From ZeroHedge:

Devonshire: True Inflation Is Three Times Higher Than Officially Reported

by Tyler Durden

May 9, 2017 5:13 PM

A fascinating, recent report by the Devonshire Research Group, whose recent work on Tesla was featured here one year ago, has moved beyond the micro and tackled on of the most controversial macroeconomic topic possible: what is the true rate of inflation. What it finds is that, like others before it most notably Shadowstats and Chapwood, the accepted definition of inflation, or CPI, is dramatically understated for various reasons, both political and economic.

For those unfamiliar with the "alternative" explanations of inflation measurement, and the implications if CPI is indeed drastically underestimating true inflation, the report is a real eye opener.

Devonshire sets the scene by noting that a wide variety of Price Indices are used to adjust for the effects of Inflation on the economy. These adjustments are widely applied to derive a number of common measures and underlie many critical economic and asset management concepts 

• Price Indices: the Consumer Price Index (CPI), the Producer Price Index, the GDP Deflator 
• Economic concepts: the Standard of Living, Real Income and Output, Real Economic Growth 
• Asset Management concepts: Real Interest Rates, the Risk-Free Rate of Return, the Cost of Capital 

These indices and concepts are intimately commingled which is leading to a wide ranging divergence between
reality, published government statistics and the assumptions used for investment decisions.

As noted above, the reason why inflation measurement and reporting has become so controversial is that it is "less a measure of purchasing power (and therefore a financial tool), and increasingly a process of affecting macro-economic policies (and therefore a policy lever)." Just see Venezuela which recently stopped reporting inflation altogether to avoid rising social disorder and anger.

The report goes on to note that while in recent decades, transportation/energy components of prices have seen dramatic fluctuations as a result of oil crises, and subsidy programs, if one treats “transportation” and “other” as exceptional assets, and follow only US gov’t stats, the modern investment age has the feel of stability. In fact, viewed from a longer perspective, the rate of inflation, once volatile from year to year, “flattened” out to the “accepted” 3% / year

Read the rest here: