> Depends on who the “we” is there.

I would argue the statement is true for any significant government or private use of general inflation measures.

But, sure, if you’ve got a case where the CPI is actually used for a purpose and you think a different measure of inflation that incorporated asset prices would be a better replacement for the CPI, please feel free to present (1) the existing use in question, (2) your proposed replacement measure, and (3) your argument for why your proposed replacement is better.

That was the purpose of comparing to cows and milk. For all the same reasons you should worry about cows being expensive (even if milk is still cheap), you should worry about real estate being expensive (even if rents are low).

In the case of a household, those mean that you can't take some of your production, and save it for the future in capital goods -- the same kind of thing that happens when more of your income has to go to the same necessities.

In the case of a central bank, those mean that the injections of money aren't (currently) effective for stimulating economic activity, but are simply causing a wealth transfer and rallies in whatever stores of value remain. That is the same signal it needs to get back as when consumer goods become more expensive: you are not relaxing a limiting factor on economic growth.

Edit: toned down

> For all the same reasons you should worry about cows being expensive (even if milk is still cheap), you should worry about real estate being expensive (even if rents are low).

I would argue that the only reason you should consider cows being an expensive an issue if milk is cheap is in regard to it making some other bovine product expensive; cows aren’t important in and of themselves, but as instrumentalities in the production of milk and other products.

> In the case of a household, those mean that you can’t take some of your production, and save it for the future in capital goods

No, asset inflation absolutely does not mean that. Increasing the minimum buy in for asset investments would do that, but we’ve got mature enough financial markets that a general increase in asset prices doesn’t increase the minimum needed to enter productive investments.

> In the case of a central bank, those mean that the injections of money aren’t (currently) effective for stimulating economic activity

No, it doesn’t; driving money into productive investments and out of cash (which, as an expected side effect, produces asset price inflation) is part of the mechanism by which loose monetary policy is expected to stimulate economic activity. Asset price inflation does not indicate that that is not working, it is what you expect if it is working.

What would indicate that it is not working is if output figures did not exceed what was expected without the policy.

>No, asset inflation absolutely does not mean that. Increasing the minimum buy in for asset investments would do that, but we’ve got mature enough financial markets that a general increase in asset prices doesn’t increase the minimum needed to enter productive investments.

Yes, "can't", taken literally (and uncharitably), is incorrect. I was exaggerating. The point is it becomes much more difficult with lower yields, just as it becomes so with cows. To produce the same X units of milk tomorrow, you have to save more milk now (to buy the cow) -- the same effect as if you had less to save due to your consumption goods being more expensive.

So, no, "mature financial markets" don't really solve this.

>No, it doesn’t; driving money into productive investments and out of cash (which, as an expected side effect, produces asset price inflation) is part of the mechanism by which loose monetary policy is expected to stimulate economic activity. Asset price inflation does not indicate that that is not working, it is what you expect if it is working.

Money going into productive investments is only good if it also translates into productive economic activity. You can't just say, "we gave it the old college try, so that's a win". We're seeing P/E ratios go up (earnings yields down), which means that the higher asset prices aren't translating into that productive use of assets. And even by your own standard, the flows into gold, bitcoin, and idle real estate indicate a failure.

>What would indicate that it is not working is if output figures did not exceed what was expected without the policy.

So, non-falsifiable, then.