Well, I am honored and humbled… thank for taking the question and running with the extensions to the questions I did not know to ask!
Super helpful to have a clearer picture of what is obviously being manipulated, and how! You have a unique ability to get to the heart of the matter and style to present in an easy to understand, and often humorous manner. I always learn something from your posts. Your efforts and skills are much appreciated!
"There are three kinds of lies: lies, damned lies, and statistics." - Mark Twain
Yes, that was it. The freeze of roughly $300 billion in Russian central bank reserves was the decisive moment - trust in the dollar as a reserve currency broke right there. Every central bank holding dollars suddenly had to admit it: this isn't really my money, it's their money, and they decide when I get to keep it.
Venezuela's gold sitting in the Bank of England (still sitting there, naturally) was the earlier warning shot. But 2022 just made it impossible to ignore anymore.
I've this in a few pieces already (more than these, but these came to mind):
Another stellar job by Joseph Stolin. When that seizure of funds occurred, the media barely spoke of it. That’s how we in the U.S.can determine that he is a Democrat.
What a great article and it explains so much! We are seeing the same thing here in Australia only much worse. Our government is a bunch of bare faced liars and most people is only stating to catch on now. Thanks for publishing
So, if I substitute cat food for dog food that means inflation is lower because cats are smaller than dogs, right? I think I'm getting the hang of this:)
One extra bit is that the cost of living adjustment for Social Security is tied to CPI, as are many union wage contracts, etc. Thus, the USG has even more incentive to lie here.
The arch metaphor is exactly right and the structural implication is worse than even the article states. CPI is simultaneously the measurement of inflation AND the metric used to determine whether the Fed's own policy has succeeded. The ruler and the target are the same object. Every methodological adjustment since 1980, owners equivalent rent and hedonic quality subtraction chief among them, has moved the measurement toward convenience rather than accuracy. Thats Goodharts Law applied to the most important price index on earth: when the measure became the target it stopped being a reliable measure.
Gold is the audit that CPI cant adjust away. A 65% move against a 7% trade-weighted dollar decline tells you the market isnt pricing dollar weakness in the conventional sense. Its pricing the gap between official inflation and experienced inflation, the delta between what the ruler says and what the ruler was redesigned not to capture. Gold doesnt respond to CPI. It responds to the actual debasement that CPI methodology has been progressively engineered to exclude. thats why the two charts dont sit on the same axis. theyre measuring different things and the divergence between them is itself the most precise measure of how much information CPI is now failing to transmit.
Thanks for another great article! I was going to ask why most people aren't paying attention? Then I realized we are near the cusp of a forth turning, with increasing authoritarianism, war and other foment. I guess at some gut level, people have realized...
When all the distortions and changes in methodology ALWAYS result in the adjustment going in the same direction, it's not measuring better, it's simply wrong.
Thanks for this very clear and convincing argument. Since this has been going on for decades, why hasn’t gold (and, I suppose, other commodities) been keeping pace all along?
I will see if I can find a graph and post it as part of my "Weekend Thoughts" graph-fest. Something that shows the correlation between gold and inflation (hedonically adjusted or otherwise)
Largest holders of gold are central banks, and all of them use fiat currency. It was in their mutual interest to inflate together and extract wealth from their native populations, such that their values would fall together, but ratios between them would be relatively stable
Thank you for putting into words what I have been saying for years and everybody was looking at me in disbelief.
I usually tried to reason with energy consumption data - how can a country grow if its Energy consumption doesn't? Looking at the story of USA and EU and APAC region the story shapes clearly:
GDP is a measure of spending and not of wealth; if real GDP is flat (at best) at the same time government deficits, ergo spending, are persistent, are counted in GDP, and outweigh GDP growth, we are clearly in recession and have been for some time. We’re certainly not getting wealthier per capita.
I have been reading your substack for about a month and have appreciated all the work you do. I upgraded to paid on this post. Is it a conspiracy to lie about the actual inflation? If so, by who. Also, why is gold acting ad a risk asset now and not a storehouse of wealth? Thank you.
I don't think it needs one. Nobody's in a room deciding to lie. It's that every methodology revision since 1980 happened to push the number down, and nobody up the chain has a reason to fix that. Lower CPI means smaller cost-of-living adjustments, cheaper TIPS payouts, a friendlier debt-to-GDP optic, a Fed that looks like it's hitting target. Everyone benefits from a number that drifts low, so it drifts low. No malice required... which is almost worse, because there's nobody to actually hold accountable.
I think the short-term behaviour - gold selling off in a panic, moving with risk sentiment - is a paper market artefact. The price you see is set in futures and ETFs, not in physical. And paper gold trades on leverage like anything else, so when a liquidity crunch hits, it gets sold. Not because anyone's reassessed gold, but because it's liquid and you sell what you can to meet a margin call, not what you want to. Gold becomes the ATM.
So on a day-to-day chart it'll look like a risk asset, because the marginal mover is leveraged positioning, not someone storing wealth.
The storehouse function still works - just on a different clock. Years, not days. Over the long arc it holds purchasing power. Inside any given week it'll whip around with the same hot money that moves everything else, because that's who's setting the intraday price.
Gold is a global asset. US inflation is a national number. Look at China - deflationary numbers.
So, perhaps we should adjust our analyses to the „sphere of influence“. I.e. looking for global yields and interest rates, weighted by the size of the economies?
Well, I am honored and humbled… thank for taking the question and running with the extensions to the questions I did not know to ask!
Super helpful to have a clearer picture of what is obviously being manipulated, and how! You have a unique ability to get to the heart of the matter and style to present in an easy to understand, and often humorous manner. I always learn something from your posts. Your efforts and skills are much appreciated!
"There are three kinds of lies: lies, damned lies, and statistics." - Mark Twain
I don't think I ever really touched on CPI yet. Adjacent yes, and never forgotten. But not truly like today's article. So thank you for poking me 😉
Outstanding article, thank you. You said, “ then it broke in 2022”. Was the seizure of Russian central bank funds that year was what “broke”?
Yes, that was it. The freeze of roughly $300 billion in Russian central bank reserves was the decisive moment - trust in the dollar as a reserve currency broke right there. Every central bank holding dollars suddenly had to admit it: this isn't really my money, it's their money, and they decide when I get to keep it.
Venezuela's gold sitting in the Bank of England (still sitting there, naturally) was the earlier warning shot. But 2022 just made it impossible to ignore anymore.
I've this in a few pieces already (more than these, but these came to mind):
- https://no01.substack.com/p/the-end-of-golds-safe-haven
- https://no01.substack.com/p/pick-a-side
- https://no01.substack.com/p/the-petrogas-dollar
Two earlier events spring to mind: Theft of Iraqi and Libyan central bank gold. Not sure about Serbia but that wouldn't surprise me.
Ukraine's gold flew away suddenly in 2014, right after the coup.
Also, I think France stole Mali's gold a few years back, might be a decade.
Another stellar job by Joseph Stolin. When that seizure of funds occurred, the media barely spoke of it. That’s how we in the U.S.can determine that he is a Democrat.
What a great article and it explains so much! We are seeing the same thing here in Australia only much worse. Our government is a bunch of bare faced liars and most people is only stating to catch on now. Thanks for publishing
The queue for gold outside physical gold in Melbourne is getting longer. Indians have a work around against Modi.
Great and clear explanation No1. Thank you.
A month or so ago I came across a 'graph of Cow vs 1oz Gold' from Von Greyerz.
Very stable looking graph, Over 5000 years 'Cow priced in gold' only fluctuated from between 1/2 Oz and 1.2 Oz Gold. Better metrics, No BS!
I saw that as well. Although I wouldn't call 0.5 -> 1.2 oz "stable". But at least it's not exponential looking like a graph of M2.
So, if I substitute cat food for dog food that means inflation is lower because cats are smaller than dogs, right? I think I'm getting the hang of this:)
You would make a great employee for the BLS!
Go apply here: https://www.bls.gov/jobs/
😂
One extra bit is that the cost of living adjustment for Social Security is tied to CPI, as are many union wage contracts, etc. Thus, the USG has even more incentive to lie here.
""Social Security cost-of-living adjustments are CPI-indexed.""?
I didn't have the union wage contracts in it though. But yes, so much is linked to CPI, it'd be criminal NOT to manipulate it (/s).
If I don't steal it, someone else will after all.
There is the Fabulous-Furry-Freak-Brothers hedonic-adjustment:
"Dope will get you through times of no money better than money will get you through times of no dope."
Hey, Gilbert Shelton is still alive. https://en.wikipedia.org/wiki/Gilbert_Shelton
A Labor & Delivery RN I used to work with had been his housemate in the 1960s in Austin, along with her boyfriend. ;-)
The arch metaphor is exactly right and the structural implication is worse than even the article states. CPI is simultaneously the measurement of inflation AND the metric used to determine whether the Fed's own policy has succeeded. The ruler and the target are the same object. Every methodological adjustment since 1980, owners equivalent rent and hedonic quality subtraction chief among them, has moved the measurement toward convenience rather than accuracy. Thats Goodharts Law applied to the most important price index on earth: when the measure became the target it stopped being a reliable measure.
Gold is the audit that CPI cant adjust away. A 65% move against a 7% trade-weighted dollar decline tells you the market isnt pricing dollar weakness in the conventional sense. Its pricing the gap between official inflation and experienced inflation, the delta between what the ruler says and what the ruler was redesigned not to capture. Gold doesnt respond to CPI. It responds to the actual debasement that CPI methodology has been progressively engineered to exclude. thats why the two charts dont sit on the same axis. theyre measuring different things and the divergence between them is itself the most precise measure of how much information CPI is now failing to transmit.
Thanks for another great article! I was going to ask why most people aren't paying attention? Then I realized we are near the cusp of a forth turning, with increasing authoritarianism, war and other foment. I guess at some gut level, people have realized...
Funny you'd say that [Aug '25: https://no01.substack.com/p/the-darkest-hours-are-before-the-f1e]
"Dammit, Cassandra!"
When all the distortions and changes in methodology ALWAYS result in the adjustment going in the same direction, it's not measuring better, it's simply wrong.
Thanks for this very clear and convincing argument. Since this has been going on for decades, why hasn’t gold (and, I suppose, other commodities) been keeping pace all along?
I will see if I can find a graph and post it as part of my "Weekend Thoughts" graph-fest. Something that shows the correlation between gold and inflation (hedonically adjusted or otherwise)
Largest holders of gold are central banks, and all of them use fiat currency. It was in their mutual interest to inflate together and extract wealth from their native populations, such that their values would fall together, but ratios between them would be relatively stable
Thank you for putting into words what I have been saying for years and everybody was looking at me in disbelief.
I usually tried to reason with energy consumption data - how can a country grow if its Energy consumption doesn't? Looking at the story of USA and EU and APAC region the story shapes clearly:
https://yearbook.enerdata.net/total-energy/world-consumption-statistics.html
Excellent post. Depressing too.
The world is what it is...
Btw, don't read my next post if you think this one is depressing...
GDP is a measure of spending and not of wealth; if real GDP is flat (at best) at the same time government deficits, ergo spending, are persistent, are counted in GDP, and outweigh GDP growth, we are clearly in recession and have been for some time. We’re certainly not getting wealthier per capita.
Excellent article, shameful behavior by our so-called “leaders”.
I have been reading your substack for about a month and have appreciated all the work you do. I upgraded to paid on this post. Is it a conspiracy to lie about the actual inflation? If so, by who. Also, why is gold acting ad a risk asset now and not a storehouse of wealth? Thank you.
I don't think it needs one. Nobody's in a room deciding to lie. It's that every methodology revision since 1980 happened to push the number down, and nobody up the chain has a reason to fix that. Lower CPI means smaller cost-of-living adjustments, cheaper TIPS payouts, a friendlier debt-to-GDP optic, a Fed that looks like it's hitting target. Everyone benefits from a number that drifts low, so it drifts low. No malice required... which is almost worse, because there's nobody to actually hold accountable.
I think the short-term behaviour - gold selling off in a panic, moving with risk sentiment - is a paper market artefact. The price you see is set in futures and ETFs, not in physical. And paper gold trades on leverage like anything else, so when a liquidity crunch hits, it gets sold. Not because anyone's reassessed gold, but because it's liquid and you sell what you can to meet a margin call, not what you want to. Gold becomes the ATM.
So on a day-to-day chart it'll look like a risk asset, because the marginal mover is leveraged positioning, not someone storing wealth.
The storehouse function still works - just on a different clock. Years, not days. Over the long arc it holds purchasing power. Inside any given week it'll whip around with the same hot money that moves everything else, because that's who's setting the intraday price.
Thank you for both those explanations. They clarify things.
Gold is a global asset. US inflation is a national number. Look at China - deflationary numbers.
So, perhaps we should adjust our analyses to the „sphere of influence“. I.e. looking for global yields and interest rates, weighted by the size of the economies?