Will Inflation's 100-Plus Year Story Prove Different this Time?
October 2, 2025
If you have ever been told, or expressed it yourself, the well-known phrase that history repeats itself, then today we have an edition for you that fits the phrase.
To be fair, the more accurate phrasing, relative to history, is that history does not repeat itself, but often rhymes. This version emphasizes that it is the spirit of the historical storyline that repeats rather than history repeating in detail to the nth degree.
Strangely, relative to price inflation, history does in fact repeat if we focus on the consistency of its behavior via its end result of producing a double top.
Monetary historians are well aware of this behavior, and in some circles, it can simply be referred to as “inflation’s insistence on double topping.” This one-liner, in said circles, is well recognized relative to what it means.
Moving from the fringe and broadening out to the masses, few recognize this historical topic, let alone the spirit of the aforementioned one-liner.
For our part, we have intended to share this topic along the path of the last few years while in this price inflation era.
It always seemed untimely in that, along the path, the growth in price inflation was working its way lower. Few can entertain a secondary spike type of conversation while in the midst of the first top clearly putting in its high point and trending lower.
Okay, why now?
We are at a stage where it seems fair to ask the question, from the proverbial 10,000-foot view of whether price inflation will do what price inflation history has shown to do again and again, and that is to double top.
A double top is a formation where X measure moves upward, then recedes, only to then move upward again.
In the previous two years, price inflation measures have been stuck in an elevated range. That is, elevated from levels seen prior to this inflation era as well as elevated above objective target levels set by general policymakers, most notably the Fed.
Said differently, the aforementioned downtrend in the growth rate of inflation measures has stopped.
Interestingly, the Consumer Price Index (CPI), historically speaking, has displayed this behavior whenever there was a notable price inflation era unfolding. It is very easy to believe, once the initial spike in the growth in prices occurs and then works its way lower, that price inflation as an issue has come to an end.
History offers that it is more akin to the behavior of a hurricane. Think of the initial storm, a relative calm, then more storm as the higher winds lie waiting just outside of the eye.
Just as in the described storm, price inflation eras can leave the citizenry in a similar socioeconomic experience.
Think of the initial upward spike in the growth rate of prices, then a pullback from spike levels that offers relative calm, and yet, growth in prices that remain elevated that then give way to a second round of spiking growth rates in general prices.
www.thechartstore.com
The above chart of the Consumer Price Index (CPI) dates back to 1914, which offers 100-plus years of experience to draw upon.
In light of the obvious storyline painted by the data, there is little to comment on. As described previously, in notable price inflation eras, we see the initial spike in the growth rate of prices, which is then followed by a decline in said growth rate.
Similar to the aforementioned storm experience, the calm enters via a bottoming period only to see another spike in the growth rate in prices.
Our friend Ron over at the Chart Store has included red circles to highlight the process of the initial spike, the lull, and then the secondary spike, which ultimately brings on the double topping process.
The central question is will our current experience lead to this historical storyline as has unfolded consistently since 1914?
If your immediate response is that is not possible, we invite you to be careful with that view. Such experiences were not widely expected in the history shown, so broad expectations certainly do not bring with them immunity to a similar outcome.
We are playing with price inflation fire. As the government fiscal year for 2025 wraps up with the closing of September, we see yet another near $2 trillion deficit. This is an actual increase from fiscal year 2024, which seemed nearly impossible to eclipse.
Simultaneously, the Federal Reserve is cutting interest rates as the current price inflation landscape wants nothing to do with policymakers’ 2% price inflation objective as it posts an upper 2% to low 3% result. Cutting rates against that type of price inflation backdrop is inviting inflation issues going forward.
Interestingly, or more accurately stated, as quite concerning, we have broad market participants bidding up the price of gold on a relentless trend. Clearly, stated fiscal and monetary policies are not lost on them, to include geopolitical issues as well.
They offer major concerns via their bidding up of the monetary metal known as gold. Importantly, they did not suddenly decide that the shiny metal was something they wanted to collect. There is good reason for their concern.
BTW, in this 21st century gold has been an outperforming asset, so this continued performance is certainly not a new development. Its tremendous growth in price is a new development for a one-year time period.
As they say, records are meant to be broken. Perhaps the above storyline of CPI double topping will prove incorrect this go-around. Near-term months as well as near-term years will fill in the above history with our current era.
Timing is an important unknown in the above history, as there is no exact time as to how long it takes to begin the secondary spike, if we do in fact experience a follow-on spike.
In part, this is why we delve into the price inflation landscape so frequently. We know history offers notable follow-on issues once a price inflation era kicks in, such as we have experienced in recent years. This should prove to be quite an interesting process.
Let’s hope we escape the historical storyline in this era. Our fragile societal cohesion can ill afford another bout of notable price inflation, which would only add to societal stress, and through that, more fracturing.
I wish you well….
-Ken From Mind Your Stops