The charts below illustrate how the money supply growth rate has vastly outpaced that of the GDP Deflator for the last eight years or so. As money supply is a key driver of price inflation, the great disconnection between the two, now the highest ever based on data starting in 1959, indicates that price inflation as estimated by the GDP Deflator could be vastly underestimated.
But if the GDP Deflator is correct, then surely it must soon turn and head upward. And should it ever gather significant momentum, this just might force the Federal Reserve to tighten monetary policy leading to a slowdown in the money supply growth rate and a collapse in asset prices.
In any case, there are more headaches ahead for economic policymakers as the U.S. economy surely must now be a step closer to a period of (official) stagflation, perhaps on an unprecedented scale.