Inflation Brief #2: Can Inflation Be Measured?
The short answer to this question is, “probably not.”
If a known quantity of empty money is dumped into the already known quantity of veteran money, we can say that the inflation rate is that ratio of the first to the second. $10 of empty money atop $100 of veteran money is a 10% rate of inflation and thus a 10% rate of devaluation. The original $100 now purchases only $90 worth of the same production (pre-contamination) once the prices are bid-up throughout the economy.
Of course, it is unlikely that either the quantities of the empty money or of the veteran money can be known; therefore, the ratio between the two cannot be calculated.
And as we stated before, the CPI is a soup from which the inflation cannot be distilled.