Dollar’s Purchasing Power Drops to Lowest Ever. Inflation Heats Up, as Fed Wants, After Simultaneous Supply & Demand Shocks

“We’re not even thinking about thinking about” slowing the decline of the dollar’s purchasing power — and thereby labor’s purchasing power.

By Wolf Richter for WOLF STREET.

A supply shock and a demand shock came together during the Pandemic, and it produced chaos in the pricing environment. There was a sudden collapse in demand in some segments of the economy – restaurants, gasoline, jet fuel, for example – and a surge in demand in other segments, such as eating at home, and anything to do with ecommerce, including transportation services focused on it.

These shifts came together with supply-chain interruptions and supply chains that were unprepared for the big shifts, leading to shortages in some parts of the economy – the supply shock. There were empty shelves in stores, while product was piling up with no buyers in other parts of the economy.

The sectors surrounding gasoline, jet fuel, and diesel fuel – oil and gas drilling, equipment manufacturers, transportation services, refineries, etc. – were thrown into turmoil as demand vanished, leading to a total collapse in energy prices. In April, in a bizarre moment in the history of the oil business, the price of the US benchmark crude WTI collapsed to negative -$37 a barrel.

Since then, the price of crude oil has risen sharply (now at positive +$41 a barrel), as demand for gasoline has returned to near-normal while demand for jet fuel remains in collapse-mode, as people are driving to go on vacations, instead of flying, and as business travel is essentially shut down.

As a result, for a few months, all of the inflation data was going haywire, with some prices plunging and others spiking. This is now being worked out of the system.

Energy prices are way up from March and April, but remain below last year. Gasoline prices jumped by 12.6% in June from May and by another 5.6% in July from June, but are still down 20.2% from July last year, according to the Consumer Price Index report this morning by the Bureau of Labor Statistics. Electricity services rose 0.3% in July, after a sharp decline in the prior two months.

Prices of food eaten at home, after surging March through June during the shifts and the era of empty shelves, backtracked in July by 1.1% from June, but were still up 4.6% from last year. More on the major categories in a moment.

Overall inflation as measured by the Consumer Price Index for urban consumers (CPI-U) jumped 0.6% in July from June, after having jumped 0.6% in June from May, wiping out the declines in March through May. Compared to July 2019, CPI was up 1.0%, still held back by the 20.2% year-over-year decline in energy prices. The June and July month-to-month increases of 0.6% each were the largest two since 2009.

The CPI without food and energy also rose 0.6% in July from June and was up 1.6% from July last year.

When we say that the CPI in July rose 0.6% from June, we mean that it rose from an index value of 257.2 to an index value of 258.7. We get this chart that looks like progress, like something good has been happening, with a fairly consistent uptrend from the bottom left to the right top, sort of like a stock market chart, and the Fed and economists want this line, and lines of other inflation indices, to move up at a steeper angle, and they then take great pride in it when it does:

But the Bureau of Labor Statistics also offers the corollary index, the “Purchasing Power of the Consumer Dollar.” And it just hit a new all-time ever low. Note the purchasing power recovery during the Financial Crisis, when consumers could actually buy a little more with their labor for a few quarters:

When the Fed wants to increase consumer price inflation, it in effect wants to decrease the purchasing power of the consumer dollar.

Currently, the Fed is very impatient about chopping down the purchasing power of the dollar. To communicate this, Fed Chair Jerome Powell keeps repeating so eloquently that the Fed isn’t “even thinking about thinking about” containing the decline of the dollar’s purchasing power when it speeds up.

A decline in the purchasing power of the consumer dollar means a decline in the purchasing power of labor. And consumers (who are in their real life workers) need a corresponding increase in wage inflation.

For employers that are able to raise prices, but don’t have to raise wages, it means “cheaper labor” – and for decades this has now been one of the big issues in the US economy among the lower 40% of workers who provide this cheaper labor.

So for consumers who make their living by working, consumer price inflation means the purchasing power of their labor gets whittled down. Goods and services are more difficult to pay for, and their paycheck gets eaten up by rising costs, and there is less money left over to make mortgage payments and other debt payments.

Consumer price inflation, given the multi-decade wage environment, means the further impoverishment of the people in the lower income categories, and means making debt payments harder – not easier.

These people want wage inflation (getting paid more for the same work) to compensate them for price inflation, but wage inflation is anathema to Corporate America and the Fed.

Rising prices make debt payments easier only for those who can raise prices: Businesses, particularly Corporate America where pricing power and debts are concentrated.

Inflation by category.

Here are the changes of the Consumer Price Index for the major categories. The second column shows the relative weight of the line item in the overall CPI. The biggie is “services less energy services” which weighs 59.6% in the index. It includes two sub-biggies: “shelter” which includes rent and owner’s equivalent of rent, which account for one-third of CPI, and “medical care services,” with a relative importance of 7.4% in CPI.

The third column shows the change in prices in July compared to July last year. The three columns on the right show month-to-month price changes, with the sixth column showing the current change in July from June (if your smartphone clips the right part of the table and you don’t see six columns, turn your device in landscape position):

Expenditure category % weight % YOY July % Apr-May % May-Jun % Jun-Jul
Food 14.3 4.1 0.7 0.6 -0.4
Food at home 8.0 4.6 1.0 0.7 -1.1
Cereals and bakery products 1.0 2.8 -0.2 0.4 -0.4
Meats, poultry, fish, eggs 1.9 8.4 3.7 2.0 -3.8
Dairy and related products 0.8 4.4 1.0 -0.4 -0.8
Fruits and vegetables 1.4 2.3 0.5 0.4 0.1
Nonalcoholic beverages 0.9 5.0 0.0 0.7 -0.5
Other food at home 2.0 3.9 0.0 0.2 -0.2
Food away from home 6.3 3.4 0.4 0.5 0.5
Energy 6.1 -11.2 -1.8 5.1 2.5
Energy commodities 2.9 -20.2 -3.5 11.7 5.3
Fuel oil 0.1 -27.2 -6.3 10.2 4.3
Motor fuel 2.8 -20.3 -3.5 12.0 5.5
Gasoline (all types) 2.7 -20.3 -3.5 12.3 5.6
Energy services 3.2 -0.1 -0.5 -0.2 0.0
Electricity 2.5 -0.1 -0.8 -0.3 0.3
Utility (piped) gas service 0.7 -0.3 0.8 0.0 -1.0
Other goods 20.7 -0.5 -0.2 0.2 0.7
Apparel 2.7 -6.5 -2.3 1.7 1.1
New vehicles 3.7 0.5 0.3 0.0 0.8
Used cars and trucks 2.5 -0.9 -0.4 -1.2 2.3
Medical care commodities 1.6 1.1 0.1 0.2 0.0
Alcoholic beverages 1.0 1.5 0.8 0.2 -0.3
Tobacco and smoking products 0.6 5.2 -0.2 1.1 0.8
Services less energy services 59.6 2.3 0.0 0.3 0.6
Shelter (rent & owner’s equivalent of rent) 33.5 2.3 0.2 0.1 0.2
Medical care services 7.4 5.9 0.6 0.5 0.5
Transportation services 5.0 -3.7 -3.6 2.1 3.6
Motor vehicle maintenance and repair 1.1 3.5 0.4 0.1 -0.1
Motor vehicle insurance 1.5 -1.9 -8.9 5.1 9.3
Airline fares 0.6 -23.7 -4.9 2.6 5.4

 

 

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  187 comments for “Dollar’s Purchasing Power Drops to Lowest Ever. Inflation Heats Up, as Fed Wants, After Simultaneous Supply & Demand Shocks

  1. Minutes says:

    Retirement can wait. We must feed the beast.

    • Happy1 says:

      I think the impacts of inflation are even more severe on retired people. There are some sectors of the economy with pretty significant wage inflation, that obviously doesn’t show up in the BLS statistics which account for all of the economy. But everyone who is retired is facing inflation for all the goods and services they purchase and a devaluation of traditional financial instruments with low risk return. It’s a double whammy. I don’t understand why retired people aren’t in front of the Fed with their pitchforks.

      • historicus says:

        Inflation and real negative rates…
        that’s the gift to the baby boomer generation from the Fed.

        • John says:

          The Boomers have chosen to prop up the value in their 401k today in exchange for disaster later.

      • sharonsj says:

        I’m too old and arthritic to get in a good jab. I’ve tried contacting my state and federal reps, but they ignore me. The only way we’re going to get real change is if a few million angry people converged on D.C. or if all those 20 million about-to-be evicted people erected their tent city near the Washington Monument.

  2. andy says:

    Not seeing any increases in the price of steak. It just vanished at my local grocer. Will have to buy some of that purple beef from Trader Joe’s.

    • Petunia says:

      During the plandemic we have seen steak go as high as $70 for two steaks. Then the next week it was $20 for two. There are definitely shortages of meat that come and go. And cleaning products continue to be in short supply, if we see it, we buy it.

    • LoneCoyote says:

      I noticed a short supply of chicken when I was grocery shopping last week (upstate NY). No thighs, hardly any boneless stuff. They still had some of it on sale for about $2 a pound, so it doesn’t seem like they were increasing the price.

    • M says:

      Keep in mind that we are in a demand suppression situation. While some goods are going to be sought regardless of this pandemic, many goods (and services) are not being purchased while this pandemic continues.

      Imagine what will happen when this pandemic ends, one way or the other. There will suddenly be a huge demand spike. Supply, on the other hand, will remain the same.

      Given the vast quantities of US legal tender that the “Federal” Reserve bankster cartel printed to benefit its cronies, aside from the $29 trillion bailout of Wall Streeters and banksters after 2008, what will happen then? See CNBC’s “The Size of the Bank Bailout: $29 Trillion” at https://www.cnbc.com/id/45674390. I understand that the banksters were discouraging the release of the funds that were funneled to their cronies into the general market.

      Indeed, reportedly, there is a huge overhang of real estate that the banks have not foreclosed upon or are holding that they cannot dump, because it will tank the markets. See https://seekingalpha.com/article/4295852-keith-jurow-housing-market-recovery-is-illusion. I hear anecdotal reports that this is true.

      Therefore, it would seem that while we may ultimately have some assets tank, like real estate, we will see rapid inflation increases for many other goods and assets, like food, personal goods, etc. I predict that we will ultimately see hyperinflation (except as to real estate, which is already, unrealistically inflated) because we will keep printing money at least through most of 2021.

    • andy says:

      I prefer free range bats, thank you very much.

  3. c smith says:

    Deflation in prices as a direct result of productivity improvements (and the rise in real wages that goes with it) is the GOAL of free market capitalism. Everything the central banks are doing works against this. Why?

    • max says:

      to enrich few chosen one.

      inflation is a tax which hurt mostly poor and middle class.

    • bungee says:

      the key to understanding why is to understand the “free market” of money. the free market demands easy credit creation. we need it for our entrepreneurial investments. the best way to do this is with a fractionally reserved banking system. but deflation destroys such a system. so they must inflate at all costs. but remember; the people… the ‘free market’ demands it. its better to lose some every year rather than to have pensions and retirement accounts go bust all at once (maybe?). of course, savers could have just hoarded physical gold.. but that would be nuts right? [grin]

    • intosh says:

      Why? For competitive reasons. More desperate workforce is a cheaper, more docile workforce, willing to do more for less. How else are they gonna compete with China and the like? How else would they bring back those manufacturing jobs?

      Pretty ironic that the western world is destroying its middle class while China is building one…

    • Clockwork Orange says:

      Where there is market there is inflation. Where there is no market there is no inflation.

  4. Bobby Dents says:

    Purchasing power declines because of growth to population. Trying to ram up purchasing power would completely destroy the economy through a cascade of defaults, eventually destroying the currency. That is the paradox Wolf.

    • Wolf Richter says:

      Bobby Dents,

      “Purchasing power declines because of growth to population.”

      That was a cute line. But no, population growth does not cause declines in purchasing power of the dollar. What causes declines in purchasing power of the dollar are various forms of monetary policy.

      Declines in purchasing power of the dollar contribute to the horrendous income disparity in this country and are a massive problem for society and consumer spending at the lower levels.

      No one is promoting to “ram up purchasing power.” But maintaining it would resolve the huge issue for the economy and society of the lower 40% on the income spectrum getting impoverished by price increases, for the benefit of corporate profits.

      That said, goods should always become cheaper as production and transportation become more efficient under pressure from relentless competition, thus bringing costs down. And you can see that in various products, including tech. This has been historically the case. That’s a positive, and a natural result of human ingenuity under pressure from competition. And this increases purchasing power.

      The entities that benefit from purchasing power declines are businesses that contribute to those declines by raising their prices. These price increases go into corporate profits and capital. And this has contributed to the huge shift from labor (which pays for these price increases) to capital over the past decades.

      And yes, investors will have to take losses if businesses cannot service their debts, but that’s how it’s supposed to be. Why strip bare the working people to enrich the investor class?

      • leanFIRE_Queen says:

        > this has contributed to the huge shift from labor (which pays for these price increases) to capital over the past decades

        Only if you let it as a consumer. My shelter costs are 10% of my income, my savings rate hasn’t gone under 70% in the last 6 months.

        There is no need to eat out if you know how to cook nor there is need to buy a new car. A 2 year old honda civic is still great value. If you are healthy, but catastrophic health insurance only.

        There are many adjustments to the ZIRP financial repression policy imposed on us that American consumers should have made already but have failed to do so… so far. We’ll see if the American consumer can keep on being taken for granted.

        Imho saying no to discretionary consumption solves ZIRP. Consume more of your own time instead of selling so much of if to corporate America, make the corporate sector work for you.

      • MonkeyBusiness says:

        Wolf, please have pity on our Private Equity guys. What would they do if they have to take losses? They might have to drive Teslas instead of Ferraris.

      • Finster says:

        “That said, goods should always become cheaper as production and transportation become more efficient under pressure from relentless competition, thus bringing costs down.“

        Excellent point. If the currency just remained stable – in the absence of either inflation or deflation – consumer prices should gradually decline as technology reduces the real cost of goods. Living standards would improve and the purchasing power of wages would grow even as they held steady in nominal terms.

        By choosing a consumer price standard for measuring inflation, the government is already building in an inflationary bias.

      • Saltfcreep says:

        I would agree with Bobby’s contention that population growth results in diminished purchasing power, all else being equal. Less pie per person. Problem is that it isn’t always apparent on the time scales we normaly relate to.

        The problem is that, due to the way we measure stuff, we mostly pay attention to turnover and consumption, and our measures are focused on the short term and not on long term sustainability. We e.g. don’t account for long term resource depletion when we consider output and productivity.

        The pie appeared to get bigger through the industrial revolution and the oil age as we converted from low productivity energy from human and animal labour, and wind and water mills, to highly concentrated energy obtained by depleting fossil fuels. But it’s nothing but a huge once off boost to our economies and populations, where we concentrated ages worth of resource depletion into a couple of centuries.

        As our sources are now becoming less and less productive the effect starts to reverse, and instead of recognising this and adapting to chronic contraction we instead resort to subterfuge through ever increasing debt loads to create an illusion of ongoing prosperity , which aso functions as a vessel for concentrating remaining wealth. It is in effect a transfer within society from those with less to those with more, and also an inter societal transfer from remaining high productivity energy sources to entities/countries that have succeeded in retaining a level of confdence in the exchange value of their monetary units.

        Technology can of course offset the effect to an extent, but it is not magic, and itsuffers from the same diminishing returns as anything else.

        • Wolf Richter says:

          Saltfcreep,

          “I would agree with Bobby’s contention that population growth results in diminished purchasing power, all else being equal. Less pie per person.”

          I agree with the possibility of “Less pie per person” but this is a different issue. Bobby (and the article) was talking about the monetary issue of consumer price inflation (purchasing power) of the dollar. You’re talking about per-capita GDP. This is a very different issue.

        • Saltcreep says:

          I was also trying to angle towards that the increase in monetary units resulting from the increase in debt leads to a diminisihing purchasing power when the pie is not increasing commensurately.

      • Don says:

        Interesting. Which came first, the chickens or the chicken hawks? Reduced market prices/wages of surplus labor due to redundant labor (and reduced real aggregate demand) caused by legal and illegal immigration or elite central bank monetary policy and increased state welfare payments to offset liquidity shortages for bankers and corporations while stimulating curbside needle exchanges for the reserve army of the lumpenproletariat and the current high fecal matter street count?

      • dr_doomz says:

        “The entities that benefit from purchasing power declines are businesses that contribute to those declines by raising their prices.”

        I’m always late to the good articles. Let’s clarify, it benefits leveraged (debtor) businesses and investors. The more leverage, the greater the benefit. But it is necessary to keep real, inflation adjusted interest rates negative.

      • jm says:

        IIRC, the general price level fell about 50% from 1800 to 1900, despite huge discoveries of gold in California, Australia and the Yukon expanding the monetary base, and, presumably, a huge increase in velocity due to technological advances (railroads, telegraph, etc). That deflation inflicted intense pain on anyone with debt, especially farmers, thus the “you shall not crucify mankind on a cross of gold” speech of William Jennings Bryan in 1896.
        The advantage of a properly managed fiat currency is that it enables businesses and consumers to plan for the future based on predictable slow inflation and less fear of deflation unpredictably increasing their debt burden — which used to make people extremely debt-averse, slowing economic growth and innovation.

  5. fred flintstone says:

    Its obvious that the central bank has manipulated a short sale of the gold market the past few days. Who do they think they are fooling. The fundamentals will take over in no time.
    Our government is in the hands of dolts and could be replaced by dolt plus very soon.
    Using normal numbers our national net worth is not 120 trillion but more like 65 trillion. With a debt of 30 we are half way there……but the decline is accelerating with the deficits in social security, defense, medicare etc to be paid for.

    • Paul says:

      You obviously know nothing about the gold market.

    • S.C. HEEL says:

      That may be true but it is not the U.S.A.’s fault we are not geographically located IN EUROPE.
      When called upon, American’s stood up and produced and fought. ON TWO WAR FRONTS
      As the child of a WW2 era mother and father, I know about the rationing, the metal drives, the rubber drives, the brothers going to war in Italy, and France, and elsewhere in Europe. Lets not forget the ENTIRE PACIFIC THEATRE. How about the supply ships from U.S. heading across Atlantic, sitting ducks for U-boats on the Atlantic. That is not fake news.
      Do not disparage the Greatest Generation. Those really are fighting words.

    • Shiloh1 says:

      Should have been a solely a spectator and not a participant /lender/supplier in what became WWI.

  6. Ed C says:

    I had been noticing inflation in the price of getting my hair cut. No more inflation there, in fact hair cuts are now free — I cut my own hair now. One more cut and I will have covered my investment in my Wahl hair trimmer set. Fed doesn’t want to think about inflation? I don’t want to think about the Fed or the stock market — the dang market stopped making sense a long time ago thanks to the Fed.

    • Each time you cut your own hair, pay yourself $20 but don’t forget to count it as taxable income.

      • leanFIRE_Queen says:

        “A decline in the purchasing power of the consumer dollar means a decline in the purchasing power of labor. And consumers (who are in their real life workers) need a corresponding increase in wage inflation.”

        One possible solution is not consuming discretionary items, switch to remote work and exit NIMBY areas. This allows for a massive increase of your savings rate that more than compensates for Powell’s stealing.

        I’m at around 75% savings rate, feels great. Also, avoid wasteful spending of items that are hard of outsourcing abroad: housing, healthcare and high ed. Live pre-tax. Be super healthy, if not… medical turism.

        Sitting on the pile of cash that gets generated with these moves makes me happy. Behaving like a US tech company is the way to go imho, they are showinv us the way.

        If possible, retire in Europe :-)

        • Natty Smasher says:

          We get it, you like FIRE

        • Dan Romig says:

          You seem to understand it so well. What would you suggest?

          Personally, I prefer Europe.

          Europe?

          Yes. Well, the fact is what I do is not a bad occupation. Someone is always willing to pay.

          I would find it… tiring.

          Oh, no – it’s quite restful. It’s… almost peaceful. No need to believe in either side, or any side. There is no cause. There’s only yourself. The belief is in your own precision.

          I was born in the United States, Joubert. I miss it when I’m away too long.

          A pity.

          I don’t think so.

        • Lisa_Hooker says:

          @Dan Romig – apparently they did not publish it.

      • Happy1 says:

        I bought a haircut card at Great Clips a couple of years ago and put the maximum amount on it. I’m still getting 10$ haircuts and now their 16$. Much better investment than bonds. Thanks stupid Fed…

      • Lou Mannheim says:

        Don’t forget to depreciate your clippers. Are you going to use MACRS or straight-line?

    • rhodium says:

      One of the most useful skills I learned in college was cutting my own hair to save money. Seeing as you only get limited intervals to practice, it took me some years before I could do it really well consistently and use more advanced techniques than just running the clippers over my head. After being unhappy with a number of cheaper cuts even my worst attempts weren’t that bad in comparison anyway. I roughly calculate that in just a few years I’ll probably hit a cumulative $2000 in savings.

    • Bobber says:

      Bowl cuts are the in thing now.

    • happy_man says:

      cutting your own hair and other exercises in frugality will do nothing to protect you from the Fed. The Fed will continue to inflate away the purchasing power of your wages until you can no longer afford parts or replacement clippers, electricity to power them, to have your hair cutting scissors sharpened.

      What will your frugality serve you then?

  7. wkevinw says:

    Spot on Mr. Richter. They want wage inflation, and so do I. It’s the magic answer to what the US needs (and maybe all of the developed economies).

    I don’t know if it can happen or not.

    Luck to all of us.

    • 2banana says:

      There can be no wage inflation with open borders, tens of millions of illegals, a H1B program and shipping manufacturering jobs to low wage countries with low tariffs.

      • wkevinw says:

        2banana- exactly. These are among the policies that need change.

        You know it’s the elites vs everybody else when you see something like the unlimited H1b visa requests (e.g. by MSFT).

        There are lots of studies that claim to show how globalization of trade and immigration help everybody get richer. The problem is that after 30 years of real-world experience, the middle class and lower in the developed economies didn’t get that memo.

        Reality is more important than theory presented in some elitist academic’s set of publications.

        • MarkB says:

          The intended effects of globalization of trade are to make everything more affordable, not to make everyone richer.

          The result of manufacturing exclusively in North america absent trade access to raw materials would drive the cost of everything moonward. Factor in western wage costs, and most producers would price themselves out of the market.

          I’d rather goods at an affordable cost than restrictive immigration and trade policies that benefit literally no one.

        • intosh says:

          “Reality is more important than theory presented in some elitist academic’s set of publications.”

          Incidentally, those elitist academics, aka celebrity economists, have recently did their mea culpa. “Whoops sorry!”

          “Economists on the Run”
          “Paul Krugman and other mainstream trade experts are now admitting that they were wrong about globalization: It hurt American workers far more than they thought it would.”

          “Krugman writes that he and other mainstream economists ‘missed a crucial part of the story’ in failing to realize that globalization would lead to “hyperglobalization” and huge economic and social upheaval, particularly of the industrial middle class in America. And many of these working-class communities have been hit hard by Chinese competition, which economists made a “major mistake” in underestimating”

          https://getpocket.com/explore/item/economists-on-the-run

        • wkevinw says:

          MarkB: “The intended effects of globalization of trade are to make everything more affordable, not to make everyone richer.” ‘making everything more affordable = making everyone richer’.

          Labor cost differentials are highly correlated with regulations such as environmental and workplace safety. As such, there are benefits, at least as society has decided, for “restrictive immigration and trade policies “. Get rid of these regs, and then let the unrestricted trade and immigration begin. Until then, it’s simply not fair for labor in the regulated/developed market countries.

        • wkevinw says:

          intosh- Wow! thanks for that link. Finally some of these academic elites are getting it. Basically, they got bashed enough by the real world data that they couldn’t just be their old arrogant and imperious selves. Academic tenure has really damaged higher learning. It’s amazing that these people nastily bash their opponents for years. Then they say, oh well I guess they may have had a point. This is how you get the kind of emotional/low info content public debate we often see nowadays.

          The policy responses are interesting also. So, basically one side wants to “solve” this problem by requiring labor representatives to be on corporate boards. That is so full of potential for inefficiency and corruption, that it should be dismissed out of hand.

          The thing to do is to apply incentives by tarrifs, controls, etc., at the point of sale. That gives the most efficient information and has the least costs to market participants.

      • Tony22 says:

        So you want to earn a liveable wage, benefits, overtime,holidays at doubletime as you vote for Gavin Newsom, Pelosi, London Breed and all the other “”Migrant”” pandering fools in California, some of them Republicans, who facilitate you having to compete against low wage peons from Latin America, not just in jobs and housing, but free health clinics, food banks and other morsels still allowed to the declining middle class?

        Your logic is as short as that sentence is long.

    • backwardsevolution says:

      Why would you want wage inflation? It’s not how much you’re earning that counts. It’s what you can “buy” with what you’re earning. What you should want is for prices to come down.

      All raising the minimum wage or giving people raises does is it causes more money to be chasing goods, pushing the prices up for these goods. What is the benefit of making more money if in one, two or three years time you are back needing more money again? It’s just a vicious cycle.

      Stop buying discretionary items, especially from big corporations. If everybody did that, they’d have to start competing for our money and prices would come down!

      Do you actually think you’re going to be able to keep that raise? No, they will just take it from you in the form of higher prices.

      This is so elementary, and yet so few people understand it. The only way the little guy is going to win is if we all stick together and force THEM to lower prices.

      • dr_doomz says:

        “Why would you want wage inflation? It’s not how much you’re earning that counts. It’s what you can “buy” with what you’re earning. What you should want is for prices to come down.”

        I’ve explained this to people, but they don’t get it.

        Would you rather have, a) your wages go up 100% and the cost of living go up 50%, or b) your wages go down 50% and everything else go down 80%? The answer is usually a).

        With a) your standard of living goes up 267%, with b) it goes up 500% assuming 100K income and 50K expenses.

        “Do you actually think you’re going to be able to keep that raise? No, they will just take it from you in the form of higher prices.”

        A very important point I try to make. In most cases, no, people don’t have that kind of bargaining power.

        “This is so elementary, and yet so few people understand it.”

        Welcome to 21st century mankind. And one wonders why there’s injustice and inequality? All self-inflicted.

    • lenert says:

      Good luck:

      (Median worker pay in 2019 – from the AFL/CIO)

      Western Digital: $10k
      Starbucks: $11k
      Chipolte: $14k
      H&R Block: $16k
      Whirlpool: $20k
      Target: $23k
      Colgate-Palmolive: $24k
      Amazon: $28k
      LabCorp: $41k
      Johnson Controls: $41k
      Westinghouse $42k
      Stanley Black and Decker: $43k
      Mylan NV: $43k
      Hilton: $43k
      CVS: $46k
      Accenture: $50k
      Illinois Tool Works: $51k
      Citigroup: $52k
      IBM: $57k
      3M: $57k
      Apple: $57k

      • dr_doomz says:

        @lenert

        That’s not what those workers get paid. Find out the total cost of labor:

        a) Employer payroll taxes, UI insurance, etc

        b) Workers comp

        c) Compliance (should include legal fees)

        Not including benefits (health, etc) I’ll fix some of it for you:

        Western Digital: $15k
        Starbucks: $16.5k
        Chipolte: $21k
        H&R Block: $24k
        Whirlpool: $30k

        ….

  8. plumasone says:

    New highs in stocks and record low yields on bonds
    are built on quicksand: the understatement of inflation.
    Thus, the Fed can’t allow reported inflation to soar and
    upset the “house of cards” and the big banks are fine
    with that.

    • Old School says:

      We are printing money right now to buy real goods and services that will be paid for by slowing growth in the future. When you start putting in a 3% or 3.5% nominal growth rate into calculations you realize how over valued SP500 is compared to the past. If plug in the current dividend of $59.68 and say it’s going to grow at 3.5% you get the stock market future very, very long term return is less than 2% annually. Or solve for value to get you an 8% return it needs to fall to around 800. It’s going to hurt. My guess is they are going to be printing to hand out money right and left to try to get nominal growth to 4% even if inflation is 3.5% and 10 year is 0.5%.

      • Natty Smasher says:

        > We are printing money right now to buy real goods and services that will be paid for by slowing growth in the future.

        With that logic, we should send real goods and services back in time to 1945 to pay off the lingering debt from WWII

        • Old School says:

          No it’s true. The added debt burden from the virus will mean slower real growth in the future according to standard economic thought. The long term treasury market is also predicting very slow growth. Who would tie their money up at 1.2% for 30 years if they thought economy was going to be booming during that time.

        • Lisa_Hooker says:

          @Old School – I would “tie up” money in 30 year 1.2% bonds if I believed that I could profit by selling them in 2-3 years when the yield is under 0.5%. Apparently so do folks with a lot of excess money.

    • Happy1 says:

      Bond yields took a big move up yesterday. There is a real possibility of a bond massacre with all this new Treasury debt in the pipeline.

      • dr_doomz says:

        Lisa_Hooker
        “@Old School – I would “tie up” money in 30 year 1.2% bonds if I believed that I could profit by selling them in 2-3 years when the yield is under 0.5%. Apparently so do folks with a lot of excess money.”

        Lisa_Hooker outsmarts Old School. A favorite quote, “nothing is ever obvious”.

        • Old School says:

          Gary Shilling who is and old smart economist was still betting on long term treasuries as of a few weeks ago. He has been right for a very long time. I can’t do it, but I will sit around on the short end of the curve for a long time just trying to lose purchasing power slowly until it’s a better time to take risk.

  9. Jdog says:

    You mean helicopter money actually causes inflation? Who’d a thunk it?
    And when they cannot afford to give away the store anymore? Then what?

  10. Endeavor says:

    Prices also rise as supply and demand are impacted by corporate bailouts. No need to drop prices to clear inventory during slow sales as the government has your corporate back. Crank up the prices of your goods to the remaining buyers and source from the cheapest producers overseas. Soon we will be getting income reducing austerity from the Repugs or more income reducing immigrant competition from the Dems to go with the weaker dollar.

    • rhodium says:

      “Choose the form of your destroyer.”
      I’d prefer the stay puft marshmallow man, but instead we get the stay puft stock market bubble and the more puft federal reserve balance sheet. Corps get to stay puft. The unemployed get to be temporarily slightly puft. People in the middle get deflated, and if you get shut out of the job market until after the ui is assuredly gone by next year, you get to live the dream of being a long-term unemployed wet noodle.

  11. lenert says:

    The NLRB has 3 Republican members and 2 open seats.

    • Petunia says:

      The NLRB is a useless agency, a paycheck generator for the professional class. Workers have been decimated under their watch.

  12. MonkeyBusiness says:

    S&P at a record high. “Inflation secured!!!”

  13. gorbachev says:

    How else will they pay off the debt.Print baby print.

  14. Petunia says:

    If we had inflation in the economy we wouldn’t have retailers going bankrupt. Another retailer, a discounter, just went bust today, Stein Mart.

    Inflation is mainly in financial assets and things the affluent purchase regularly. Luxury items are sky rocketing in price and discounted merchandise is sitting on the self.

    • leanFIRE_Queen says:

      Exactly!!! Why on earth would I care about higher costs di ni ng out when I prefer to eat home 99% of the time?

      In my area, Trader Joe’s and Walmart haven’t increased prices. That’s where I shop. Dont really care that Costco has increased them.

      Same with new cars. Who cares? My used honda civic was a steal.

    • lenert says:

      Health insurance prices up 1.1% in July, 18.7% over the last year.

    • dr_doomz says:

      Yeah, never mind the list Wolf provided. Who needs food when you can eat a deflating iPad!? Petunia, who pays you to write this stuff?

  15. Engin-ear says:

    “A supply shock and a demand shock”

    It sounds like dividing zero by zero.
    The result is undefined.

  16. Ramp up CPI, pay those old folks (ones who haven’t died of Covid) a nice COLA, and buy some votes. Under counting inflation is counter productive, or they are lying to themselves? Can’t figure out which.

    • Petunia says:

      Expect the social security cola to be almost nonexistent for next year. They only use the summer months to calculate the increase and with the number of unemployed and the UI benefits gone, it will be a dismal number.

      • Lee says:

        Australia’s CPI was negative for the previous quarter and year as a result of government subsidies to childcare which made it free and the fall in gasoline prices which, of course, have now recovered………..

        Wonder what the government here is going to do for those on the Age Pension? The next adjustment is in September. They change the rates here twice a year – March and September.

        They’ve thrown tonnes of money at everybody other than those people during the government induced economic crisis here

        • Bill from Australia says:

          Wrong LEE received $1700 in two payments , a pensioner.

        • Lee says:

          I really wouldn’t call A$1700 ‘a tnne of money’.

          You got one fortnight of JobSeeker or whatever they call it.

          You got one month’s worth of the equivalent of the top up on the unemployment payment.

          Just from the feds businesses got a cash grant of intially $25,000 and then was it $50,000 or $75,000? And then there were the asset write-offs of $150,000, reductions in payrol tax from the states and more grants from them too, reductions in electricity costs, etc, etc, etc.

          People with children got free childcare. Arts and community entities got grants, international students got grants – didn’t Melbourne University fork out something like $5000 for international students?

          And then rent reduction for renters………………….

          You got squat from the various governments compared to everybody else, but then you got $1700 more than I did!!!

          I got a free COVID test though.

      • Lisa_Hooker says:

        That’s OK Petunia, because They use the inflation numbers for what WORKING PEOPLE buy, not what retirees on SocSec need.

        • sharonsj says:

          Then it’s a good thing that us retirees on SocSec eat less and less food as we age….

  17. Fat Chewer. says:

    Data not accepted. Wolf Richter targeted for reeducation. End transmission.

  18. Lance Manly says:

    Headline on CNBC, Increase in Inflation Shows Economy is Healing

    • Wolf Richter says:

      Lance Manly,

      Yeah, this stuff is just astounding. That inflation = growth is inbred into media depiction of this issue.

      The NY Times economics editor, who gets to ask a question at the FOMC press conference, has been hounding the Fed for not generating enough inflation. He keeps calling it “failure” and the like. That’s the self-serving editorial line at the NYT. It needs inflation (higher subscription rates) to show income growth and pay off its huge mountain of debt. The NYT tends to take the side of the little people except where it matters the most. And there, on the economic front, it wants to crush the little people and impoverish them in order to serve its own interests.

      • RobertM says:

        I pay $4/ month for 7/24 NYT digital. Not sure how their business model works today. Once in a while I pick up the Sunday addition for $6.

        • leanFIRE_Queen says:

          You are wasting $48/year after tax $. Not my cup of tea. I’d rather buy 4 cans of great white tea with that $.

          Btw I do read nyt, but for free. Brave browser is faster to load, print as pdf before the pay to read thing pops up.

        • Wolf Richter says:

          Not sure about your deal, but the NYT want’s $4.25 a WEEK from me for a digital subscription, regular price, and will give me a special if I sign up NOW. $4.25 a week = $221 a year.

        • Lisa_Hooker says:

          I used to buy the Sunday edition for $1.25. I quit when they raised the price.

      • MonkeyBusiness says:

        Faux liberalism and virtue signalling are the two worst diseases in America.

        • Lisa_Hooker says:

          Most especially signalers boasting about all the gold they lost in a boating accident. Sheesh.

    • Alistair McLaughlin says:

      Heh, I was going to quote that very headline. That’s how utterly bankrupt the state of economics is today. And every so often we get a helpful editorial explaining why the economy needs inflation, just in case we were questioning whether or not it’s a good thing to devalue our money every single year forever and ever. It never occurred to ANYONE within the mainstream economic consensus to consider that if the economy “needs” inflation, maybe that is indicative of a deeper problem that needs fixing? Is an economy that doesn’t need inflation so hard for them to visualize?

  19. David Hall says:

    The price of a bushel of wheat was $2 in 1960. It was about $4.90 recently. The price of a new car went up 13x since 1960, but they added airbags, cruise control, rust protection, automatic transmission, tinted windows and a back up camera.

    • Double Bluff says:

      Wheat has added fertilizer, pesticides, herbicides, genetic modifications.

      • VintageVNvet says:

        Only GMs since 1960 db:
        The others started earlier based on the huge increase in chemistry, etc., after the poison gases used in WW1, then were greatly increased to get rid of the left overs from the chemical warfare manufacturing during WW2 and the Korean war. The basic components were sufficiently similar, even when the final product was significantly different. Many of the actual war poisons were stored until finally being incinerated at various military facilities in the last couple of decades, and even that incineration was deadly for some of the workers.
        The main factor in the increased productivity of wheat and all the other agricultural commodities, at least in USA, has been the consolidation of smaller farms, 300 acres and less, into huge farms, now usually 3,000 acres or more, and the development of equipment to take the place of vast majority of farm laborers, with one family now doing the work of at least 10 families – with additional help at harvest time. Previous to GM technology, hybrids of various kinds helped productivity a lot also.
        One of my ”midwestern” dad’s fave sayings was, “How ya gonna keep them down on the farm once they been to LA?” A concise comment on the desire of many to get away from the hard manual labor on the old farms.
        While the movement(s) ”back to the land” have created many wonderful results of higher quality produce, organic and conventional, as seen at ”farmers markets” the fact is the vast majority of our basic foodstuffs today come from huge corporate farms, including those that are committed to the ”eco-farming” and organic methods.

        • Lisa_Hooker says:

          There’s nothing like the stirring sight of 8 computer-assisted, air-conditioned, half-million dollar, giant combines in parallel munching up the wheat. “It smells like … victory.”

  20. MiTurn says:

    Wolf,

    Will this inflation potentially undermine the US$ as a reserve currency? I can’t see how it can’t.

    Thanks.

    • Wolf Richter says:

      MiTurn,

      Only if competing currencies (the euro is the closest with a 20% share of reserve currencies, then the yen with a 6% share) somehow are better managed, which I doubt. Nothing else is even close. The dollar’s share of reserve currencies is still 62%. That’s down from where it was in the heyday, but it’s still big. Any significant changes will take many years.

      https://wolfstreet.com/2020/01/02/us-dollar-as-global-reserve-currency-chinese-renminbi/

      • I get the gist says:

        Any chance TPTB just create a new digital currency and then give us pennies on the dollar for the new one?

      • gkc says:

        And it’s worse. An institution like the Fed (and other CBs) that can conjure money at will, can also in conjunction with the primary dealers, transnationals, and sovereign treasury depts, manipulate every price on the planet. They can inflate markets, crash marketss, control prices, etc. This is how modern despotism operates. There is no escape. We must take this power away or we are doomed.

      • wkevinw says:

        Another benchmark against which a currency can be measured for inflation or deflation is a basket of commodities, e.g. CRB index. By this measure, there hasn’t been much inflation.

        I just checked a chart, and in fact the dollar has gained value against these commodities, meaning deflation.

        The construction of the benchmark index is of course all important. Since the consumption of items has changed, so have “perceptions of inflation”.

        Opinion: single family home construction per capita tells a lot about the health of an economy. In the US, this has been at lows going back for 50+ years now since ~2008. That will cause deflation in lots of commodities, for example, as will slowing of per capita vehicle sales, etc. I don’t think this is a matter of “popularity”. People would like to have more and better transportation and residences. It shows some slowing in standard of living.

        • Ensign_Nemo says:

          The total fertility rate is a measure of how many children a woman is expected to have during her lifetime. It needs to be about 2.08 to 2.10 to have zero population growth. The extra 0.08 to 0.10 compensates for children who do not survive until adulthood. The rate was at about 1.7 in 2019, and the coronavirus crisis and the economic depression that we are entering are almost certain to make it drop even lower.

          If families don’t have any kids, or have only one child, then they don’t need a big house with a backyard.

          The major driver for slowing economic growth and lower inflation is demographics. The US population would shrink in the future except for immigration, and that is also decreasing.

          We are making economic choices to maximize current profits and minimize future investments, and children are an investment. We are making it difficult to afford to raise children in this country. We are, in effect, outsourcing motherhood to third world nations with lower socioeconomic development, because they are a cheaper supply of labor for multinational corporations, and corporations control the US political system.

          “Little pink houses for you and me” isn’t the ground truth in America anymore, we are becoming a nation of renters with few roots in the community. This will continue to erode the real economy as single people don’t need to buy houses or diapers or minivans to meet the needs of kids that were never even born.

        • VintageVNvet says:

          Very good truths in your summary of population changes in USA now and very likely also true going forward wkn, at least in the short term…
          Long term imo will be combination of the two great movements out of Africa, east and west, meeting now in USA and our entire ”The Americas” from all north to all south.
          I have tons of ‘hopium’ that ALL of WE the PEEDONs (per Una) will eventually be able to figure it out to give all people the opportunities that were formerly reserved for the oligarchies of each and every nation/state, and the sooner the better,,, if for not other reason than the example of Mozart.
          Oligarchies need to understand when it is time to ”get out of the way” if they have any real hope of continuing now that the battle is mostly digital and ”unmanned” rather than the cannon fodder of the last few centuries…

        • Lisa_Hooker says:

          @VV – might I borrow your rose-coloured glasses? Mine no longer work as well as yours.

        • sharonsj says:

          I don’t “perceive” inflation. It smacks me in the face every time I go shopping; I buy the same things year after year and those things go up in price while the packaging shrinks.

          We had massive inflation after the 2008 implosion when pet food went up 50% – 100%. We’re starting to see some of that now. I needed boxes of moth balls. Last year it was 24 oz for $4.75. Now the same box is $5.83. That’s 22% higher. Or I could have bought the 18 oz box for the same $4.75; that’s 25% higher. Meanwhile I’m being told inflation is only 1.5%

      • Beardawg says:

        Which is also why we will not see hyper-inflation in the USA

        • Lisa_Hooker says:

          We will not see hyperinflation in the US because we will define it away.

        • dr_doomz says:

          “We will not see hyperinflation in the US because we will define it away.”

          When small children lie, they say, “a bear did it!” When governments lie about inflation, they say “it’s the international speculators! OIL embargo!” And now we can add, “the pandemic of 2020!”

  21. breamrod says:

    I think you’ll see interest rates start to rise. August is usually a low. Let’s see if rates start to sniff out inflation after labour day.

    • RobertM says:

      If interest rates rise anywhere over inflation this house of cards comes down.

      • leanFIRE_Queen says:

        Looking forward!

        I rather focus of rebuilding ASAP than sustaining a growing ponzi.

      • dr_doomz says:

        “If interest rates rise anywhere over inflation this house of cards comes down.”

        It’s not the interest rate the matters, it’s the inflation adjusted interest rate. One can have 5% interest rates and 10% inflation (-5% real negative) and the economy will hum along or be on fire.

  22. The Bob who cried Wolf says:

    That shelter thing sure is way up here in 92115. I’ve been harping on this since May. Housing costs, at least ownership is way way more expensive than it was back in January or February (pre covid)
    Wolf, you had suggested a while ago that you might keep an eye on that house I mentioned that sold for too much back in May and maybe make some sort of study of what we’re seeing here. There’s absolutely no houses (SFR) for sale in what I would consider my neighborhood. Spread that out to all of 92115, which has many thousands of houses, and there are only 13 SFR’s for sale. What’s available is outrageously priced and what has sold has got to be at least 15 to 20% higher than what it should be going for.
    I feel that shelter (SFR’s) are going for a bunch not only because people are desperate for something with a yard, but also because people are freaked out about inflation now and need to hedge it somehow.
    Food inflation is freaky, but what’s happening to housing is downright scary.

    • RobertM says:

      Record single family home sales and prices in
      July in the NC High Country (formally known as Appalachia).

  23. Joe in LA says:

    Wolf, does this inflation data have any implications for your SPY short?

    • Wolf Richter says:

      Not that I can see.

    • Considering the liquidity in the market, inflation being perceived as economic growth, a rip your face off rally could occur. There is very little in the way of news which can hurt this market, so anything could be a catalyst. The best catalyst would be a short sharp correction.

      • RightNYer says:

        Just curious, what “rip your face off rally” do you expect that hasn’t already occurred? The market has priced in a full recovery to February levels (which were still overpriced even then). Are you expecting the S&P to trade at 50 times earnings? At what point would investors say “enough?”

        • How many more trillions have been added since Feb? The economy will recover, maybe not here, somewhere, these are multinational cos. They know how to work around a soft US economy. Earnings are dependent on credit availability, less on product sales, or revenue. Additionally the tight labor market has been shattered. Companies have pricing power (sell smaller packages at the same price). The virus ensconced corporate America as our primary financial and moral institution. They have PR issues, they must build a faux cure and wait for the public to forget. Corporate buybacks are up and running, which means more investment dollars chasing fewer shares. S&P 4000, back of the napkin.

    • The Colorado Kid says:

      Joe in LA, so the inflation rate needs to really rocket before the stock market will take off. Normal ‘high’ inflation knocks the crap out of Stocks and Bonds.
      In the ’71 ‘temporary suspension’ of the Gold Window, the stock market took off and then when inflation started getting really high it crashed in 73-74 and it was wickedly choppy ride from there on is my understanding.

      I’m still short like Wolf and I have been getting killed, so I’m not the person to listen to right now. There’s so much distortion & malinvestment right now, who knows what will happen in the Markets with no Price Discovery. Reminds me of going to Eastern Europe after the fall of Communism and nobody knew how to price anything. I remember eating and drinking all night in restaurant and pubs and paying like 3.75 USD in Prague.

  24. Citizen AllenM says:

    Don’t think inflation is going to rage just yet. Silver bungee jumping, but almost everything else wholesale and input material looking meh. Look at most of metals, energy, food at the producer level. At this rate of inflation, food commodity producer bankruptcy will blow out next year.

    In short, everything is taking a long jump upward, but another demand cliff is here…

  25. Fat Chewer. says:

    The new work from home environment is another sign of the growing venal iniquity of our society. It has divided us into WFH workers and working at work workers. I find it very distasteful that these people are paid so much more without even coming in to work. I am quitting my factory job after this nightmare ends. If you can’t beat ’em, join ’em, I say.

    I used to believe in an honest day’s pay for an honest day’s work. Pfft. That’s for the birds. I now wanna get paid a fortune for sitting on my ass, on my own couch, for doing sweet FA, like so many others.

    You got way more than your pound of flesh out of me and it still wasn’t enough. You underpaid me, pulled the rug out from under me, heavily slanted the playing field and repeatedly moved the goal posts. I’m done. I hope you’re happy.

    • leanFIRE_Queen says:

      Working from home in the US has been key for mothers like myself. I’ve done it for the last 3 years, before it was cool:

      * men cannot sexually harass you
      * time flexibility that you need with kids in the only country without paid maternity leave becomes a built in feature

      Mothers win with WFH, so it benefits society, as their kids also win.

  26. Lou Mannheim says:

    This is just theft dressed up as monetary policy. I’m glad someone with a profile is writing about this – it’s hardly popular but must be addressed. Every basis point of manipulation is interest stolen from savers.

  27. gorbachev says:

    Print baby print

  28. Lee says:

    Some comments:

    1. When was the last time you actually ‘felt rich’ or well off from money you made from work? Probably a long, long time ago. Exceptions of course for the top 10%. For that matter when were you last in the top 10%, if ever?

    2. Everybody with an ounce of brains knows that the numbers are so distorted that they have no real meaning for most Americans.

    3. If you own a home the cost component of the inflation numbers is only important in such variables such as upkeep, real estate taxes, and insurance, etc. If you have a mortgage and the rate on the loan is variable, you might even have a negative number there.

    4. Here in Oz the biggest increase over the past few years int eh components has been tobacco as a result of huge increases in government tax on the items. A basically menaingless number if you don’t smoke.

    5. Maybe it will happen in the USA, but is sure going to happne here in Oz over the next year is food inflation. We are going to get hit with huge increases in the price of fruit and vegetables as there aren’t enough people to pick the stuff.

    The people that usally do most of the work are temp visa hodlers that come to travel around the country and work as they do so. Over 2/3rds of them have left the country since the virus hit.

    Oz also exports a bunch of stuff (usually the best quality) to overseas markets as well and those that pay top price will get served first. China is having a really, really bad year for ag product prouction and this will finally hit the rest of the world in tems of demand and prices. Something to watch.

    And finally, if we don’t have a normal growing season here this year after the crap we had last year, the price of ruits and vegetables is going to soar even more.

    • leanFIRE_Queen says:

      > 5. Maybe it will happen in the USA, but is sure going to happne here in Oz over the next year is food inflation. We are going to get hit with huge increases in the price of fruit and vegetables as there aren’t enough people to pick the stuff.

      Totally agree with you! My hobby is growing my own food. Growing my own fruit trees as we speak and my first microgreens. So I’m greatly protected, not only food inflation, more important: glyphosate exposure!

      5 acres is enough for growi ng plenty of the best food for a small family in an area with decent weather.

      • The Bob who cried Wolf says:

        Agreed. Food inflation is happening already in a big way. Not only have prices gone up since pandemic, but package sizes keep shrinking. We’re on a third of an acre and manage to grow most all the fruit we can eat year round. Veggies are a lot more work than trees (once trees established) so we stick mostly to what’s simple…tomatoes, squash, etc. I’m tired by the end of summer so don’t do a winter garden but may this year because of exactly what we’re all seeing with massive supply chain disruptions, disposing of good crops/livestock, eggs and milk being dumped, etc. When things get back to normal it’ll take several months to years to catch up on what was tossed.

    • VintageVNvet says:

      Lee, appreciate your very informative posts on here re OZ; however, answers and extended replies follow:
      1. ”felt SO rich” last week when i went to my favorite ”liquidity” source, and bought ”whatever the heck i wanted” for the first time in a while,,, barely been scraping by on the bare bones liquidity budget until empowered by the ”stimulus” to go above and beyond!!!
      1-A. Had this discussion with a cuz several decades ago, and he, a pilot for PAA, made this point: we can listen to the music played only for the very very rich 200 or so years ago anytime we choose,,, not to mention his point about the pint or so of better wines than the popes of old could every imagine, etc., etc…
      2. True without doubt everywhere, eh
      3. True that, far shore,,, one commenter on here nailed it on another thread, ” You really do not own RE, you just rent it from the guv mint, and if you fail to pay their ”rent” they will take it away in a NY minute.” or some such verbiage meaning exactly the same thing!!
      5. Food ”inflation” is not going to happen in USA anytime soon, if for no other reason than the major part of food in USA is produce, so far, by huge corporate farms that are all too vulnerable to movements by radicals of all sorts, left and right, to take them over…including radical movements of the ”take back the land” and others that are apparently claiming ever more areas based on their currently growing strengths both on the streets and in politics.

  29. Petunia says:

    Unrelated question, sort of, I think:

    My mail in flyover country southern US is usually bad, but this month it has been extremely terrible. Bills not delivered, packages sitting at PO, checks sent not received. Is anybody else experiencing this?

    • roddy6667 says:

      Suggestions. Pay all your bills automatically or at least online. Switch to UPS or FEDEX. Get direct deposit for any checks. It’s 20 years into the 20th century.

    • Yertrippin says:

      Um. The USPS is getting the drain the swamp treatment. Enjoy!

    • The Colorado Kid says:

      Petunia, my Wife works for the Post Office. Since Trumpolini’s new stooge Dejoy (who gave 270 million to the Trump Campaign) was installed as the Postmaster General Puppet, he has put a freeze on hiring and all overtime, while at the same time you have massive retirements occurring.
      The real kicker is when the retards with their Red Herring argument come out with the “Post Office is losing money, so we will have to privatize it”.
      Well, does the EPA or the US Forest Service ‘make money’? How about any other Federal Agency or even your local Library, or Fire Dept, or the fucking Public Parks Dept. Will they all be required to ‘make money’ as well.
      We’ve seen this movie before with the bitch Margaret Thatcher she used the same bullshit playbook to privatize everything and crush labor will she was at it. This pendulum is only gonna swing so far & all these people are going to get what’s coming to them. Kid rant over.

      • The Colorado Kid says:

        Sorry, Postmaster General DeJoy gave 2.7 million.
        But hey, what’s a few more zero’s these days, eh.

    • Lee says:

      Try living overseas…………………..

      Last three letters from the USA: 7 weeks, 4 weeks, and 3 weeks.

      Am waiting for one from the UK now. Wonder how many weeks that will take…………………….

      No mail at all from Japan to Australia.

      Internal Australian mail: one express package – almost had a heart attack: one day from door to door Sydney to Melbourne suburbs.

      Next ones back to normal – two weeks from South Australia, one week from the suburb 20 miles away.

    • wkevinw says:

      USPS was targeted for “efficiency” improvements prior to covid and the impacts are happening now. The way the accounting is done, it’s hard to hide costs, e.g. benefits have to be accounted for differently (more honestly) than other institutions.

      I am a fan of the USPS, notwithstanding all of the improvements they could use. The legal standing of mail fraud and other issues may require some kind of USPS. As usual, the costly routes also contribute to the “inefficiency”. If there is going to be service everywhere (which may be required for certain legal standing), there may have to be subsidy forever. It might be worth it.

      It’s a lot easier to be cost effective (e.g. FedEx, UPS…) if you can cherry pick service/delivery routes.

    • Anthony A. says:

      Don’t get me started on the useless post office. I could write a book on what’s going on “Bad” around here with mail delivery.

    • Wolf Richter says:

      Petunia,

      Well, Trump’s new guy in charge at the USPS is trying to gut the USPS. And they just had their own Friday night massacre. So I would imagine that we’ll see the consequences in our mailboxes sooner or later.

      • Just Some Random Guy says:

        I check my mail about every 10 days. 95% of what’s in the mailbox is junk mail. The other 5% is “real” but almost always info that I have access to online. Things like a monthly bank statement which for some reason I still receive even though I requested to not get one.

        USPS needs to go to once or twice a week residential delivery. Stuffing junk mail into mailboxes 6 days a week while losing billions of tax dollars yearly is absurd.

        • Wolf Richter says:

          I think USPS should charge a whole lot more for junk mail. No one reads this stuff. It’s just a waste — the whole huge cycle from making and transporting the raw paper to recycling the discarded junk mail. The US government should make a big profit on this or push it over the edge.

      • timbers says:

        Sooner or later? What planet do you live on.

        Try NOW. It will vastly improve your accuracy.

        “Just a moment. Just a moment. I have just identified a solution to multiple problems. By dramatically increasing funding to the United States Post Office we can provided tens of thousands of good paying jobs with benefits while provided huge upgrades in service and mandated by the Constitution of the United States of American.”

        – The HAL9000 unit, which has perfect operational record and has never made a mistake or distorted information in any way.

      • Lee says:

        Gotta make me laugh.

        Australia Post is a joke compared to the USPS. You could write a book about all the stuff ups there.

        The better half ordered some stuff off eBay a couple of days ago from a suburb about 40 miles away from us.

        The package was sent to Sydney…………….where it is now, who knows.

        The previous head of Australia Post came in and destroyed the entity. Regular letters went from 60 cents to $1.10 and for priority went to A$1.50 (Priority used to be normal delivery, but now you have to pay extra for it.)

        Spent big on parcel machines that send packages all over the country and some go back and forth for months.

        Got rid of him and brought in a Vitamin company executive to run the place.

        The price of sending anything in or out the country is ridiculous. Service times were bad and are now much worse.

        And on and on…………

      • Petunia says:

        Thanks to all that replied. I generally think the PO is necessary but in my town it is awful, and that was before covid.

        One of the threads I was hoping to hear about was the PO’s deal with Amazon. I heard the prez refer to it, that Amazon got a too good deal from the PO, but not much else has been said. I was thinking maybe the current “slowdown” was about an increase in volume.

    • MCH says:

      I’ve already seen it. I think I had more undelivered mail this year and delivered to wrong address than the last few years combined.

      Three missing credit statements (not even the same ones), two packages delivered from the neighbors three doors down… Couple of missing checks.

      And here is Wolf telling me it’s going to get worse? *Faints*

    • jn says:

      Are you unaware that Trump has put a crony by the name of DeJoy in charge of the USPS, clearly with the intent to injure it so badly as to screw up voting by mail? Google USPS DeJoy and read.

  30. sierra7 says:

    Pre-Reagan innauguration:
    “American labor must be crushed to a world level playing field before American corporations can compete in a global market”.
    Plain and simple.
    The plan has been working for decades.
    Many of the upper middle class workers/professionals know the jig is up and are just plowing ahead and paying off all their debt and hope to be in decent shape when the blade falls.
    Unbeknownst to many there are many labor strikes across the country (Labor Notes) indicating that there is still a spirit of fighting back. Not enough Americans realize where their accessibility to “benefits” came from ……the streets in labor strikes.
    It’s gonna be a hard fall but the crushing of unions/labor in America has more or less succeeded; the globalization in the early 1990’s did the rest.
    Lack of good politicians dooms the rest.

    • Yertrippin says:

      This 100%. Hard to believe that the plan to depress wages and bust unions was misinterpreted as “bringing back the jobs.” oof.

      • Petunia says:

        The unions made it worse by fighting the ability of companies to automate and upgrade. Instead of understanding the future was a more modern and learner workforce, they fought a losing battle to the bottom. For the most part they are still doing it and still losing ground.

        • wkevinw says:

          The globalization made a lot of sense at first, in my opinion. I am old enough to remember the 1980s- especially ~ 1989. When the communists basically all started to fall apart, there was a big opening of markets. Any free market business knew that they had to participate. Really, if one had said, “no, we are only going to grow domestically”, you would be crazy.

          By ~ 2000 it was starting to look fishy. 10 years and one big country :) was clearly using unfair practices, and labor being globalized was crushing developed country labor markets (think lack of borders in either direction). Also, there were many IP theft cases dating back even then. There are whole industries probably worth billions of dollars that have been stolen.

          I have read that one reason the US doesn’t get fair prices for meds overseas is that other countries threaten just to steal the process and make the patented molecules.

          By 2010, if you wanted to face reality, it was obvious that it wasn’t working right.

          Unfair labor, IP and trade practices are easy to see.

          There was an election in 2016 about it.

        • Xabier says:

          Intelligent organised labour is of great value in redressing power imbalances at work: sadly, there is very little intelligence discernible in the leadership of many unions.

    • Brant Lee says:

      I remember well, the air traffic controller strike. Afterward, it was all downhill for labor and has been ever since.

      But when you have your own government working against labor, what can you do?

      Joe Biden made it all sound glorious today while introducing his VP candidate. Those politicians can pour it on pretty good and get you in the spirit. Then it hit me: these are the same people who have been in office for years. We have tech constantly gathering, using, and selling our info. We have corporations and banks making us debt slaves from the easy cheap money provided to them by our government. Jobs are dying from continued unregulated outsourcing etc etc. Sorry, this is still not the election where anything will change.

      • wkevinw says:

        My dad was an air traffic controller and involved in the strike situation.

        It was very professionally handled by the Reagan admin. They gave incredible numbers of warnings, etc. It was a typical example of a public employee union striking and what the consequences should be. See what FDR said. The union leader was a real piece of work. I’ll leave it at that.

        Note- some time later, many controllers applied for their old jobs and were re-hired.

  31. Coinshaver says:

    When people realize the system is rigged they will lose faith in the dollar. They will see us using our dollar like toilet paper which will cause a flushing effect where they will buy everything that is not nailed down from the United States.

    That day is rapidly approaching. The dollars will come flooding back to the United States which will initially be seen as a second wave of prosperity (Some of this has already been happening for years).

    However, it will not be that at all, but a sign that foreigners no longer trust us to respect our power as the world reserve currency.

    Right now, the Chinese government is using communist funded front companies to buy U.S. assets, mostly food and food production. That food is being shipped back to China as they are currently experiencing massive flooding and potential starvation.

    The possibility exists for the U.S. to become entangled with them in a hot war, I would guess this would be more likely if Trump is re-elected. Biden is likely a puppet of the Communist regime.

    Regardless of how that ends up the new global reserve currency will probably be a basket of currencies, backed by gold and possibly silver in a bi-metallic standard.

    The dollar as we know it will be devalued and then probably abandoned with a new currency and a screw you to the world sorry you played in the ponzi scheme called the dollar.

  32. Robert says:

    So if the CPI rises, then at least retirees will get a social security raise. Or will all that be ‘adjusted’ away by BLS statistical nonsense?

    It should be pointed out that in the next three years many of the lower earners in the progressive states are getting ‘forced minimum raises’ by state mandate to $15/hr. So many people will be getting raises (Walmart), regardless of the whims of their employers.

    • Just Some Random Guy says:

      Progressives: $15 minimum wage now!!

      Also Progressives: Gee I wonder what’s causing all this inflation?

  33. A says:

    *obligatory comment about how none of this is real because *I* succeeded in today’s world*

    *shares random specifics that you should have magically known how to emulate and assumes you were in the exact same situation as I was*

    *finish off with a smug tone of self-congratulation, tone-deaf to the larger picture and all human suffering that isn’t related to my own ego*

  34. Just Some Random Guy says:

    This is why holding cash is a foolish thing to do these days. Buy hard assets and inflation doesn’t hurt you. Keep cash and you’ll regret it.

  35. Just Some Random Guy says:

    One thing I never hear about when inflation comes up is mortgage rates. Someone refinancing into a sub-3% mortgage on a $500K home is going to save a lot of money that will more than offset the increased cost of food or what have you.

    • Wolf Richter says:

      Consumer price inflation doesn’t help at all paying off a mortgage. It makes it harder because you have to pay more for other stuff and don’t have enough money left over for your mortgage payment. What you want is wage inflation.

      What you’re talking about is real interest rates that are repressed by the Fed to be below zero. That’s is just a Fed-engineered wealth transfer, plain and simple.

      • Lisa_Hooker says:

        Wolf – what I want is Social Security check inflation. And, I would like pension check inflation too. Higher interest rates would be nice, but I can’t see how that can happen when the Fed outbids the public.

    • RightNYer says:

      That only helps people who CURRENTLY own their houses and are refinancing. It makes homes more expensive for people trying to buy their first home, as lower rates cause higher prices.

      Basically, current Fed policies are a massive wealth transfer from younger people to asset-rich people.

      • Just Some Random Guy says:

        “That only helps people who CURRENTLY own their houses and are refinancing. It makes homes more expensive for people trying to buy their first home, as lower rates cause higher prices.”

        Not really. It’s a wash. Higher prices but lower rates offset as far as monthly payment goes. That’s what matters in the end.

        • RightNYer says:

          Except that the value of what they paid for will drop significantly if interest rates ever are forced to normalize.

    • Alistair McLaughlin says:

      Buy hard assets and inflation doesn’t hurt you. Keep cash and you’ll regret it.

      And this is precisely what so many of us object to. Not everyone wants to – or in the position to – take on huge leverage to protect themselves from inflation. Not to mention the fact that the more leverage we take on collectively, the more systemic risk we are exposing the entire economy to. That’s why we have financial crises every decade or so now. How’s that working out for you?

      Also, you might consider that bidding up hard asset prices is a big part of the inflationary cycle. You’re basically arguing – like CNBC and the rest of the financial press (and the Fed, and economists) – that inflation is a good thing because some people make money off it. That’s the very argument those of us who oppose intentional devaluation of the monetary base find so objectionable, if not unethical.

      • Just Some Random Guy says:

        I’m not making an ethical or moral argument. I’m stating reality. If you hold cash you are losing money. Do what you want.

  36. historicus says:

    What crushes the working man more than inflation?
    2% inflation rips 22% off the dollar in ten years…..2.5% 28% off the dollar in ten years….
    Stable prices mandate of the Fed ignored…
    Dealing only in federally backed securities…ignored
    Moderate (not extreme) long term interest rates…ignored
    anybody catching on?

    • Lisa_Hooker says:

      I once went to hear Paulson and Geithner speak. During the Q&A I posed the question: “Why should prices double every 35 years when it’s an exponential function.” They refused the question.

  37. Nate says:

    A handly correllary graphic would be the flat-to-down wage graphic for inflation adjusted wages for the last 40 years. American salarymen are slowly being bled to the level of the average world wages.

    Unfortunately, last I checked about 75% of the world population makes less than poverty level in the US in absolute cash terms.

    Income producing hard assets seem like the best place to park cash to me. Will see how that holds up if nobody can afford to buy anything eventually…

  38. Augusto says:

    If you print and give money to people who are not savers (say 75% of the population), they are going to spend it. Of course we are going to get inflation, especially in essentials, as more paper chases fewer goods. Some of this money has been used to pay down credit cards, but many spenders have also deferred rents and mortgages, and spent the temporary free money. What a total mess

    • RightNYer says:

      And if you print it and give it to people who are savers, they dump it into financial assets and real estate, making those unaffordable for younger people.

      The takeaway is not to print and give free money out.

      • Nate says:

        Or the Corporate types. First thing they did with all that free money from the last bailout was to wash it thru the financial system and purchase real assets with it. Screw Main St of course.

        The gentrification of the American Dream is turning most of the population into renters, just where the owners want them.

        • RightNYer says:

          Yeah, well, they keep this up and they’re going to see millions of people with AR-15s showing up in Washington. Wealth inequality always leads to civil disorder, every time.

      • Mr. House says:

        Not true, i’d never put a cent i save in the stockmarket. And i save about 25% of my take home pay a month. Its the people who think a 401k is the only savings account they need. Until they lose a job. Savings is the only freedom you’ll ever get in this country.

  39. CrankyMathGuy says:

    I love your info and your point of view, but the ghost of my grade 8 math teacher, who also taught English, came to me in the night and said, “Tell that Wolfstreet guy to stop using double negatives!”

    When you say crude oil futures went to negative -$37/bbl, it makes my brain hurt. Either “negative $37/bbl” OR “-$37/bbl”, but not both!

    • Wolf Richter says:

      It’s done for clarification — in a situation where it’s very unusual and people who read fast miss the – in front of the number. Happened many times. Your math teacher has no clue about how easy it is to misread something when you’re in a hurry. So I add the negative for clarity in these situations so I don’t hafta deal with it in the comments.

  40. DV says:

    Well, baby boomers may not be in that bad position if their savings have been invested in the stock market or real estate. Anyone, who owns assets, benefits.

    But then the issue of income inequality comes and has to be dealt with, making US economy non-competitive with most of the manufacturing being off-shored. At some point it makes little sense to produce anything, even in agriculture. And that is where you get Trump…

    • Lisa_Hooker says:

      No one “benefits” from their assets until they are sold. If a lot of folks start selling assets around the same time it’s going to show a lot less benefit.

Comments are closed.