So much of the world’s economic steam depends on interest rates, which in turn are tied to inflation, i.e., the rate at which producer and consumer prices are rising. But measuring inflation isn’t easy. It is as much art as it is science. The world’s number one inflation index, arguably, is the United States Bureau of Labor Statistics (BLS) Consumer Price Index (CPI), which has been around for over 100 years.Not all economists and business leaders are happy with the CPI, however. Its methodology sometimes seems antiquated, and it publishes only once a month. It also relies on a workforce of 477 people who canvas supermarkets, department stores, gas stations and hospitals, often simply jotting down retail prices — not exactly 21st century.
“Basically, they go to stores — whether it’s electronically or in person — and write down prices,” Nationwide insurance chief economist David Berson told Marketplace. “They compare those prices to a month earlier.”This may be why Truflation.com, a blockchain-based inflation index, is now attracting some attention. It gathers digital data from some 40 “partners” or sources that collectively offer up to around 18 million data points, compared with the CPI’s relatively modest 80,000 data points. Truflation also has a United Kingdom version. The new inflation index is also updated daily. If rising consumer prices are finally plateauing or beginning to drop, it should be able to pick up changes earlier than the government gauge. Economist Paul Krugman wrote in a New York Times column in late October: “I’ve been having some fun with a project called Truflation, which supposedly uses the blockchain and was backed in part by crypto types and which I suspect was intended to show that official inflation was greatly understated. What its numbers actually show is a steep decline in inflation over the past year.”