How is one to explain this chart? At first glance I see three quick explanations: 1) the money supply is overstated, 2) the CPI is understated, and 3) they're both accurate which must mean CPI will eventually have to surge once the additional money is fully reflected in the items making up the index.
The first is unlikely - why in the world would the Fed overstate the money supply? The second is very likely, at least to some degree. If so, price inflation is currently higher than reported (which many seem to agree with). But is the actual price inflation high enough to bring the chart below down to more normal levels? And if it is, why is this not reflected in nominal bond yields and break-even inflation rates?