How I Learned to Stop Worrying and Love the Guy With a Clipboard Checking the Price of Tube Socks in Toledo

I'm going to do my best not to lose it. But no promises.

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Dear Fellow Traveler:

We have AI that can write your college essays better than 90% of Americans.

We have cars that can drive themselves and avoid ditches.

And I have a computer in your pocket that tracks every burrito I’ve ever bought at Chipotle.

But how does the United States government measure inflation?

They send Dave from Omaha to Target (TGT) with a clipboard.

This is the same nation that runs the world's reserve currency…

I'm not making this up. Wish I were.

American Price Safari

According to the Wall Street Journal, our inflation data is less reliable.

But not because of the reason you assume.

Government officials say we don't have enough people to walk into stores and write down prices.

Follow me here…

The Bureau of Labor Statistics employs hundreds of "enumerators" who fan out across America monthly like some economic census taker from 1936.

"Excuse me, sir, how much for the Wranglers?"

Inflation is supposed to be how we measure the debasement of the dollar.

This CPI figure is tied to $2 trillion in inflation-protected bonds.

This idiotic process determines your grandmother's Social Security check.

Remember… Visa processes 150 billion transactions a year.

Amazon knows the price of every item sold in real-time.

Walmart's inventory system, updated every millisecond, can tell you the inflation rate of bananas in Boston down to the penny.

But America?

America has Dave. With his clipboard. In Toledo.

It’s Gonna Get Worse

According to this report, the BLS had to "guess" 29% of their price data using "different-cell imputation" in April.

To explain this in government terms… we couldn't find the price of cargo pants in Cleveland, so we used the price of pajamas in Phoenix and then had a beer.

Twenty. Nine. Percent.

That's not data collection.

That's Mad Libs.

What’s to blame…

The government hiring freeze.

We can't afford to pay people to collect the data that determines the price of money itself.

Bartender!!!

The Sacred Sham

When I graduated from Purdue University’s Agricultural program, I applied for a job with the United States Department of Agriculture. There were three reasons why I didn’t take the job: First, I wouldn’t be allowed to write about the markets anymore.

Second, my retirement fund would be Treasury Bonds because they were concerned about insider trading.

Third… the guy in charge of calculating wheat prices… did it all by hand and didn’t know how to use a computer. Hand to God.

So we have people who can’t use technology on one side.

Then, you have Congress and the people in Washington.

Nobody wants to fix this.

You know why? Because the CPI isn't designed to measure inflation.

It's designed to manage expectations.

It's designed to keep Social Security payments low, to make GDP look better, and to ensure that when Jerome Powell says inflation is "transitory," he can point to numbers collected by Dave, who couldn't figure out how to use the self-checkout.

Think I'm exaggerating?

I want to introduce you to the CPI's key adjustments.

These are real ways that CPI is measured, and they are economically insane.

First, we have Hedonic Adjustments:

Your laptop might cost twice as much, but it's "better," so we'll only count half the price increase. Don’t think about this too much, or your nose will bleed...

Then there’s Substitution Bias:

Is steak too expensive? We'll measure the price of chicken instead.

Can't afford chicken? Here's the price of beans.

The CPI assumes you'll eat worse food as prices rise, then measures that shift in expectations as "stable prices."

Third, there’s Geographic Smoothing.

Is Manhattan rent through the roof? They’ll say that it doesn’t matter, because apartments in Topeka are stable. Therefore, prices are just fine on average.

People spend a lot of money on economics degrees.

And they’re taught that this is rational mathematics.

Nope… this is a social science with a logic problem.

Someone Punch Me

Remember, this CPI figure that we’re doing by hand… it influences…

• Treasury yields

• Federal Reserve policy

• $2 trillion in inflation-protected bonds

• Every COLA adjustment in America

• Union wage negotiations

• Your tax brackets

We've embedded a broken thermometer into the heart of the American economy.

And it’s nuts because we could fix this tomorrow…

If we want to understand the real inflation rate…

Here’s a radical idea: ASK VISA.

Every single day, payment processors handle billions of transactions.

They know what you paid for gas in Gasburg, groceries in Greensboro, and that questionable purchase from that website at 2 AM.

ADP processes payroll for 20% of the U.S. workforce — they know wage inflation better than anyone.

But we can’t let go of Dave. In Toledo. With his clipboard.

The Political Protection Racket

Changing the CPI would require admitting it's broken.

If you admit the CPI is broken, you must admit:

• We've been lying about inflation for decades

• Social Security has been systematically underpaid

• The Fed has been flying blind

• Those "inflation-adjusted" returns you've been calculating are fiction

No politician wants to be the one who "changed how we measure inflation."

So, here’s what I recommend…

First… Stop believing CPI data.

It's not measuring what you think it's measuring.

Instead, track your own inflation. You can measure what you spend.

That would be your inflation rate.

Second, use our Sovereign strategy… because this is insane.

If the government uses Dave with a clipboard to measure currency debasement while running the money printer at warp speed, you should own some assets they can't print.

Finally… Laugh.

Because if you don't laugh at the absurdity of the world's largest economy measuring inflation like it's 1936, you'll cry.

The CPI doesn't measure inflation… it manufactures consent.

And it justifies how the money printer goes BRRR….

This is especially true when private data figures have put inflation well above the government numbers over the last decade… Much higher…

But at least the guy with the clipboard says everything's fine.

Stay positive,

Garrett Baldwin

Secretary of Toledo