To make people feel better about high oil, it is adjusted for inflation and we are told how today’s prices are much less than the record inflation-adjusted price per barrel. That used to work, except now the previous peak in late-1979/early-1980 is within a few “inflation-adjusted dollars” of today’s close. Click here for a nice chart and click here for some key dates in oil history (inflation-adjusted of course!)

Almost everything is adjusted for inflation these days, not just energy. You can find inflation-adjusted data on average earnings or food or education or housing or gold or wheat or corn (you name it!).

All these efforts are meant to convince us that current prices are nothing to worry about. After all, according to the experts, prices are supposedly less than extreme peaks that formed decades ago. Since I live in the here-and-now, I am not soothed by this strategy. What bothers me today is that if you look into the items I have mentioned, almost all of them are being mentioned at the same time. Right now! And if you pull up the historical inflation-adjusted records, you’ll see that current prices are often higher than or roughly equivalent to the inflation-adjusted records.

So you might imagine that when I listen to economists and fund managers and “financial journalists” telling me that inflation is not so high, I wouldn’t mind if they choked on their inflation-adjusted hot air. “Bulloons” were out in force to downplay the PPI data today. Hearing CNBC’s editor Dennis Kneale say that current inflation is “no big deal” and that it never will be is just classic. But while I expect to hear stupid stuff like this from him, it’s more troubling to hear the Fed’s #2, Don Kohn say the following:

“I expect the run-up in headline inflation to be reversed and core inflation to edge lower in the next few years.”

AND

“I do not expect the recent elevated inflation rates to persist. The adverse dynamics of the financial markets and the economy have presented the greater threat to economic welfare in the United States.”

It seems that Kohn is looking at a new figure I call “Inflation-Adjusted Inflation.” He has been downplaying and ignoring inflation for many months. Today he is claiming that the inflation we have now is going to head lower “in the next few years” and that it will not persist. He has no clue. He and the Fed failed to forecast the inflation we have now. What makes anyone believe he has the economic crystal ball to tell us that today’s “Inflation-Adjusted Inflation” is going to decline and when it’s going to decline? He has no clue.