Blockchain: Trueflation Gauge for Transparent Real-Time Inflation

This article is a summary of the YouTube video ‘Blockchain provides transparent real-time inflation gauge, says Truflation’s Stefan Rust’ by CNBC Television

Written by: Recapz Bot

Written by: Recapz Bot

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How does it work?
True Flation’s blockchain-based inflation measures surpass critics, Wall Street, and the Cleveland Fed, while inflation is seen as stubborn and the Fed’s communication criticized.

Key Insights

  • The video discusses dueling economic data and the fight against inflation.
  • Stefan Russ, CEO of True Flation, explains their approach using blockchain technology to deliver real-time measures of inflation.
  • Critics argue that True Flation's data is high beta and overcorrects on the up and down inflection points.
  • True Flation believes their data is more accurate, using 15 million items compared to the Bureau of Labor and Statistics' 80,000 items.
  • Wall Street firms stress tested True Flation's data and found it to be ahead of the Fed by three to six months.
  • The project originated from the crypto world and has an expectation of dollar debasement and inflation.
  • True Flation was surprised by the traction their project gained, given that inflation was initially believed to be transitory.
  • The methodology and calculations used by True Flation are fully transparent and documented.
  • The Cleveland Fed also has a similar version called the now-cast, which supports True Flation's data.
  • Oswald DeMota, a finance professor at NYU, is hawkish on inflation and believes it is stubborn.
  • DeMota emphasizes the importance of not stepping back too soon from addressing inflation, as it can come back even stronger.
  • DeMota criticizes the Fed for playing games around inflation and suggests that less communication from them would be better.

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Transcript

Let’s dive a little deeper into the dueling economic data and whether or not the Fed is winning the fight against inflation. Joining me now are Oswalt DeMota, professor of finance at New York University Student School of Business, and Stefan Russ, CEO of True Flation, which uses blockchain technology to deliver real-time measures of inflation. Welcome to you both.

Stefan, I just want to start with you because when your gauge fell below 3 percent this week, or maybe it was last week, it garnered a lot of headlines. So explain exactly how this works and what it’s telling us.

Stefan: Basically, we use fresh data. We aggregate about 18 million items that we track daily. We take a modern technology-based approach to ensure the data used is actually fresh in the calculation. Critics would say our data is high beta, meaning that when prices are rising, our data overcorrects on the up and down inflection points. However, we believe our data provides a more accurate calculation since we include 15 million items compared to the Bureau of Labor and Statistics, which only tracks about 80,000 items with 477 employees. Based on stress testing conducted by Wall Street firms, we are ahead of the Fed by three to six months in some cases.

One more question before I bring in Stephen Oswald. When you look at the roots of this project coming from the crypto world, there seems to be an inherent expectation of dollar debasement and inflation. Are you surprised that your reading is posting a sub-3 percent?

Stefan: I never anticipated this project would gain as much traction as it has. We started when inflation was considered transitory and highly unlikely. But looking at the massive money printing in the last decade, we felt the need for an independent source of truth. Today, we track more items than I can keep track of myself. Our methodology is documented, tested, and fully transparent. The weighting of data and subcategories under the 12 categories that feed into the true CPI can be easily accessed by anyone.

Stephen, your thoughts?

Stephen: If Stefan has created a better mousetrap, we will all be interested in it. Now, I have a quick question for Stefan. Are you also capturing services inflation?

Stefan: Yes, we account for services inflation as well.

Stephen: Okay, because your index looks more like the goods index in the CPI than the overall index, which includes services.

Now, let’s bring in Oswald. Your recent slide deck has been making the rounds on Wall Street, particularly regarding your valuation calls. On the inflation point, you seem quite hawkish right now, while the Fed consensus is moving towards a skip or a pause. Can you explain that?

Oswald: The truth is, there is good news about inflation currently, but history shows that it is stubborn and doesn’t go away easily. If the Fed steps back too soon, it could lead to a comeback of inflation, which will be even more painful. The question is whether the good news about inflation will persist or if there will be a bounce back. We don’t know yet, and I don’t think the Fed does either. I prefer the Fed to be less involved, as their interference tends to complicate matters.

This article is a summary of the YouTube video ‘Blockchain provides transparent real-time inflation gauge, says Truflation’s Stefan Rust’ by CNBC Television