards 5%….

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