Essentially this is really just measuring the exchange rate itself, which isn't really an accurate measurement for a currency in terms of inflation.
IMHO that IS the most accurate measure of inflation, any other methods are just government propaganda. (the most important one in the government propaganda is to exclude the 2 most important commodities in their inflation measuring basket: food & energy).
There is this fine inflated
article at wikipedia on inflation:
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the Consumer Price Index) over time.
I'm a simple minded logical person, i prefer to simplify and ask a conditional question:
If the above is true, then what is the core
component at the root of inflation ?
I can today exchange bitcoins for RL cash and purchase whatever goods i want (to generate my CPI basket). To measure inflation, i do that again after a period of time and with that get the actual inflation. If my new purchasing power is weaker than the first it means we have inflation, otherwise we have deflation.
Inflation/deflation = change in exchange rate. Or to put it in streetlanguage, financial ability to exchange productivity for currency.