The dynamics of the world economy depend largely on interest rates, which are linked to inflation, the rate at which producer and consumer prices rise.
But measuring inflation is not easy. It’s both art and science.
Arguably, the world’s number one inflation index is the U.S. Bureau of Labor Statistics’ (BLS) Consumer Price Index (CPI), which has been around for more than 100 years.
However, not all economists and business leaders are satisfied with the CPI. Its approach sometimes seems outdated and it only publishes once a month. It also relies on 477 employees to survey supermarkets, department stores, gas stations and hospitals, often simply noting retail prices – not exactly a 21st century scenario.
“Basically, they go to the store — whether electronically or in person — and write down the price,” said David Berson, chief economist at Nationwide Insurance. Tell market. “They’re comparing those prices to a month ago.”
This may be why the blockchain-based inflation index Truflation.com is attracting some attention right now. It collects digital data from about 40 “partners,” or sources, which provide a total of about 18 million data points, compared with CPI’s comparatively fewer 80,000 data points. Truflation also has a UK version.
New inflation indexes are also updated daily. If rising consumer prices eventually stabilize or start to fall, it should be able to detect changes earlier than government data releases.
Economist Paul Kluman wrote in a New York Times Column from late October: “I’ve been playing with a project called Truflation, which is said to use blockchain and is partially supported by a cryptocurrency type, and I suspect the project is designed to show that official inflation is vastly underestimated. Its data actually What’s shown above is a sharp decline in inflation over the past year.”
Never mind the mining of “cryptocurrency types” — Kluman is a well-known cryptocurrency skeptic. Notably, the Nobel Prize winner is taking blockchain-based inflation analysis seriously.
Comment Regarding last year’s Truflation, David Harris, chairman of Rockefeller Capital Management, noted: “Their inflation data last fall seemed prescient in that it signaled an improvement in the economy earlier than the Bureau of Labor Statistics. I expect more of this.” The website will provide investors with more ways to assess inflation trends.”
Elsewhere, the Base Ecosystem Fund invests in “next-generation on-chain projects based on Base, Coinbase’s layer 2 blockchain,” declare In September, Truflation was selected as one of the first six investment recipients out of 800 applications.
Its digital sources include NielsenIQ, Big Mac Index, Amazon, Walmart, Zillow, Trulia, Penn State MRI (Marginal Rent Inflation) Index, Real Capital Analytics, Yahoo, Energy Information Administration, OPIS, AAA Natural Gas Prices, JD Powers, CarGurus, Numbeo, Statista, CoreLogic, Kantar, etc.
cleveland federal live predictions
Truflation isn’t the first to try out real-time inflation forecasts.The Federal Reserve Bank of Cleveland created a real-time inflation index called “Nowcasts” as early as 2014, and now the bank has released the inflation data predict every month forward Official CPI or Personal Consumption Expenditure (PCE) inflation data is released. Its index is updated every morning at 10:00 am.
The idea is to inform consumers, businesses, financial markets and others about current inflation conditions and “likely future inflation conditions.” For example:
“If consumers are considering a loan, it can be helpful to know how quickly wages and prices will rise over the life of the loan – after all, it will be much easier to repay the loan with strong wage and price growth.”
The Nowcast model draws on “a small number of available data series of varying frequencies, including daily oil prices, weekly gasoline prices, and monthly CPI and PCE inflation readings.” according to go to bank.
It has had some success, claiming to be “more accurate than the consensus (mean) instant forecast from the Blue Chip Economic Indicators Survey” and “more accurate than the median instant forecast from the Philadelphia Fed’s survey of professional forecasters.”
Need instant instrumentation
Many believe real-time inflation indexes like Nowcast and Truflation are long overdue. Omid Malekan, author and adjunct professor at Columbia University Business School, told Cointelegraph: “There is a great need for independent inflation measures that are calculated more frequently than once a month.”
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“Today we have millions of prices to watch in real time and there is absolutely no reason to delay the release of inflation data in the first place – so we can look at them in real time if we want to,” explain Lars Christensen, economist and associate professor at Copenhagen Business School, said in a recent post on LinkedIn.
Stefan Rust, the company’s founder and CEO, told Cointelegraph that the view that the Bureau of Labor Statistics’ CPI is outdated and ripe for disruption “is the main reason we founded Truflation.” He explained that the new protocol tracks 18 million items, each with three price information, while the government “manually” collected 80,000 items, adding:
“Instead of tracking household spending through a rotating panel, Truflation uses a census-based model to track those spending.”
Of course, there’s no clear “right way” to track inflation, but that’s arguably another reason the new approach might be popular. “There is a lot of discretion in any statement when answering questions like how much weight to give to different goods or services,” Malekan said, adding:
“The Labor Department claims to be an independent observer, but its formula presents a serious conflict of interest because billions of dollars in cost-of-living adjustments for services like tip payments (used to protect against inflation) and Social Security depend on how we calculate inflation. .”
Rust echoed the sentiment that the government’s methods are not only outdated but also biased, telling Cointelegraph that the methods established by the government “are vertically integrated, biased, and editable.” They can do whatever they want with old data sets Change method and time settings. “
Related to CPI 97%
Danielle DiMartino Booth, CEO and chief strategist at QI Research, told Cointelegraph that overall, the emergence of apps like Truflation is “a very healthy development.”
Booth, who worked at the Federal Reserve Bank of Dallas for many years, was one of those who conducted the “stress test” of the Truflation model. The company provided her with the raw data so QI could perform relevant analyses. Booth said the index’s correlation with CPI since 2012 is 97%, which is very high.
As mentioned before, Truflation can be accessed on-chain – it is a node on Chainlink’s oracle network that feeds its inflation data into smart contracts on four blockchains: Ethereum, Avalanche, BNB Chain and Fantom. Cointelegraph asked Booth if it was important to her that Truflation’s data be on-chain.
“What’s important to me is the end product,” she responded. Is it accurate? Is there any correlation with CPI?
democratization of economic information
Sam Friedman, chief solutions architect at Chainlink Labs, sees things differently. Truflation’s updated inflation calculation method is verifiable, updated daily, and accessible on-chain and “represents the world we live in today,” he told Cointelegraph.
The app is not just for economic forecasters, but also for consumers who want to “understand the impact of inflation on their lives.” Many people have been attracted to the company’s eye-catching online dashboard and personalized inflation calculator. Friedman said:
“This bottom-up education will drive adoption and is very consistent with the idea of decentralized systems. Of course, workers in large institutions, SMEs, small businesses are also consumers.”
Software developers can now also access real-time inflation data when designing smart contracts for their decentralized applications. “They can cite Truflation with confidence as an independent data provider and help provide end users with cryptographic assurance that their data has not been manipulated,” Friedman said.
When Cointelegraph asked Truflation if it envisioned an audience/market beyond professional economic forecasters and institutional investors, Truflation’s Rust responded: “Yes, 100%.” He noted that there could be 500 million accredited investors worldwide — “But what about the remaining 8.5 billion people on the planet? “How do they get information about inflation and protect themselves from its effects? “
Does Truflation really need blockchain?
Truflation’s approach may require absolutely no blockchain. For some users like Booth, its on-chain availability is largely irrelevant. Still, Rust is at pains to explain that what sets Truflation’s methodology apart from others is that it is “transparent, continuously tested, and validated in real time using multiple sources.” Blockchain enables us to achieve this goal. ” The technology also offers immutability, censorship resistance, lower cost and “accessibility to everyone.”
Consider immutability. Rust said the government can sometimes “redact up to six months of historical data and reporting.” In contrast, “once data is written to the blockchain, it’s recorded forever.”
In addition, the project leverages blockchain-powered tokenization to significantly reduce costs.Data providers, hosting companies, and software and data builders can earn Truflation tokens (TFI), “represent their ownership and utility in the network.”
This also ensures transparency in governance, as token holders have voting rights in various protocol activities, including data category selection, market strategy, and token rewards. This is in stark contrast to the government model, “where the government can change its approach based on the whim of the government,” Rust told Cointelegraph.
Can it replace CPI?
Could Truflation’s real-time inflation index (or a similar index) one day replace the CPI as the leading inflation index?
Booth said that was unlikely.
Professional forecasters like her still want a way to compare what’s happening today with what happened in the past, and the CPI has been released regularly since the early 1920s.
It’s not static either. Its methodology has changed over the years, sometimes significantly. A more likely outcome, she believes, is that Truflation is eventually included in the CPI.
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Additionally, many mainstream economists seem to have only just heard of Truflation, so it may take a while for the app to gain real traction. In early September, Ed Yardeni, president of Yardeni Research, wrote in his “Quick Takes” newsletter:
“The overall CPI inflation rate in July was 3.2%. Truvlaki August’s trailing rate was about 2.60%, down from July’s 2.73% trailing rate…”
But when Cointelegraph contacted Yardeni, a well-known Wall Street economist, he declined to comment on the new models: “I have only recently started tracking them. So I don’t have a strong opinion on them yet,” he said.
Booth said the “ultimate test” for Truflation is whether it can be useful to those whose careers depend on making accurate inflation forecasts. If it achieves this, it could eventually be adopted by government agencies.
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