Examining Inflation

[WFJ]

The number of investors who have successfully used Inflation as a valuable input into investment decisions is not significantly different from 0. One will generate more financial returns by working a minimum wage job and investing the proceeds in an index vs. studying and making decisions based on inflation. One can make a decent living providing financial firms reports with complex data and models estimating inflation to be used to market one investment over another (one can easily justify higher or lower inflation estimates depending on what a firm is trying to sell), but for an ERE individual, there are more interesting/value added hobbies to pursue.

[JCD]

...but for an ERE individual, there are more interesting/value added hobbies to pursue.

With all due respect, I think the word interesting is an inappropriate word to use. It might be for you, it might even be for the majority of ERE'rs, but I don't think it can be universalized.

As for the question of payoff or value, I think that is indeed an open question, depending on who you are. If one could get a 1% payout on 1 million, it would certainly be less than what is being offered in today's jobs in the USA. If you are EREing in a less economically prosperous country, that same number may not be true, assuming you can legally work at all. Certainly compared to say doing Mechanical Turk for 2 bucks an hour, it would be better to get that 1% on a million.

If you mean "value" in the sense of producing value for humanity, I will concede much work humans do is of little value, even from a human-centric view. Perhaps the world can be organized better, perhaps it can't, but for now, humans make judgement on where capital goes, so it is at least as valuable as any other job you'd find in one of David Graeber's book.

The last question is, is there any value to be had? Can one gain 1% by looking at financials, technicals and macro compared to the average index fund? I will accept that this is a debate without end, but I don't think anyone claims that the majority of people should be playing in the stock market on the side. Speaking just for myself, one of my larger concerns around indexing is basically what Mike Green describes. In summary indexes are a flows based system where generational lift will either increase or decrease the value of the index. Depending on what the flows are doing, you should or shouldn't invest in an index. I'm not saying a flows game is bad, but you have to accept that is the game you are playing. If you don't like that game, you must find another. Even if you don't increase your wealth overall, if your economic cycle does not follow everyone else's, you may gain the benefit of buying cheap things when others must sell (due to flows). That seems like a decent goal to have, even if you gain 0% additional return from the market itself. These of course are just words, if one can find non correlating assets is an open question, which always depends on a uncertain future. If COVID had been a computer virus that literally destroyed our computing infrastructure instead of a human virus, we'd have a much different set of outcomes. Owning big tech or stocks like Zoom would have looked foolish rather than smart. One must place your bets accordingly.

[Mister Imperceptible]

By the way, M3 stopped being reported in 2006:
https://fred.stlouisfed.org/series/M3

Where do we put the over/under for the reporting of the M1 series to be altered? 2029?

Never mind, looks like they just discontinued/altered M1 also:

https://fred.stlouisfed.org/series/M1

NY Fed suspends its GDP tracking model

https://www.newyorkfed.org/research/pol ... rview.html

“Suspension Notification
The uncertainty around the pandemic and the consequent volatility in the data have posed a number of challenges to the Nowcast model. Therefore, we have decided to suspend the publication of the Nowcast while we continue to work on methodological improvements to better address these challenges.”

Note that there was no issue with their model for the first 18 or so months of the “pandemic” until now.

[Campitor]

Even if you don't increase your wealth overall, if your economic cycle does not follow everyone else's, you may gain the benefit of buying cheap things when others must sell (due to flows). That seems like a decent goal to have, even if you gain 0% additional return from the market itself. These of course are just words, if one can find non correlating assets is an open question, which always depends on a uncertain future. If COVID had been a computer virus that literally destroyed our computing infrastructure instead of a human virus, we'd have a much different set of outcomes. Owning big tech or stocks like Zoom would have looked foolish rather than smart. One must place your bets accordingly.

And there's the conundrum - the world's markets and the interrelatedness of it all make this a very hard task to do for the lone individual. So the question must be asked, from an ERE perspective, what is the best use of that analytical brain power?

1. Should we be tracking inflation whose metrics are skewed to very specific markets and populations/age groups?
2. Should we be reading every market trend and cyclical event to determine if cicadas will devour the sesame seed production of a particular commodity market so we can benefit financially?
3. Or is our time better utilized learning and practicing increased resiliency and removing our dependency on markets which can fluctuate unexpectedly via unforeseen circumstances?

I understand that humans are capable of pursuing multiple goals but time is finite and I'm guessing most humans will only have enough time and energy to focus on 2 out of the 3 above. It's better to be a warrior in a garden than a gardener in a war (hint: #3 is the warrior).

[JCD]

@Campitor

I could respond in a lot of different ways, but let me try to circle around my view of the landscape of ERE while making a response.  First of all, is ERE a monolith or a bunch of different practices that anyone can use as their situation requires?  If it is a monolith, then we could establish if a particular activity belonged or not.  If it is a bunch of different ideas, then each forum here could be a spoke and anything within that spoke would be possibly valid, even at the risk of contradicting the other spokes.  This is the fox vs hedgehog issue and the way I read your response suggests you prefer a hedgehog approach.  I submit to you that ERE is, at least to me, not a hedgehog system.  

It seems to me like ERE is a lot of little things, "Renaissance" Skills, each which can be valued or ignored as circumstances require.  Jacob has even said he put the forum in so many people could tell their story about how they got or are on the journey to ERE.  ERE generated a dozen other variants like fat fire, lean fire, MMM, etc.  Of course you might say that there is a true ERE and it holds certain priorities, that it is an integrated system while I argue something that sounds a bit like no true Scotsman.  Fox and hedgehog speaking past each other.

Even still, if you gave a fox argument, you might say given my overactive discussion on this topic, it might be valid to warn me in particular that I'm at risk of becoming a hedgehog.  I think that would be a valid point, if not for a few other elements.  To quote the wiki:

"Early Retirement Extreme (ERE) is a movement of individuals integrating ideas from anti-consumerism, DIY, the Renaissance man ideal, home economics, individualism, environmentalism, and rentier capitalism toward the goal of achieving financial independence extremely rapidly."- https://wiki.earlyretirementextreme.com ... Philosophy

Financial independence is right there, along with home economics and rentier capitalism.  That seems like it would justify an interest in financial topics.  Then you point at being a gardening warrior.  I get the apple stock vs Apple stock argument, I get the sustainability argument, I get the "T-shaped" person vs specialist.  Given certain circumstances, I would agree from a personal level I should invest more in the gardening side.  However, a garden works better for a settler vs a nomad.  A nomad may have other skills they pick up, but in general nomadic skills tend towards traveling light and trading skills.  Understanding underlying economic systems, understanding whom you trade with and what they think are all elements for the nomad.  A fox accepts that a nomad has different needs than a settler.  Jacob allowing everyone to have their own ERE stories with very divergent systems is a very foxy view.  A hedgehog assumes one system will work.

Ironically, I believe some argued the reverse when I said I thought that the inflation rate was good enough for the average person, because at its core it is a simple tool to estimate long term financials for retirement.  I still think that it is useful enough to create a rough estimate, even if it is inaccurate to the particular ERE lifestyle.  Basically I'm suggesting it helps one think about breathing room in how they do their own personal plan to reach FI so they can handle unexpected events, which is the entire point you are making about resiliency.  By using a rough measure, you can decide your own level of security, beyond just the 4% rule. At some point the financial piece should matter less if you've reached FI, unless that is part of your FI plan.

Going back to folks like myself who tend towards the markets side of ERE rather than the gardening side, is resiliency only an individual goal or a collective goal?  I recall seeing some folks wanting to create an ERE town.  That is a very collective effort, suggesting ERE can include collective efforts.  In the same way, if some folks tend towards markets, spending their time on that element of ERE, does that not collectively give the gardeners more ability to work on the gardening side, collecting wisdom for us more market oriented folks to use.  If I'm the extreme case with an interest in inflation, then I probably should be one of few in the community paying that level of attention to it.  For someone else who is into gardening extreme and is the extreme poster on that topic, I think that should be celebrated. I certainly value it as a resource.  I want a foxy community, with lots of foxes who contradict each other, respectfully.

Let me finish up on a semi-related topic of the concept of a Wheaton scale and the illusion it gives(*).  The Wheaton scale suggests hierarchy, something humans love and appear to need.  It suggests there is a top level ERE skill or a top level internet troll or a top level juggler.  Those at the top of their respective areas are in some sense superior.  I don't agree with that sense, rather I think they are superior in a given environment.  Will a wonderful gardener be superior to a wonderful investor?  That is like asking if a concentrated portfolio is better than a diversified one.  Diversity is better in some cases and concentrated is better in others.  Since no one knows the future, the best we can say is to make your bets and make sure you have hedges.  If ERE as a community became a concentrated monolithic hedgehog, it might turn out wonderfully, if we bet right.  A diversified portfolio of skills on the other hand may survive much better if the bet was wrong. You might say, but how can "Chop Wood, Carry Water" ever be inferior? I'd point you to Socrates and his life's ultimate outcome. The argument for the need for evolution is that environmental pressures change and no creature can be fully adapted for all environments. I see the contradictions between the desire for a hedgehog-like view, with a single Wheaton-system with a set of specific skills, yet I'm skeptical that it is the intention of ERE to be hedgehog-like.  I think ERE is meant to be fox-like, at least at a community level and this means at least for some of us, specializing in a skill set has some value for the community as a whole.  Could we as individuals suffer relative to those who specialize elsewhere? Absolutely, but at least those specialists will be there when we need them.

(*) I am not saying the tool isn't useful. I'd say its value outweighs the issue, but it does not eliminate the issue. What philosophy doesn't have issues?

[Campitor]

@JCD

I'd like to clarify one thing. Bullet #3 in my previous post wasn't about a warrior in a garden. Bullet#3 is actually the path to becoming a warrior and bullet #1 and #2 are the gardens. So in my analogy, it's better to spend your time becoming a warrior (becoming more resilient and less dependent on the market/consumerism) first and then focus on #1 and/or #2.

First of all, is ERE a monolith or a bunch of different practices that anyone can use as their situation requires? If it is a monolith, then we could establish if a particular activity belonged or not. If it is a bunch of different ideas, then each forum here could be a spoke and anything within that spoke would be possibly valid, even at the risk of contradicting the other spokes. This is the fox vs hedgehog issue and the way I read your response suggests you prefer a hedgehog approach. I submit to you that ERE is, at least to me, not a hedgehog system.

While I don't believe ERE is a monolith, I do believe the term "ERE" itself encapsulates a set of ideas that are interrelated and can't be separated from the whole. And if I someone asked me what actions to focus on when commencing their ERE journey, it would be to increase their resiliency and lessen their dependency on the consumerist lifestyle.

[WFJ]

And there's the conundrum - the world's markets and the interrelatedness of it all make this a very hard task to do for the lone individual. So the question must be asked, from an ERE perspective, what is the best use of that analytical brain power?

1. Should we be tracking inflation whose metrics are skewed to very specific markets and populations/age groups?
2. Should we be reading every market trend and cyclical event to determine if cicadas will devour the sesame seed production of a particular commodity market so we can benefit financially?
3. Or is our time better utilized learning and practicing increased resiliency and removing our dependency on markets which can fluctuate unexpectedly via unforeseen circumstances?

I understand that humans are capable of pursuing multiple goals but time is finite and I'm guessing most humans will only have enough time and energy to focus on 2 out of the 3 above. It's better to be a warrior in a garden than a gardener in a war (hint: #3 is the warrior).

#3.

[white belt]

What about measuring the price of items in gold as the denominator rather than a fiat currency? See here: http://pricedingold.com/

Using charts from that site one would come to the following [counter-intuitive] conclusions:

-S&P500 is currently on par with prices in the late 1960s and half of its peak in the dotcom bubble

-U.S. home prices are relatively cheap at the moment, less than 1/3 of their peak in the mid-2000s

-Yale college tuition peaked in 2000 and is now ~1/3 of the peak, which is about on par with 1986 prices


I'm unsure if gold supply is steady enough to use as a stable denominator and not skew data due to outside factors, but it certainly seems more stable than most fiat currencies. I'm also not really sure what to do with this information. I guess pile money into assets that are undervalued historically and sell assets that are overvalued historically? But that assumes you believe in a mean reversion hypothesis.

[JCD]

What about measuring the price of items in gold as the denominator rather than a fiat currency?
... I'm also not really sure what to do with this information. I guess pile money into assets that are undervalued historically and sell assets that are overvalued historically?

There is a sublime madness in which we humans seem built to desire what is known as "absolute". Be that a God or currency or country or self, we back things under the assumption that it is an absolute. God's will. Fate. Physics. Math. Death and taxes. Gold fits into that basket. Some folks think crypto does too. Firstly you have to decide what is the absolute value and what is the relative value. If you buy into the antifragile thesis, things that are older are more likely to be near absolute. We make systems of analysis to try to understand "relative" things to these absolute views. Is the absolute value of the dollar:

A. It's relative value to gold/bitcoin/other currencies.
B. 1 USD divided by M2/3/6 or whatever supply side view
C. Demand/Momentum (e.g. dollar milkshake, Velocity of money, etc.)
D. Mix of B and C using something like 1 / M2 * Velocity
E. Weighting the above based upon other people's beliefs.
F. Average of all above ideas.
G. Something else entirely.

The way you anchor your view changes how you value it. Of course, even absolutes change. Bitcoin halving. Miners mining gold. Then there are other forms of exceptions that are thrown out by the system. Two miners mining the same coin at the same time causing a fork. Direct attack on the chain via a large enough actor to destroy the value. Gold purity levels. Central banks buying or selling gold/crypto. Legality of holding assets. Euro dollars being created by people who can't actually print dollars and aren't tracked in the metrics. All of these sorts of issues impact "absolute" concepts we play with. Once one digs in, once is forced to conclude at least in the financial system it is turtles all the way down. What you do about it depends on how you want to play. Much of my thinking and analysis of this comes from The Gervais Principle, and in particular the last part.

My apologies for putting this in flowery language, but I think much of finance ends up as tribes based upon human desires. At the end of the day there is no known, absolute. Turing and Gödel more or less killed that hope. Elsewhere I pointed to Münchhausen trilemma which captures the same problem. So, what engineering solutions do we have? The only solution I'm aware of is antifragile. What psychological solutions do we have? Basically momentum/technical analysis. One suggests using gold, the other bitcoin. How about economic solutions? They suggest money supply style solutions. Perhaps PPP or inflation style metrics. What my esteemed forum contributor @Campitor suggests by implication is exiting the game of finance as much as possibly. All have valid and invalid states. Confiscation or extreme taxation of land destroys your ownership of gardens while your gold is safely stored in a vault in another country. Confiscation of your gold at the border vs memorizing 12 words in a password. etc. etc. No method is full proof and all methods have limitations.

As for gold denominated measures in the day-to-day practicalities, I think if you use it as one of several valuation techniques, it is likely useful. Using other completely different techniques may also be wise. See this thread for a start in thinking about that, to say nothing of alternate forms of investing like skills or gardening. If you use it as the only measure, I think you're attached to a single tribe with all the limitations that it creates to be tribal.

Edit:

Let me add that gold has many enemies, like interest rates, Fed taper and obviously the value of the dollar. The fact that interest rates are at historic lows with a belief they will never go up is in fact a element of gold's current value. If interest rates were to go back up to say 5% gold would likely fall. That hits on the reflexive nature of all assets. The beliefs in them impact the values which impacts the buying . That is momentum. Gold too is impact by this and many other things like India buying up gold during certain seasons and selling it in other seasons, revolving around crop yields. I'm not expert enough to get into the practical elements, but hopefully the above gives a system for thinking about denominating any asset by any other asset. Personally I think house prices should be denominated in pizza. How many home delivers does this home cost? All else is relative, Pizza is eternal.

[sky]

The true, absolute value of any currency can be compared to other currencies, metals or coin by the amount of said currency required to purchase a 50lb sack of lentils that day.

[JCD]

The true, absolute value...

Yes, but are those absolute values or relative values (or "absolute" only for a given timestamp)? Imagine claiming this statement was absolute: The only things certain in my life today are death and a tax rate of 11.382%. Is that absolute? Even if you said death and taxes at x tax rate(s), it would be relative to location (tax rates vary by country) and time. Not particularly absolute. Still pinning it down to a time makes it sound absolute.

Imagine Jeff Bezos sold every share of Amazon today by dumping it all on the market today in a "Market Order". A Market Order is a order which buys or sells at the whatever the market will buy or sell the order for. In other words, let the market decide the price. Would he get today's Amazon shares sold at the quoted ticker price for his entire market order? Of course not. The massive dump of stock on the market would find there was no bidder prepared to buy that amount of stock and thus the price would go down until a bidder is found. Therefore, even market prices is an illusion given a sufficiently large order. Or to go back to Lentils, imagine you try to buy out all the Lentils in your city. Would the price of the last bag vary in price compared to the first? I'd suggest it would. So at best if you try to formulate an absolutish statement, you can say "The price of a single x which when denominated in gold, based upon the last transaction known to the market I measure to purchase gold indicates y cost at time z." That is not my idea of an absolute.

[Campitor]

What my esteemed forum contributor @Campitor suggests by implication is exiting the game of finance as much as possibly.

Actually that's not what I'm implying at all.

Self-reliance and non-consumerism allows me to aggregate money and knowledge that can be repurposed for any number of things. I can invest this extra money in the market, purchase land, learn a new skill, or build a home. I have the freedom to take risks that would be unadvisable to anyone with debt or addicted to a consumerist lifestyle. I'm now a "warrior" in the garden. It doesn't matter what financial battles come my way because I'm prepared for war.

But for the record I'm content living simply. Life is short and I want to focus on meaningful things and avoid the hedonic treadmill. I don't want self-imposed golden handcuffs.

[JCD]

Actually that's not what I'm implying at all.

Self-reliance and non-consumerism allows me to aggregate money and knowledge that can be repurposed for any number of things. I can invest this extra money in the market, purchase land, lean a new skill, or build a home....

And there's the conundrum - the world's markets and the interrelatedness of it all make this a very hard task to do for the lone individual. So the question must be asked, from an ERE perspective, what is the best use of that analytical brain power?
...Or is our time better utilized learning and practicing increased resiliency and removing our dependency on markets which can fluctuate unexpectedly via unforeseen circumstances?...

@Campitor If that is not what you are implying, then why would you be against an interest in observing inflation from an investing prospective, as well as a historical method for understanding where "we" come from? I find both inflation as an economic tool interesting as well as the historical means to see how people's relationship with money and stuff has changed over time. If your point is that the existing economic engine we have today is likely doomed due to climate change or other "End of growth" I'm not going to dispute it, even if the timeframe is unclear. If you prefer going towards simpler solutions "apple vs Apple" I totally understand why, it isn't an irrational conclusion. My only doubt has been if that is the only solution in a ERE framework.

In a climate change/cooking analogy, is the earth going to be rare or well done? In a well done scenario, gardening near the metaphorical north pole(*) may be about the only sort of solution. In such a case, if medium well done, I don't think studying inflation is going to matter, instead a Burry style "buy water" might matter, assuming rule of law is maintained. If not, an Alpha strategy + guns makes more sense. Inflation will matter in the sense that stuff will go up in price, but in reality it just will quit being made as life gets harder or dies off. This is what I thought you were getting at, in which case, I totally respect that conclusion and method.

(*) I have not dug into the studies enough to know where the actual ideal spot is in a well done scenario.

If it is rare, then we'll still have people buying and selling things, and perhaps looking at older products and how they were produced might add insight into the behavior change towards sustainability and higher prices. Looking not just at inflation but the causes might add insight into this as well. Depending on how gov'ts reacts, you might also find knowing how monetary phenomena work useful. All this does depend on the value you get from this sort of analysis and if you enjoy doing it.

I can see how you might say, "Sure I could do any of these things, they are technically valid in ERE but why bother when there is risk of a well done scenario and apples are as good as Apple?" If that is what you are thinking, that all makes sense.

If I've completely missed my mark on your mental model (e.g. Climate change resiliency), then can you clarify how the two quotes above are not contradictory, at least as general advice (rather than your personal preferences)?

[Campitor]

*** Part 1 ***

@Campitor If that is not what you are implying, then why would you be against an interest in observing inflation from an investing prospective, as well as a historical method for understanding where "we" come from?

For me the data regarding inflation is too narrow, too politicized, and doesn't account for substitution bias in any meaningful way for it to be used effectively as a means of identifying real-time investments strategies.

Earlier in this thread Riggerjack mentioned the sudden rise in price for shipping containers despite the multitude of shipping containers in existence. This rise in price had a cascading effect on the market as shipping containers became harder to get. The price increase was caused by several issues that impacted the availability of containers: the ship blocking the Suez Canal, bottlenecks in certain ports (California and China), and the rush to ship orders to vendors who wanted to take advantage of the relaxed covid restrictions. Studying inflation would not have identified the investment opportunities caused by the container shortages. Why? Because inflation numbers lag behind real world activity. By the time the reported numbers show a trend, you're already behind the curve.

[JCD]

For me the data regarding inflation is too narrow, too politicized, and doesn't account for substitution bias in any meaningful way for it to be used effectively as a means of identifying real-time investments strategies.

I think in this we basically agree, although it is not always priced in, it is rare that CPI is the first indicator you'd get. My example of not being priced in is the possibility that the chip shortage will lead to more gas cars (which we have built in the past without chips) and thus more gas usage longer than expected, while oil and pipeline companies continue to be underpriced relative to the rest of the market. However, I rarely use a single CPI reading for investing. That does not mean it isn't useful for investing, in say, quant analysis where you are using CPI as a tool to decide what to invest in. There are other elements of CPI which might be useful, including knowing where the politicians are looking (and what that might imply for investing). It also can be a good "check" on any assumptions you have about where the world is going, but again, I don't think a single CPI reading is useful. Finally, I would suggest CPI or even inflation alone is not the only metric one should use to make judgements, quant, value, momentum or whatever for investing. Just to pull one ironic example out of a hat, "google trends" of the word inflation might be an important part of the measure--are consumers taking a certain level of inflation as reported by CPI or are they still complaining about it x months later.

[sky]

Despite the changes in speculative script, the caloric value of the sack of lentils does not change.

[JCD]

Despite the changes in speculative script, the caloric value of the sack of lentils does not change.

It feels like your comment should be insightful and I will sound trollish writing this, but consider: Despite the change in the number of pounds of lentils, the ounces of the pure element Au does not change.  By doing a denominator, numerator flip, it make it hard to see what the exact insight I'm supposed to see is.  So I'm going to explore that and see if I can find anything.  If I miss your point, please explain what I've missed with a bit more detail.

I am aware of the EROI/Alpha strategy style analysis your comment seems to highlight, but it still is relative as soon as you have two things.  One day gold may be out valued over lentils or visa versa.  Even if you assume both are absolute, what happens when the ratio changes, which one is the one that is mispriced relative to the other?  Let's set gold aside for a moment, how about calculations per hour?  "Despite the changes in the number of calories of lentil, a teraflop stays constant" says the AWS consultant.  It feels weird reading that.  Number of lentils for one teraflop of computing power could suggest lentils are going down in value or the cost to produce a teraflop has been getting cheaper over time.  One teraflop is just like another as are lentil calories.  So it seems likely that the preference is in the eye of the beholder.  Maybe you have an objection that computing changes all the time, it's not a constant in the universe like lentil calories are (*).  Yet some see the universe as a sort of giant calculator or possible simulation, solving itself towards heat death.  Maybe the universe is just speeding up it's ultimate solution in a natural, constant path upward.  Maybe change is the constant we should assume.  It appears to be a perspective difference, making the choice of putting lentil calories in the numerator or denominator a perspective.  

(*)Sans changes in lentil genetics, which are also relevant but this is going too long already.

If you don't buy my last points, insisting that the value of calories is constant, is the value of a calorie equal between the starving man and the man who just ate?  The relative scarcity and need of lentils, Au or pieces of paper with dead people on them make changes to the fraction.  Yet, I don't think this is the form of value you meant.

Also related to teraflops, sand and electricity also feel like they should be constant costs using the same calorie style view.  Yet power costs vary greatly in a EROI sense as does sand in a recovery cost sense.  Even if you say, "no, my measure is grains of sand, not cost to get the sand" it is not clear that all sand is created equally, based upon my experience in different beaches.  Which type of lentil might change the calories density in your sack.  Does that have any impact on your perspective?  We're almost recreating the commodity markets here.

Only in a scientific sense are the calories constant in value and even then there are measurement issues like the atomic structure of the lentil might impact the calories it would produce even with precise weighing.  Even the same sack at different times might have different calories due to changes by nature.  One of the reasons gold is much loved is the perceived purity where weight could be made absolutely constant as it doesn't have form differences, unlike lentils.  So it is difficult to say one sack is exactly like another, even at the same weight.  This ultimately gets to "is any element absolute" in value?  Surely a pure element in an exact weight equals another instance of the same pure element at the same weight.  In that sense I'm forced to agree, but that seems like a tautology.  But if you try to denominate one element with another, the amount we will value one over another will vary over time.  

It doesn't seem you are trying for any form of human utility, nor a perfect scientific sense nor an argument for why lentil calories should be a denominator value to measure all else by.  It doesn't seem you have any reason to pick one type of lentil over another, either.  It feels like you're trying to go for something like Joseph Tainter's comments about Rome stealing one time energy gains but unable to maintain that after running out of places to steal energy from.  In doing so he reduced economic activity to basically EROI.  I think it is a handy abstraction to zoom out to the 50,000 ft view, but I'm not sure it works at the ground level (e.g. Human hours of toil cost of calories has gone down over time in the last few hundred years but that may change in the future).  So what were you trying to demonstrate? What am I missing?

[sky]

A 50 lb bag of dry lentils provides 79,852 calories of nutrition, which for a person with a life expectancy of 80 years, works out to about 0.14% of ones total life nutritional intake at a daily caloric intake of 2000 calories. A lifetime supply of nutrition using a lentil based diet (which I admit is not likely nor healthy) would be 715 bags of lentils.

[JCD]

A 50 lb bag of dry lentils provides 79,852 calories of nutrition...

I see how for a human there is a possible "absolute" nutritional value, barring concerns around allergies, gut bacteria, and a host of other medical/biological issues.  However, that is not what makes a currency absolute.  For something to be "overvalued" or "undervalued" you have to have "constant" value in the denominator.  A book at 5 USD that goes down to 2.50 USD is looked at as a steal, but that assumes the currency has not changed in any way, shape or form.  If we print 2x the currency, the value of the currency goes down, making the deal seem even better.  A currency would be absolute if the measurement of the value was absolute.  You're arguing that calories are the measure.  You point at the exactness of the number and my points about the precision of the measure don't really matter enough to count.  Cool beans.

Yet, we can replace your currency with my sugar currency, and as we know, bad money pushes out good money.  Sugar will win.  It too is measurable as an energy source, and remember we were barring all the medical problems from the discussion.  This is just the first sort of problem with that sort of measure.

The second, more serious problem is your trying to grow money on trees, as it were.  In order to properly measure lentils as currency, you need to look at both stock and flows.  Let's assume your 50 pounds of lentil stock is all there is in the world.  Tomorrow I grow 100x that number of lentils and every day after another 100x comes onto the market.  Are you poorer because of it?  Now we might say the # of people on the planet needing to hold lentils grows daily, so some additional stock is needed year in and year out.  This is a definite problem and so a little extra supply is fine.  But 100x certainly devalues you.  Again, going back to the precision of your calories, imagine the stock of calories the world has as 80k calories on the first day and then 800 + 80 calories on the next day and 88000 + 880 + 80 on the next, due to the extreme growing of calories due to the demand of your currency.  Such devaluing takes away any possible absoluteness.

Lastly, just to hammer the point home, let us say we resolve such issues and people adopt your lentil measure.  However, no one wants to carry around 50 pounds of lentils.  So they put them into a seedy place, we'll call a "bank".  This bank holds lentils and gives out "anyone can collect x lentils at y address" paper forms in an uncopyable way for the lentils you own.  Maybe they do it as a crypto even.  They then issue credit on future lentils by handing out more copies of the paper than they have in beans.  Some go bust, so we create a central bank to prevent a run on the bank.  Someone else created a sugar version of the same concept and the value of the two currencies ended up competing with each other and now your absolute currency becomes relative again.

Let me stop at this point.  Absolute might mean different things to different people:
- Human absolute: All humans value something at an equal value.  I'm not sure this can ever be true, but at least it is a theory (E.g. air, water are worthless when you have lots, and worth everything in space and Arrakis).
- Absolute measure: These measures allow you to measure change in some other value which fluctuates.  I'm denying this can exist within today's system.  In this world view, all currency is a trade.
- Universal absolute: If there is only one currency, you see everything relative to that absolute.  Gold bugs, bitcoiners, etc.  In this world, your currency is everything, trading can't ever be considered.  In order for this to be true, everyone else must adopt your view and the infidels must be fought.  Even aliens would see your currency was ideal.
- Other: ???

I think the only form of absolute you might try to describe is:
A personally absolute: Your 1000 pounds of lentils cost me 200 USD in 2015. Therefore, 1 pound for 1 dollar shows a massive reduction in USD value relative to your lentils. This clearly is useful but not absolute because it is time based and very likely cyclical to growing seasons and weather. I might say lentils haven't gone up in value at all since 2019 with my 1 pound of lentils still costing a dollar. Therefore, it is not even absolute as a personal measure because it is relative to the timeframe you start your measure. If you made your own crypto with no new coins ever hashed, at least you could claim it as absolute in the "not growing sense", but without a market trading them, it would be difficult to measure the "trade value" to evaluate other things. Once you have a market, trading your coins, the question is, what incentive or reason is there to own them? Maybe you back it by lentils... but what happens if a bank gets built on top of your personal coin which extends credit? What if someone wants to do a pump and dump? You can see how the coin gets out of your control. This is why I deny the claim that this can be an absolute. You can have an absolute, without a market and thus no pricing information or you can have a market without an absolute, thus the pricing information can be distorted.

If you have some other view where an absolute measure could be used, some other way of measuring absolute, you'd have to specify it and explain how it is absolute and how it prevent any kind of market manipulation such that you were always sure that the it gave accurate descriptions of the value of all other objects in the universe. Thanks for the stimulating pushback. It took me a while to think through why calories don't work.

[Campitor]

For those interested, the 2022 CPI data for the last 12 months released February 10th: https://www.bls.gov/news.release/pdf/cpi.pdf