Good ol' Fashioned Inflation Like in the Late 1970s

If we still measured inflation the way we did during out last CPI inflation crisis, we'd say it is now at an annualized 9.6 percent rate based on February figures, reports CNBC's Fast Money:

Since 1980, the Bureau of Labor Statistics has changed the way it calculates the CPI in order to account for the substitution of products, improvements in quality (i.e. iPad 2 costing the same as original iPad) and other things. Backing out more methods implemented in 1990 by the BLS still puts inflation at a 5.5 percent rate and getting worse, according to the calculations by the newsletter's web site, Shadowstats.com.

"Near-term circumstances generally have continued to deteriorate," said John Williams, creator of the site, in a new note out Tuesday. "Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem.  Until such time as financial-market expectations catch up with underlying reality, reporting generally will continue to show higher-than-expected inflation and weaker-than-expected economic results in the month and months ahead."

Reason magazine's January 2009 feature from Robert Samuelson on how the last great CPI inflation was defeated in the early 1980s. Hint: it did not involve keeping federal funds interest rates near zero to create "stimulus."