Inflation is coming.
It’s taken seven years of ZIRP and over $4 trillion in QE, but the Federal Reserve has finally begun to unleash inflation.
It won’t show up in the official inflation measures like the Consumer Price Index CPI for a while. And this is intentional. The Fed knows that CPI doesn’t measure real inflation.
How do we know this?
The Fed itself published a paper back in 2002 admitting its official measures of inflation (CPI and PCE) do a horrible job of predicting future inflation. The paper received almost no publicity for the obvious reason that it would reveal that the Fed’s whole emphasis on CPI and other official measure of inflation were a massive scam.
So what does predict future inflation accurately?
We see that past inflation in food prices has been a better forecaster of future inflation than has the popular core measure…Comparing the past year’s inflation in food prices to the prices of other components that comprise the PCEPI (as in Table 1), we find that the food component still ranks the best among them all…
I want you to focus on these two admissions:
1) The Fed has admitted that its official inflation measures do not accurately predict future inflation.
2) The Fed admitted that FOOD prices are a much better predictor of future inflation. In fact food prices were a better predictor of inflation than the Fed’s PCE, non-durables goods, transportation services, housing, clothing, energy and more.
Put simply, if you want to predict inflation well… you NEED to look at food prices.
The process of tracking food prices begins with agricultural commodity prices: wheat, soy beans, lean hogs, sugar, rice, and the other stuff that is used to make “food.”
With that in mind, agricultural commodity prices look to be bottoming/ breaking out of a massive falling wedge pattern that has been developing over the last SIX years.
This chart is extraordinarily bullish with an upside target of 26-28. And when this hits, agricultural prices will spike, unleashing the first wave of an inflation tsunami.
The $USD has already picked up on this, dropping hard against EVERY major world currency thus far in 2017.
Put simply, inflation is coming. And you’re not taking steps to actively profit from this, it's time to get a move on.
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Chief Market Strategist
Phoenix Capital Research