The new inflation - asset bubbles?

Some argue that CPI is a poor measure of inflation.  They point out it is flawed measure for a variety of reason.  The fact that rent of primary residence is used instead of home prices is the commonly used example.  This may be an important point to be aware of as home prices decrease or stay flat while rents increase in the near future. A higher CPI might result when really this portion of the index actually decreased for many people. 

We can agree the numbers are not perfect. But I do think CPI can be reasonably used as to monitor changes in purchasing power over time even it isn’t perfect.
Niall Ferguson has a take on the changing nature of inflation in today’s the LA Times.

The lastest figure for the annual growth in core consumer prices is just 2.3% in the United States, down from 3.8% in May.

Yet simply because consumer price inflation has remained low does not mean that money is irrelevant

In our time, unlike in the 1970s, oil-price pressures have been countered by the entry of low-cost Asian labor into the global workforce. Not only are the things Asians make cheap and getting cheaper, competition from Asia also means that Western labor has lost the bargaining power it had 30 years ago. Stuff is cheap. Wages are pretty flat.

As a result, monetary expansion in our time does not translate into significantly higher prices in shopping malls. We don’t expect it to. Rather, it translates into significantly higher prices for capital assets, particularly real estate and equities.

No one can say for sure what the consequences will be of this new variety of inflation.

For the winners, one asset bubble leads merrily to another; the key is to know when to switch from real estate to paintings by Gustav Klimt. For the losers, there is the compensation of cheap electronics.
 
My two additional comments:

1) We currently are not in a period of monetary expansion.
2) I am not sure how he factors the increases in health care costs in this analysis.