As expected, reporting on the state of the economy has become a house of mirrors. It’s hard to tell what is true from what is merely politically motivated perception management.
For years, we’ve heard that inflation was merely transitory and somehow was always “cooling” despite obvious evidence of the worst inflation in 40 years at least.
Now that Trump is in charge, the tune has entirely changed. We see now the mainstream financial press generating serious concern about rising inflation, even though it’s not even clear from the official data that it is true.
To be sure, there is plenty of pent-up anger out there at the pillaging of income via the printing press that has taken place over four years. This entire time, there has been unity in denial between the agencies, the media, and communications from the previous administration.
We awake from these years with new awareness of what has happened to the dollar at home. The public is rightly furious and wants answers.
The question of the moment concerns what is happening right now. If you look at so-called sticky prices, we are at a three-year low of 3.6 percent—not great but an improvement, which is all we are really looking for.
If you think about it, with all the digital tools we have today, it makes no sense to rely so heavily on old-fashioned bureaucracies, especially when we know for sure from the last four years that their methods have dramatically underreported inflation based on data from industries. In housing, cars, groceries, energy, and services, the CPI has failed to capture the fullness of the problem of inflation for years now.
At last, we have now a highly credible alternative in Truflation. It is gaining attention by the day as the reporting and operations have improved at the pace we’ve come to expect in the digital world.
Back to the hall of mirrors. Just as all the headlines are expressing panic about inflation, we might check to see what Truflation is saying. Remarkably, it is reporting a real-time inflation rate that is below the Fed’s own targets! We have not had an inflation rate this low since the end of Trump’s first term.
That’s just the facts. I’m just reporting the data as we know it.
Let’s try to tease out an explanation. It is not merely because Trump is in charge now, though that does change public psychology.
Here’s how this works. Low inflation expectations lead spenders to do less panic buying for fear of higher prices later. They figure that this is a good time for frugality, which is why we are seeing all these slogans out there about not spending so much in 2025. This change in public psychology has absolutely boosted the personal savings rate.
It is now up to 4.6 percent, which is rather interesting and perhaps surprising.
This increase in personal savings has a counterposing effect on the rate at which money changes hands, or the velocity of money. It is falling in response to the new frugality. A falling velocity puts downward pressure on prices so long as nothing else changes. You can have a rising pace of money creation but a greater rate of decline in velocity and end up with a lower rate of price increases.
There are millions of complicating factors to this simple formula, but it is helpful nonetheless in accounting for what might otherwise be hard to understand. In any case, that is my core analysis of the reason for the sudden fall in the rate of price increases.
To be sure, this could turn around any day, and we can be certain that Truflation will track that too. There is no political bias or manipulation in these numbers. The site merely reports what their machines gather with no room for massing it this way or that.
Now we find ourselves in this awkward situation. Since around the time of the inauguration, we have the first good news to report on inflation trends. But it is not being reported. Exactly the opposite is appearing in the headlines of all the legacy media, leading people to believe that the inflation problem is getting worse, not better.
Do you see what I mean about a house of mirrors? For years, the truth about the decline in purchasing power has not been in the headlines. Quite the opposite. In the course of four years, the dollar has lost domestic purchasing power value of 25-40 percent depending on how you calculate it. All this time, the public has been gaslit about this incredible reality.
Now that we see actual improvements taking place, the very opposite is hitting the headlines.
You already know where I’m going with this. We are right to suspect that this is all aimed at Trump, hopefully to panic him into some extreme reaction that would deploy price controls or some other disastrous path. With better information, the White House could easily counter these demands by simply pointing to better data. We have that now.
Inflation is far from being beaten. And to be sure, the latest data showing falling rates may not last. The good news is that the money stock has indeed been falling since mid-January, which further reduces upward pressure on prices. If these trends continue, we could see inflation consistently back to target by the summer, provided no one in power panics.
In economics as with everything, we need to look below the surface and adopt a position of incredulity on the mainstream headlines. Everything these days is being fed through a political machine built to manipulate public perceptions. The only way around that is to look at the actual facts on the ground using tools that are nonpartisan and credible. Once we do that, we leave the hall of mirrors for the gorgeous reality outside the building.
