For Stocks & Bonds, Upside Surprise of Inflation and Interest Rates “Could Prove Nasty”: Dudley

Five reasons to “worry about faster inflation.” It’s “a greater danger precisely because it’s no longer perceived as such.”

By Wolf Richter for WOLF STREET.

“Given how completely financial markets have come to expect low inflation and interest rates, and how much support those expectations are providing to bond and stock prices, an upside surprise could prove nasty,” says former president of the Federal Reserve Bank of New York Bill Dudley, in a warning about how markets are ignoring the rising risks of inflation.

Companies have been raising prices, and they have been getting away with it. I’m not talking about prices at the gas station or grocery store which bounce up and down, but prices for things that are more stable, particularly services, where 70% of spending takes place, such as broadband services, shipping rates, and the regular highflyers, such as healthcare. Rents on a national basis are mix of plunging rents in some cities and surging rents in other cities. There has been inflation in goods too, including used-vehicle prices which have spiked by 15% since June,

Many of the restaurants that remained open raised their prices to deal with the additional costs and the decline in seating capacity during the Pandemic, and people are willing to pay those prices to support their restaurants. This happened across other industries that have cut capacity, triggering surging prices despite a decline in demand.

Some of these price increases happened because demand was red-hot, brought on by the sudden shifts to eating at home, working at home, learning at home, playing at home, and vacationing at home, and the other distortions brought about by the Weirdest Economy Ever. Other price increases happened because there were supply constraints due to the Pandemic, and the higher prices stuck.

Companies themselves are now reporting surging prices-paid in their part of the economy. This is particularly the case with services-oriented companies, where most of the economic action takes place. They’d only experienced a brief pause in price growth in March, and prices didn’t actually drop – they just stopped rising. But in April, prices took off. And for November, the ISM Services PMI for prices paid jumped to 66.1 (values above 50 indicate rising prices compared to the prior month, a higher value means prices rose faster). It was the eighth month in a row of price increases (above 50). And it matched the two sharpest month-to-month price increases since 2011.

These are prices paid – the costs of these companies are rising and are pressuring their margins, and they’ll want to pass those higher costs on to the next one in line.

But neither consumers nor markets see inflation. Least of all the Fed.

In surveys, consumers remain calm about future inflation, though they face higher prices every day. Treasury market metrics of inflation are somnolent as well about the potential of future inflation. And Fed officials, in their Economic Projections, don’t see inflation (as measured by core PCE) reaching 2% until 2023.

So now, Bill Dudley is stirring the pot with an editorial on Bloomberg: “All told, inflation might be a greater danger precisely because it’s no longer perceived as such,” he says.

“And given how completely financial markets have come to expect low inflation and interest rates, and how much support those expectations are providing to bond and stock prices, an upside surprise could prove nasty,” he said.

Dudley’s five reasons to “worry about faster inflation.”

After April 2021, the low comparison basis of April 2020. Inflation had dipped in March and April by 0.5%.  But since April, the core PCE price index that the Fed uses has already risen by 1.3%. Next April and going forward, the low points of 2020 “will become the new basis for comparison, and year-over-year measures of inflation will jump,” Dudley says.

Consumer spending pattern shift back to normal after vaccines. Consumer spending has been upended and distorted during the Pandemic, with spending on some goods and services surging to new records, while many other service providers, such as the travel industry and restaurants and bars and hair salons, got crushed. In the second half of 2021, assuming that the vaccines are functioning, people will start doing the things they’d stopped doing, including more travel, and these industries “will probably regain pricing power as demand recovers.”

“Sharp price increases might even be needed to balance demand with the available supply, which the pandemic has undoubtedly diminished,” he says. Think capacity cuts among airlines, hotel and restaurant closures, and the like. If there is more demand, it will meet with capacity constraints, and companies will jack up prices.

These price increases “are unlikely to be offset by price decreases in areas that probably will see less demand, such as online streaming (Netflix) and videoconferencing (Zoom),” he writes.

Lacking or misallocated capital investment. “When the crisis period ends, capital will not be allocated to its most productive uses: Many expansion projects and investments have been suspended and new demand patterns will likely emerge post-pandemic,” Dudley says.

And then there’s the issue that the hardest hit sectors – restaurants, airlines, etc. – have shed the most employees, and those workers have moved on, “making it difficult for businesses to find the labor needed to expand. Some businesses, such as restaurants, will simply have disappeared, reducing the capacity available to meet resurgent demand.”

The Fed will let inflation run hot. The Fed has switched from a target of 2% inflation – meaning not more, not less – to a goal of an undefined average of 2% inflation, with periods of above-2% inflation to make up for periods of below-2% inflation. “This means they’re unlikely to respond to any inflation uptick until they expect it to be both persistent and sizable,” he says.

“Fiscal orthodoxy has shifted” – more deficit spending. There has been a huge policy shift toward big fiscal deficits, starting with massive tax cuts two years ago, which caused the federal deficit to blow out even during the Good Times, followed by the massive Pandemic spending, which caused the deficit to explode. And it appears that there are at the moment not a lot of concerns about the deficit and debt in Congress, as “fiscal orthodoxy has shifted.”

As a result, “the government is much more likely than it used to be to support the economy with added spending” to offset shortfalls in demand. And “the government probably won’t want to remove fiscal stimulus as quickly as it did after the 2008 financial crisis (a move that led to a disappointingly slow recovery).”

There is a chance, however, that Republicans in Congress will become instant deficit hawks once again the moment their guy leaves the White House. And if they retain control over the Senate, they could stifle those fiscal stimulus efforts. A possibility that Dudley sees as well.

So he concludes that “inflation might be a greater danger precisely because it’s no longer perceived as such.” And that for stock and bond prices, this “could prove nasty.”

Well, OK then. Another warning about asset prices, on top of a pile of warnings about asset prices. And so far, markets have blown them all off. Which seems to be precisely what Dudley is getting nervous about.

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  129 comments for “For Stocks & Bonds, Upside Surprise of Inflation and Interest Rates “Could Prove Nasty”: Dudley

  1. VintageVNvet says:

    Certainly greatly appreciate the reporting and especially your wonderful use of great graphics Wolf!
    How some ever, until and unless the guv mints at all levels use ”real stuff” as the basis of inflation, anything from BLS, FED, Treasury, etc., that has reference to inflation is irresponsible at best, criminal at worst as is now the case when such absurd numbers are used to keep elders and disabled on a constant downward financial trajectory.
    Grand father decided to live on his SS of $100 per month, and devised every trick to do so living on the hook on his (home made) sailboat in Nassau harbor; try that today with the delta of the ”official” inflation rate since 1961 == $866 per BLS inflation calculator.
    Wouldn’t even pay your bar bill from what I read…

    • MiTurn says:

      VintzgeVNvet,

      You wrote “Grand father decided to live on his SS of $100 per month…” That’s me too, although a bit more than $100 a month. I am now a fixed-income retiree. While my monthly income currently allows for a comfortable lifestyle, if I’m wise with my monies, inflation will blow it out of the water.

      At least somewhere down the road.

      • 2banana says:

        The real question is why would any FED want a 2% inflation policy in the first place?

        This, by definition, will cut the purchasing power of a dollar by 50% over 35 years.

        The end game is that government can either cut its massive deficits by cutting spending, raising revenue by increasing taxes/increasing GDP or devaluing the worth of the debt.

        Which one of the three alternatives has the least political opposition?

        • historicus says:

          2% compounded rips 22% off the dollar in ten years…
          2.5% rips 28%…
          2.5% in 20 rips 68% off the dollar..

          “…promote stable prices…”
          “..promote moderate (not extreme , either way) long term rates”
          The Fed has violated two of its three mandates for 12years…and not a word it seems (except from the likes of me)

        • Fat Chewer. says:

          You would think higher taxes on the 0.01% would have 100% support from the 99.99% but that would be wishful thinking.
          Option 2.5: increase taxes on the 99.99% and destroy services simultaneously will be the outcome.

        • Thomas Roberts says:

          Inflation over time always favors the rich and banks. It’s important to remember the FED is basically the king of banks and is unelected by the average jo. It’s also telling that positions on the FED’s board of governors are 14 year terms. Much longer than say congressmen or presidents. This signifies the higher importance of the role compared to elected officials.

        • DR DOOM says:

          The whole point of fiat paper is to allow the ruling class to steal its original par value to silver of gold by issuing debt . The Constitution codified silver as the money of the realm. The value silver has not gone up, the fiat dollar has gone down.We the people allowed fiat to replace silver for money. Dudley is just doing his job for representing the ruling class theft. It’s really just that simple . Insular people like Dudley will not be affected by the theft, in fact he has done well. Did you hear Janet Yellen blathering about insuring our dreams and potential as Treasury Secretary ? This was insulting to ones intelligence considering that she represented the other side of that trade as Fed Head.

        • elysianfield says:

          “The real question is why would any FED want a 2% inflation policy in the first place?

          This, by definition, will cut the purchasing power of a dollar by 50% over 35 years.”

          Yes, with a concomitant devaluation of the “National Debt”.

        • Whistleblower says:

          Dear Fat Chewer,

          Actually taxing the ultra-rich is the only solution to America’s oncoming demographic cliff (when Baby Boomers retire and want to sell their expensive homes and securities holdings to poorer generations) and oncoming $211 TRILLION plus, undisclosed US federal liabilities. We must not give up hope for reform.

          The ultra-rich have evaded paying their fair share of taxes for too long (e.g., via the foreign income tax provisions), like the French aristocrats in the 1700s. While solving the problem with guillotines is just a pleasant dream, due to the cruel and unusual punishment clause’s bar, there may be hope for reform if the majority of Americans stop being distracted by foolish, minor issues and awaken to their power.

          I think that might just happen when both parties’ lower/ middle-class members eventually realize that they have both been victims of the ultra-rich’s covert economic war. The political corruption is so great that this will be the battle of this century.

          However, the majority can win against the corrupt minorities in both parties. I switched parties after seeing the level of corruption in LA and how the ultra-rich here were getting away with murder.

          However, there is a silent majority of Americans that are now slowly realizing the level and unfairness of the widespread political corruption in both parties. While I doubt that it is politically viable for now (because the banksters own too many politicians in both parties as implied by Simon Johnson’s in his “The Quiet Coup”), raising taxes on the ultra-rich is very popular. See NPR’s “Warren Wealth Tax Has Wide Support, Except Among One Group.” Except among Republicans with college degrees, there was majority support for a wealth tax on the ultra-rich, including among a majority of all Republicans.

          Currently, I suspect a US Supreme Court (the “Supremes”) majority would rule that a wealth tax is unconstitutional because their wealthy sponsors would be outraged if they did not. Thus, I suspect that a tax on the ultra-rich would only be viable and collectible if we eliminate their many deductions: i.e., if we just impose a flat income tax on the ultra-rich and most companies without allowing them or their corporations any deductions, which the Supremes would find harder to strike down.

          (For example, owners of more than 4% of a publicly listed corporation would have to pay taxes on 3% of their 3%+ share of the company’s operating income without any deductions even for salaries. Underreporting of most cash income, at least in LA, is now so regular, that companies with cash income should be targeted with wiretaps and other methods used against organized crime.)

          That would eliminate the ultra-rich’s incentive to use the tax deductions legally allowed corporations for their massive, ongoing tax frauds through which they have evaded taxes for many DECADES by deducting millions or billions in personal expenses/purported wages (e.g., paid to relatives for no work.) This practice is now endemic.

          Aside from the foreign income tax laws, which have allowed so many US persons to avoid paying taxes legally, abuse of deductions has enabled the ultra-rich’s GIGANTIC tax frauds. Other reforms may work to enable this: e.g., requiring officers and attorneys employed by corporations to report tax fraud, improper taxable deductions, or other frauds involving those corporations on some PUBLIC bulletin board or face disbarment and personal liability for the tax frauds.

          Law enforcement (at least in LA) is so corrupt that, only if the proof were public, they might take action against the ultra-rich for these frauds. If there is no public shaming of law enforcement, we will again see a repeat of what happened with the SEC and Maddoff: the law enforcement employees will not even investigate reports of corruption among the politically connected and powerful.

          For example, I once worked for a company (call it X) that I ultimately discovered had secretly hired me specifically to commit tax fraud by deducting my wages for work that they secretly planned to have me actually mostly do for company X’s individual owners. The individual owners (henceforth called the “rich crooks”) were about to be sued by their former business associates for having induced them to engage in tax fraud (understating another, unrelated company’s (company Y’s) cash income for many years), so that the apparent value and creditworthiness of that third party company (Y) to creditors was destroyed. As a result, it could not get the foreseeably necessary refinancing and was in desperate financial straights and wound up bankrupt with its major asset obtained by the rich crooks.

          That enabled the rich crooks, who deducted every possible expense from the company’s income (such as sums that one had paid to support his mistress {or successfully-sexually harassed employee} for years, who was shown on taxes as “working for the company”) to evade paying more taxes. I ultimately discovered that I had been hired due to my litigation background, to induce me to work defending that anticipated case against the crooks for fraud.

          I eventually learned that the promised allocation (of my wages, so that company X would be compensated by the rich crooks for my work) was never planned to be actually made: they just lied to me. The corrupt LA judges, who clearly saw the emails and other evidence of the tax frauds, then cooperated with the rich crooks to continue the trial, intimidate me, and do everything the sink my case against the rich crooks and their cronies until I had to settle.

          To date, even though there is no statute of limitations for such tax frauds, and I still have all of the evidence, so they could still take action even now. I reported these events many years ago to the IRS, DHEF (while still employed at company X), Franchise Tax Board, and other government and state agencies, yet law enforcement officers are so utterly corrupt that no one even contacted me — for years. Those rich crooks bragged of their power due to their alleged cash payments (through their corrupt, private lawyers) to powerful, California politicians.

          Clearly, they were telling the truth. One of those politicians (still in power) can be easily identified if you just do a brief internet search as to political corruption in California. Many former clients faced similar corruption as I learned in my decades of practice, so I can certify that our legal system, at least in California, is utterly corrupt, every agency, many corrupt LA state judges, and even federal and state tax authorities.

        • Andy says:

          Silly you 2banana.

          The government doesn’t give a rats arse about long terms falls in consumer purchasing power (as long as it doesn’t cost at the ballot box, which it doesn’t because its the hidden tax)

          But 50% wiped off government debt every 35 years, now that’s attractive. And is the alternative you didn’t mention, but the one always chosen.

          To complete the circle, have the Fed buy the debt and call it MMT. We’re there but I’m sure you know it.

      • Anthony A. says:

        MtTurn, that’s us too. Old, retired, SS income and a nest egg that I can’t risk too much in the “market”. The last of my string of 3% CD’s mature in early 2021 and I don’t know where to put those important funds that are (or soon to be were) generating income needed to live on.

        Granted we are blessed with no debt, and will get by with proper diligence, but there will be no significant revenue growth on the nest egg unless I increase risk. And the inflation monster is already rearing it’s ugly head with healthcare increases, food cost increases and several service and insurance increases.

        • Paulo says:

          Same for moi….pensions with a nest egg, but no debt. Plan to add another rental in the next little while. As a carpenter I can do all maint as well as plumbing plus son can help with electrical. The rent will go back into the nest egg and the RE appreciation keeps up with inflation (as RE always has in this market). Kids will end up getting it all anyway, as we live pretty modestly.

          Our idea of a big holiday is taking the 40 year old Westfalia for a pleasant road trip. If inflation takes off we’ll just tighten the belts and spend less. We have our after Covid trip all planned out, to be honest. Pretty fun but certainly not for most.

        • This is precisely where the Fed’s 12 year plus application of ZIRP has put our silver haired population at great risk by forcing precious money to speculate for a return of any kind. I would even go so far as to say it is criminal, but I would have to resurrect Perry Mason to prosecute same.

          I am in the zero rate CD world also as a retiree, and have to time investment sales each and every year to supplement my income. No rest for the weary, but we need to abolish the rogue FED as it operates free of supervision or oversight now. Much harm to many it has wrought.

        • historicus says:

          Desperation investing and yield chasing.
          The Fed has taken away any chance of saving toward prosperity.
          IMO, interest rates, FAIR interest rates that match or exceed inflation is a tremendous economic engine, putting disposable income into the hands of the savers of this nation.
          The fake low rates have made people hunker down and take inordinate risk to achieve any yield.
          Danger.

        • historicus says:

          For the entire 20th Century, Fed Funds have equaled or exceeded the inflation rate.
          Since 2008, all of that changed by central banking decree.
          There once was a time people could be frugal, save, get a fair return on their money and move up the ladder, eventual investing in a house and maybe a stock portfolio.
          That avenue is SHUT.
          You are either in the stock market enough to make a difference in your life…or you are not.
          That divide between those situations is creating a tremendous rift in our nation.
          Sell the restaurant and put it all in stocks and see how it goes seems the course they want you to take.

        • w says:

          Go Oldschool!Bring in a well-screened older boarder if possible.Garden and can at home.Cook at home.Sign up for every discount possible-AARP membership is open to +55 years young!

      • Millie Brown says:

        If you are worried about inflation then it’s a good idea to do something about it. Digital scaricity is a newer concept that is priceless. From a younger generation to your generation – you got us to 2020, let us take you to the future.

        • Joe Saba says:

          2 items I bought this week
          lumber – up 50%(no inflation here)
          steel – up 20%
          solution
          RAISE RENTS, FEES and COSTS
          in fact I just took back property yesterday(DEED IN LIEU OF FORECLOSURE) because they only paid every other month
          now they RENT

        • flashlight joe says:

          “Digital scaricity is a newer concept that is priceless. ”

          Yes. It is very difficult to price something you cannot touch, taste, smell, hear, or see.

    • Fat Chewer. says:

      And you’re not the grandson in the Sloop John B? You must have known him though.
      Uh, anyway, this is the worst trip I’ve ever been on.

    • M says:

      The combination of what is coming plus inflation is the most worrisome. It has been estimated by some that after the CDC order ends, landlords will be able to evict 6.4 million renters and their families, which some estimate to be 40 million Americans.

      A lot of states have been overwhelmed, will be more overwhelmed with bills for treatment of uninsured persons and Covid-related bills, and cannot pay their bills by printing money. Thus, states will not be able to bail out or help those Americans who will be suffering by early to mid 2021.

      On top of that, if inflation continues at a faster rate, whatever meager life savings some Americans have will be less and less adequate to pay their meager expenses. The upper middle classes and upper classes will start to feel the pinch as the lower classes cannot afford to patronize their businesses either before the Covid vaccines are distributed (due to risk) or afterward, due to the financial cataclysm that seems to be coming.

      The likely absence of an adequate, relief bill as this pandemic explodes (as was predicted since February 2020) will condemn this economy to miserable growth. Moreover, since landlords cannot afford to pay many mortgages when their tenants have not paid them for months, more and more mortgage backed securities (“MBS”) will be in default and become worthless.

      Since accountants are supposed to realize losses when they become evident, internal accounts for the banks and financiers probably already show them to be legally insolvent. They are just hanging on because they are not legally required to report their insolvency and their “Federal” Reserve bankster cartel will do anything possible to gift them more and more US taxpayers’ legal tender.

      It already purchased $2 TRILLION of MBS since early 2019, according to reports. In other words, it turned itself into the banksters’ favorite dream, a “bad bank” that will take all of their uncollectible “assets” off their hands by paying them the full price, which they have no chance of actually collecting.

      The US taxpayers will then bear the banksters’ losses when the “Federal” Reserve cartel prints more dollars and creates more inflation, which robs more Americans of their savings, the worth of their salaries, etc. As usual, the banksters will then just laugh and party. Guillotines. Think of guillotines after fair trials.

  2. MonkeyBusiness says:

    Market drops 10% and Dudley will sing a different tune altogether.

    “Markets are overestimating inflation!!!!”

    Bill Dudley either:
    1. Missed the rally and wanted a good entry point.
    2. He’s got a short position on.

    • Wolf Richter says:

      In Dec 2018, when the S&P 500 was down close to 20%, Dudley (he was still at the NY Fed at the time) was asked about it on TV, and what the Fed would do about it, and if the Fed would stop raising rates and stop unwinding QE. And he said, the drop was just “small potatoes.”

      • Cas127 says:

        The 20% fall came on the heels of a tiny 1% hike in Treasury rates over the previous yr.

        (Translation – People don’t want to be in the dumbass equity casino…only ZIRP bayonets keep them there…give them a way out and the equity mkts implode)

        So…”nasty” means…”fatal”.

        Given that, the Fed will *never* acknowledge paternity of inflation (the Fed’s whole gig is to convert unrepayable DC debt into inflation that the private sector can be framed for).

        • Kenny Logouts says:

          Indeed, with all the new Covid19 induced debt, the government will need rates at zero forever, and a good dose of inflation to erode them.
          Growth at the other side via stimulus.

          Zirp bayonet will remain.

          BTFD forever.

      • MonkeyBusiness says:

        Exactly Wolf, he’s been short since 2018 and probably can’t hold on anymore.

        In 2019, he wrote an op ed for Bloomberg asking his Fed colleagues to reject interest rate cuts that would help T’s reelection. Sure T was wrong in continuously badgering the Fed, but two wrongs don’t make one right. I think the real reason was he was short the market then as well.

        • Ed says:

          I think a man like Dudley is much less likely to be talking his book than other financial actors.

          The Fed Governors have “made it”

          It would be foolish to fritter away the admiration and respect gained over decades for a few bucks.

      • w says:

        Well that says a mouthful!1)Scary sentiment!2)How far does he forsee it falling and when?3)Is this comment a peek behind the curtain of FED plan?Pull the $ rug out from the whole brittle economy?

  3. The Rage says:

    Fiscal deficits are irrelevant in many respects going forward. They are going down in the long run. Its the 7 trillion of money created that will swish for years in the system, making it easy for businesses to run up debt themselves, causing a boom in growth in the short run, which leads to faulty lending and over investment. That pushes up inflation and eventually commodities as liquidity seeps………..it takes time.

    Its why Mitch’s gambit won’t work. The plans I am seeing for 2nd quarter 2021/1st quarter 2022 investment surges are huge, really really huge. It will last longer than you think as well.

    • historicus says:

      “Fiscal deficits are irrelevant in many respects going forward. They are going down in the long run.”

      Double Wrong.

      • Cas127 says:

        Golly, I wonder how the US got to a 100%+ debt-to-GDP ratio, what with all this deficit irrelevancy business that DC has been retailing for decades…

      • Thomas Roberts says:

        Deficits matter alot. If the euro doesn’t implode, allowing the US to only pay its debt with negative interest rates going forward (0% could work, but, not as well). The interest on the federal debt will be massive, potentially, it could exceed a trillion a year in near future. That’s a trillion every single year that could have gone towards rebuilding various aspects of America. Right now, the interest on the debt is merely hundreds of billion a year. Without all debt being paid with zero to negative intrest rates, eventually, the US dollar will crash causing a depression in America. America should recover to an extent, but, it will likely never reach the same global financial significance, instead being probably replaced by the EU. Right now, probably only either America or the EU can be a financial giant in the world. Both are pursuing ridiculous financial paths, only 1 can win that game. No other economy or currency in the world is even in same magnitude right now.

        • DC says:

          But at 0 percent there is no interest expense and with a negative rate principal decreases. See how it works?

        • historicus says:

          The Fed can buy up the Treasury debt that is floated to service the “treasury debt”. A snake eating its tail.

        • Crunchy says:

          So the last sinking ship to reach the ocean floor wins?
          I don’t see how that works out without maintaining today’s modern financial chicanery. Sooner or later the debts must be addressed, and with a dead currency that’d only leave real resources to claim. I know nobody likes going there, but conflict (war) has been the usual route to settling these issues.

        • Lee says:

          The EU is an economic basket case and will always be a basket case.

          That dolt in charge of Germany did more to wreck Europe than any other preson in the post WWII years.

        • Thomas Roberts says:

          DC,

          Obviously yes.

          There is a myth that most in America believe, that simply storing away money long term will always result in that pile of money snowballing into a massive amount. However, the global economy is stagnanting, and even if it wasn’t, the average person is in no way entitled/(guaranteed access to) all the best available investment opportunities. If too many store away too much money the returns should logically become negative, as putting off consumption until a later date becomes an increasingly difficult barter.

          If the euro collapses that will make the US dollar very strong, strong enough to offset most to all of the current financial nonsense (assuming it doesn’t become too ridiculous). That also makes US debt more attractive, to the point that bonds should go negative as it is a safe bet with little likewise competition. If all future bonds go negative that makes them more valuable, because, the risk of default drops to near nothing, especially when compounded with the fact interest payments on US debt will disappear.

          So if the euro collapses and America doesn’t get too ridiculous, the situation becomes stable. For awhile the US stock market may also experience an even greater bubble. As alot of foreign money may flow into America.

  4. 2banana says:

    How does a country get “real” and sustained inflation, the kind the government and Fed wants to dilute the massive debts, without wage inflation?

    And how does a country get wage inflation with open borders, a massive H1B program and no policy to protect the manufacturing base?

    • Paulo says:

      Easy.

      You have a multi decade assault on unionised workers, change the labour laws to suit corporations, and promote a system bought and paid for with corporate swag/donations. The hard part was getting those affected workers to buy in, but that proved easy too.

      “Nobody is goona tell me what healthcare I won’t have ever have. I have my freedom” and “goddamn socialism”.

    • John says:

      There are lots of people from Europe who are on H1B visa in the US. Lots of doctors in the US are on H1B visa. Melania Trump was on H1B visa. H1B visa is just a small drop in the bucket. Changes in H1B visa impacts people from a lot of countries including Europe. Unfortunately this issue has been used to divert the nation’s attention from the real problems of corruption so that the rich can keep getting richer.

    • Anon1970 says:

      Going to war helps get real inflation, even if it is with a lag. Before WWI, the British pound was worth $4.80US. Now it is down to about $1.30. Once upon a time, it cost 1 penny (at the time worth about 2 US cents) to mail a domestic letter in the UK. Now it costs at least 65 pence (about 85 cents US) and the service is much slower.

      • Lee says:

        From September 2020 Royal Mail charges 69 pence for a 1st class domestic UK letter and 50 pence for a 2nd class letter up to 100 grams.

        Where the huge prices come in is for INTERNATIONAL mail services. They have various weight steps, but for a 20 gram letter (which isn’t much) it costs 1.35 pounds to Europe and 1.6 for the rest of the world.

        For a 100 gram letter the price jumps to 1.6 pounds and 2.4 or 2.45 pounds respectively.

        Large letters are at a different rate.

        Here in Oz, the PO has ‘simplified’ rate schedules which means that you pay more.

        For example, to the USA a 50 gram letter is A$3.20; 50 – 125 grams will cost you A$8.30; and 125 to 250 a whopping A$13.50.

        A small registered letter will cost A$17.70 and a large one a huge $27.50 both limited to 500 grams in weight. And for these letters you have to use the prepaid Australia Post envelopes. You can NOT use postage stamps. (And once out of Australia, Australia Post doesn’t provide tracking so in reality it isn’t the same as registered mail in the USA!!!)

        Japan, which many think of a high cost country, actually has some of the cheapest postage rates and services. Their small packet air service is cheap, cheap, cheap.

        Their EMS is also cheap and has automatic insurance coverage to about US$200 is automatically included along with tracking. Every additional $US200 or so of coverage only costs 50 yen or about 50 cents. In Australia every A$100 cost A$5!!!

        And finally when it comes to postal services and various laws, the USA takes the cake when it comes to requirements.

        The STOP Act means that a hand addressed parcel may be delayed at customs or be returned to the sender. In fact, Japan Post will no longer accept packages to the USA with a hand addressed label from 1 January 2021.

        Data required by the STOP Act include:

        “the sender’s name and address, recipient’s name and address, names of contents, gross weight and number of items.”

        Just another data entry for big brother to keep track of you.

    • historicus says:

      It may not be “wage inflation”. It may come from food, health insurance / care, and others…
      And that will be what crushes the working families…..inflation without wage increases.
      The Fed has removed the ability to save one’s way to prosperity by dropping rates to zero and promoting inflation. The people will be pounded as the markets rise, until they dont.
      Fed policy has assisted one group to the detriment of another. That is what central planners do, as warned by Hayek.

  5. Willy2 says:

    – Prices are rising because companies want to restore or increase their profits. Very Deflationary in an environment where wages are flat !!!!

    • w says:

      Some prices are rising because They Can!Too many unchecked monopolies/cabals price fixing and gobbling up competition.Visa trying to buy Plaid as example.Prices are going up in some cases because logistics costs are rising.Production costs in China Have been rising for years and it may still be more expensive to pull out manufacturing from China and move them to Mexico or Vietnam.Unpredictable,severe weather events and increased insurance costs drive consumer costs up as well.

  6. Patrick says:

    So a former arsonist is warning about fires breaking out.

  7. Inconceivable the labor market will tighten. Consumers buy sell less, companies charge more (to offset the lag in volume), revenue drops, profit margins rise. Gas costs $5 gallon because there is less demand. (They have to pay their expenses somehow). Can a worker say I need to double my wages because I only get half as many hours? No but stimulus works the same way. In a few years every state will look like Kentucky? Poverty makes new highs, but political blowback will clean House (and Senate) ..

    • Goldlaerche says:

      This is heresy pure. How dare you suggest there are price dynamics other than up with supply and down with demand!

      • To paraphrase it I would say consumers determine what price they will pay for goods and services. Until there are serious shortages, (of affordable housing) there is no pricing power, and then like the home rental market, the government gets involved. I was predicting last year that gold would drop below $800 and there would be none to buy. It may still happen.

  8. gorbachev says:

    Using my own experience I just leased a car with all
    the bells. The price was no deal and I did not seem to care.
    The extra money saved at home all these months paid for
    the fancy things I dont even know how to use. A little
    crazzzzzy but inflationary just the same.

    • timbers says:

      Worry about faster inflation? What’s to worry about? Inflation is already here and has been for a while. My house value is rising 2% a month. My real estate taxes are rising at double digit rates. My city water bill is rising at double digit rates. My electric bill is rising. My gas heating bill is rising. Food is rising from cheese milk to broccoli and tomatoes. Healthcare is rising. But the Fed never sees this because it removes them all from it’s “inflation” “reports”.

      • Amen, Brother.

      • Fat Chewer. says:

        Well said

      • Cas127 says:

        Inflation ex inflation is the DC way.

      • IdahoPotato says:

        Prices for what we need (food, shelter, healthcare, education) are going up. Prices for ugly crap that we want (electronics, vinyl flooring that looks like wood, inflatable Santas) are going down.

      • Anthony says:

        I still can’t get over the cost of real estate taxes in the United States…it’s the one thing that you appear to pay far more on than here in Britland…. You pay less tax on lots of things but housing.. ouch

        • Disgusted In Mount Pleasant says:

          It depends a lot on where you live. I left the UK almost 40 years ago so no idea what it’s like now. Here, in a house which would sell for $700-$800k we pay $3,100 a year in property taxes – is that really so much higher than the UK? Granted we wouldn’t have to move too far away for them to be triple that amount or more.
          Not to worry though – local taxes everywhere will be going through the roof shortly as towns and cities start to realise how much they’re losing in revenue from the shut-downs.

        • Mr. House says:

          If you have to pay for something every year, you don’t own it.

      • Winston says:

        “My house value is rising 2% a month. My real estate taxes are rising at double digit rates.”

        That describing the incentive to artificially inflate home “values.”

      • Happy1 says:

        +100

  9. Ron says:

    Systemic bankruptcy only way out of this mess rich people buying farms planes yachts have a plan to escape chaos history always repeats my children know the game is up no s s or pensions but plenty of guns hide the silk underwear

  10. Petunia says:

    Other then spending more at the grocery store most people can’t afford to contribute to inflation in the markets. I don’t own stocks or bonds, and I’m trying hard not to use credit. Some prices are up on services but they are compensated for by not spending on other services. Overspending on some things are balanced by no spending on others. Overall, not an inflationary scenario.

    Where I do see crazy pricing is in the residential real estate markets. In my area, with a rising unemployment problem, house prices are rising $50K with each extra point in unemployment (my metric). This is nuts.

  11. James says:

    Petunia…what market are you in?
    One should not confuse rising asking prices (often instigated by Realtors) for prices sold less the 4-6% commission & other related costs such as the homeowner providing a clear proof of a clean & clean title &* other costs related to “selling: a home.

    • Cas127 says:

      And sales volumes are off. That is the prelude to accelerating price declines (see 2009).

  12. Boomer says:

    Is Core PCE a good measure of inflation? Core PCE excludes food and energy. It sounds like there are other slight of hand adjustments that make inflation seem lower than it really is at the bottom of the food chain.

    • Wolf Richter says:

      Boomer,

      The PCE price index is the lowest measure of inflation available in the US. It’s OK to exclude food and energy for guideline purposes because they’re so volatile in the short term. Gasoline can double or plunge by half in a short time, and that would cover up underlying inflation trends. But the PCE price index is structured to where it nearly always shows quite a bit less inflation than CPI. So the Fed’s 2% core PCE inflation could be 2.5%-3% core CPI.

      • historicus says:

        PCE allows substitutions OUT of items that rise TOO MUCH in price.
        So it is inherently a false measure, biased sharply to under measure inflation.

  13. Mad Dog says:

    We went to my local Irish Pub today and ordered lamb stew a cold beer, and greek salad. We split the dishes. The tables were well spread out following the social distancing guidelines. It was wonderful. Who the hell cares about the price as long as we are getting a good food and a nice night out. I’m just happy some good places are still open. A lot of them are going under. We’ll get through this if we focus on what we’ve got instead of what we don’t have. We should try support our local family businesses.

  14. What inflation ?!
    I’m spending less on food,
    and the quality is improving.

    I’m getting really good home cooking;
    curry powder rocks !

    Same goes for (online) “circuses”;
    they’re getting better and cheaper.

    If you’re a Zen Buddhist minimalist,
    and all you care about is bread-n-circuses,
    — not assets, college, nor healthcare —
    then you’re doing fine, like me.

    In Japan, the government owns
    80 % of the stock market; America
    is heading in the same direction.

    Soon, we’ll all be insufferable
    trust fund babies, like Karl Marx.

    • historicus says:

      And the Swiss National Bank has a stock portfolio the size of all out doors.
      Davos cabal…..and the sea food tower, with the real punch bowl….a collection of unelected people who run the world.

    • IdahoPotato says:

      As an Indian, I consider using “curry powder” a prosecutable offence.

      • Saltcreep says:

        As a non Indian I must concur. Buy whole spices from a good spice merchant, toast them before use and grind up your own masalas. The smell and taste will make you never go back to buying those powders they sell.

    • Lee says:

      “In Japan, the government owns 80 % of the stock market; ”

      Sorry, Jeff, but it doesn’t.

  15. Gman says:

    Not only is there “hidden inflation” in plain sight (where demand is outstripping supply) but CPG manufacturers are quietly and systematically reducing the size of their package goods while keeping prices the same or raising them.

    This is the prophetic Black Swan rolling out in real time. Taleb said we would misinterpret and miss the highly unlikely probability like an inflation fed collapse.

    The good news is that we’ll ALL be able to rationalize it after it blows up in our face.

    • w says:

      Ha!Noticed not only the Shrinkflation years ago,but reducing protein in packaged meals while increasing sugar,salt,and/or carbs.Recipes of old standards like Oreos,Twinkies,OscarMayar products have Obviously changed from tasty to tastes more like a lab experiment,Gross!

  16. Rcohn says:

    Even using the so called “official” stats, the implied 10 year inflation rate is currently %1.86.
    Why would anyone invest in 10 year Treasuries currently yielding %0.92.
    I understand that some financial institutions are forced to keep some monies in Treasuries or the equivalent, but there is no reason for them to invest in anything but short term instruments.

  17. Quantifying a thesis with real world numbers is the way to go to identify an actual trend. I am not sure the price elasticity of demand is going to be there in 2021 and beyond to allow service companies to raise prices at will. Most U.S. inflation will come from the accelerating devaluation of the U.S. Dollar (I wonder why?!!!) on all the imported goods (say Bad Trade Deficit) that Americans throw earned and borrowed money at.

    I just don’t see the distorted image of what we are now calling “normal” pre-Panic-Pandemic returning even when the exaggerated rapidity of vaccine transformation of the economy is factored in; I bet it will take years to get back to Ground Zero (if at all in the next 20 years) because resistance to being first in line to get the non-field-tested concoctions with pie-in-the-sky efficacy rates is going to be huge; just ask the senior standing in the grocery line next to you.

    Thousands upon thousands of small businesses have already gone bust, and they will not return, period. And to think that Americans have a bevy of new employable ideas just waiting for funding is far fetched also. The normal channels of funding new ideas and businesses are so stretched with potential business loan implosions that there will be a credit crunch no matter what the nefarious Fed or incompetent Government does. These clowns are just going to make inflation worse with more unearned money printing. Said in total disrespect mode.

    THE STOCK AND BOND MARKETS ARE AKIN TO THE FROG IN THE BOILING POT OF H2O. The rise in over-valuation and absurd speculation had lasted for so long and been so numbingly persistent that the FROG (U.S. INVESTOR) has grown insensitive and blind to the impending danger. I happen to like frog’s legs, so there will be no shortage of this specialty in the months and years ahead.

    When Buffet buys Barrick Gold, one knows not all frogs are equal and someone with a real, verifiable investment record sees the writing on the wall (or pot).

  18. c smith says:

    1973-74 could happen again…P/Es fell from 17 to 7 in 18 months as inflation doubled. If it happens again, the entire character of the U.S. stock market will change. Many investors are not ready – the Robin Hood crowd in particular.

  19. historicus says:

    First, the inflation will be explained away. Nothing to see here. An anomaly.

    Second, the inflation will be welcomed as an indicator of a healthy economic rebound.

    Third, the Fed will “limp in” with 1/4 pt raises. Way behind the curve.
    (remember when they cut 1.5 in one fell swoop?)

    Inflation will CRUSH the working families. The same inflation pushed by a Fed that made stock holders rich. The gap between the two sectors of our society has never been wider. That is a danger.

    • Mr. House says:

      But but they can control it, they’ll just push all that anger into SJW causes with more fake news. You don’t see it at work already? I think the final goal will be what they talk about in the “great reset”. You won’t own anything, and you’ll rent it all as the major corporations consolidate into one at some point. But you know, at least you’ll be able to continue to complain about it on wolfstreet for a bit longer. Once you actually get angry enough to do something about it, they’ll turn off all the websites you like.

  20. EternalSkeptic says:

    The tail is wagging the dog.

  21. Ted says:

    Paulo: That Westfalia has the structural integrity of a Coors Light beer can. Be careful out there.

    • Paulo says:

      Good thing it goes so slow. :-) hmmmm, Maybe that’s why we’re slowing down, my wife and I.

  22. WES says:

    As far as I can tell federal governments in every country can not let their interest rates rise.

    In the US, the Fed will keep interest rates on federal government debt at or near zero.

    That means currencies will fall in value but most people won’t notice because all currencies are falling together. They can fall forever until people loose trust.

    Owning a few real things is probably wise.

    When you have a wheelbarrow full of money, the real tragedy is when someone steals your wheelbarrow.

    • cas127 says:

      “the real tragedy is when someone steals your wheelbarrow.”

      Bravo.

      Captures the fact that “savings” have to have potential intrinsic utility to be “savings”

      Money printing/ZIRP intentionally disembowels the utility function of the USD.

      • historicus says:

        “Money printing/ZIRP intentionally disembowels the utility function of the USD”

        I am torn. Does the Fed know what they are doing, and that it is long range destructive but will risk that to fluff the present, or are they totally oblivious to the ramifications of their policies and think themselves clever?

        • Historicus, I THINK IT IS A COMBINATION OF BOTH. Bad economists with blinders on practicing Keynesian economics with the grossly flawed WEALTH EFFECT TRICKLE DOWN mumbo jumbo, manipulating financial markets to achieve same, and with strictly government/banking backgrounds that make them think they are: “KINGS OF THE WORLD” as DiCaprio shouted thru salt spray at the stern of the Doomed Titanic!!

        • Heinz says:

          Fed is full of Keynesians who indulge in feel good group think.

          Reminds me a bit of the tale ‘The Emperor’s New Clothes’ with respect to Fed heads & elites in charge of economy.

          They are all standing around stark naked and admiring each other’s beautiful ‘economic’ garments.

        • Cas127 says:

          H,

          I don’t think they are oblivious, I think they are terrified.

          Most of them know that forever ZIRP must court capital flight/Fed fueled hyperinflation to offset it, but they are scared sh*tless of the massive real world dislocations that would quickly follow if they step an inch away from it (11%+ interest rates for junk bonds, not 4% = waves of bankruptcies).

          So they temporize, hoping some economic deus ex Machina will arrive to save them, their careers, the country.

          Normalizing rates (likely tripling current ones) would probably result in a quick 50% to 75% fall in the SP 500 (tiny 1% interest hike in 2017-18 led to 20% equity fall in Fall 2018 as ZIRP hostages ran for the gates).

          Few in the Fed (and essentially none in Congress) have the spine for that.

          Forever ZIRP seals the fate of the nation (by building up economic forces the Fed won’t be able to contain with paper lies) but ruin tomorrow is different than pain today…nowhere is this essential cowardice more true than in DC.

          Sooner or later their corrupt power will pass from DC, and that will be the end of the US as we have known it (although the decline of 2 decades have given us a taste).

      • Mr. House says:

        Money in a savings account is the only real “freedom” you have in the united states, makes you wonder why they don’t push that narrative, since we’re such a freedom loving people.

        • Trailer Trash says:

          If the money is still in a bank account, it is *their* money. Yes they are supposed to give it back, unless Uncle Sam says otherwise, but how ya gonna make ’em?

          Keeping some cash on hand, for the remaining time people will still accept Federal Reserve Notes, seems like a good idea.

      • c smith says:

        Government provides almost NO utility, so it must coerce resources that the market provides freely to others. When the amount of resources it must leach from productive people becomes too great for the survival of those in power, it begins leaching not from current income, but from savings – in the form of inflation.

        • Trailer Trash says:

          “Government provides almost NO utility”

          In the United States of Corruption, that is mostly the case. But maybe not true of all governments. The Chinese government organized their huge society to effectively stop the virus and even restore their economy. They are back on their road to “moderate prosperity”.

          Not suggesting US should be organized and managed like China. Rather, it is sensible to closely examine how they did it, and why others failed. One doesn’t have to copy or even like other ways of doing things in order to learn from them.

  23. Max Power says:

    With the long bond currently yielding 1.6%, not only is the market projecting no inflation, but no inflation in sight for more than a generation. However, given our precarious financial situation as a nation, that seems quite improbable.

    • Sir Eduard R. Dingleberry III says:

      How does that work anyhow? 1.6% on something that will never be paid back seems a little low. Hardeehar. Does it stay at 1.6% and then one day jumps to 40%?

      • Max Power says:

        Oh, it’ll be paid back. The question is how inflated would the dollars be that it’s paid back with. You’ll frequently hear people say… “Treasury bonds is the ultimate ‘risk-free’ asset”, forgetting about the risk of inflation, which they are very much subject to.

        Of course the Fed’s handiwork is all over this one because even if you assume just 2% inflation between now and maturity in 2050, you are still looking at a negative real return of .4% per year.

        This situation is one of the main ways the Fed has been forcing investors onto risk assets, resulting in the the strong rise in the equity market over the past decade.

      • c smith says:

        Inflation futures didn’t exist in 1970, so we didn’t have an “early warning” system (not that they would’ve worked anyway) but over the next 5 years the CPI doubled and P/E ratios fell by 60%.

        • Max Power says:

          Yields were actually trending up well before 1970.

          In any case, the inflation of the 1970s really did have some significant “surprise” factors built in… Most folks didn’t foresee the Vietnam War getting as out of hand as it did, and certainly no one foresaw the oil crisis (and back then the US economy was much more dependent on oil).

          We now live in a different universe… many folks are asking themselves how in the world are we ever going to get out from under so much debt without inflating it away. Under such a scenario one would assume more inflation expectations compared to what folks were expecting back then given the surprises that led to the 1970s inflation.

    • historicus says:

      Max…
      Your observation is based on a faulty premise. You assume the market is free and unmanipulated. It is not.
      Price discovery via supply/demand forces is short circuited by the Fed.

      • Max Power says:

        Yes, I recognize that. See my response to @Sir Eduard above:

        Of course the Fed’s handiwork is all over this one because even if you assume just 2% inflation between now and maturity in 2050, you are still looking at a negative real return of .4% per year.

  24. BuySome says:

    Mock government. Mock economy. Mock medicine. And a real unstoppable organism that will magically be transformed into a mock disease by shaking a stick at it…ha! So why not rising values in the Mock Market? Prices increases…oh that’s all in your mock imagination which they can disprove with mock data. Things are really all mocked-up.

  25. Memento mori says:

    Nobody owns you interest risk free on your cash.
    However Fed keeping interest rates below inflation rate should be a federal crime.

  26. Y says:

    Making Sense of Sky-High Stock Prices

    with interest rates low and likely to stay there, equities will continue to look attractive, particularly when compared to bonds.

    • Lisa_Hooker says:

      From a potential return aspect the roulette wheel always looks better than the craps table.

  27. WES says:

    The easiest way to tell if trust in a currency is being lost, is when you see people preferring to spend their money rather than save it.

    If people are in a hurry to spend their money, then it is already too late.

    • 91B20 1stCav (AUS) says:

      Wes-this is what happened in the U.S. population during Ford’s ‘WIN’ (actually stagflation) days. With the benefit of that hindsight, your excellent observation rhymes heavily with what has become the mental destruction of ‘savings’ as a concept in the life philosophy of average Americans.

      may we all find a better day.

    • Lisa_Hooker says:

      Another good indicator is the amount that your bank will pay you for the temporary use of your spare money, i.e. interest.

  28. intosh says:

    My home broadband internet service’s monthly cost has risen 50% since the pandemic (two price increases within 4 months). They got us by the b@lls.

  29. Eugenio Triana says:

    This is just nonsense. The inflation rate has been below 5 per cent this entire century. It hasn’t hit 3 per cent since December 2011, 9 years ago. The average since the pandemic hit is below 2 per cent. Inflation is not a worry.

    • Wolf Richter says:

      “Inflation is not a worry.”

      That attitude is precisely the problem, according to Dudley.

    • Happy1 says:

      Do you have children who attend college? Pay for health insurance? A home? If you do, the rate of inflation is well above 3% and has been for the last 20 years.

  30. Micheal Engel says:

    1) DX is down. Buying TY (US10Y price) for the next grouse road
    is cheaper for foreign buyers.
    2) SPX weekly log : draw a line from Sept 17 2018(H) to Feb 10 2020(C)
    to Aug 24(H) and this week high. This line have five nods.
    3) SPX was up 2700 pt from 667 in Mar 2009(L) to about 3,000 in Sept 2018(H).
    4) There are only 700 pt between Sept 2018 and Dec 4 2020 : SPX is shortening it’s thrust.
    5) Investors are subjected to vertical moves : Feb(H) to Mar 2020(L) was a vertical plunge. Mar(L) to Sept 2(H) was a vertical rise. From Oct 30(L) there are nine vertical days. All those verticals, including the last one, are shortening SPX thrust.
    6) Fast verticals up cure pain at the bottom, but they don’t last long.
    7) Vacillations and indecision at the top will shape the next vertical move.

  31. Frostbitefalls says:

    Besides the fact I abhor ANY inflation, or what they have brainwashed the sheeple to accept as inflation, and that a little is ok, even good for us, why the pitch forks don’t come out at what now is being touted as a “goal of an undefined average of 2% inflation” sheesh….

  32. Xi Ping says:

    How’s your 12% loss holding up? Sure still haven’t hit 5-digit loss? If don’t cut now you may lose your entire retirement sum soon.

  33. Yort says:

    The Fed knows they produce too much “money commodity”, yet they just recently fully comprehend that it mostly went to the top 10%, who do not have the capacity to spend said overproduction of the “money commodity”; therefore, we had a 20-year decline in the velocity of money that is obvious via Fed charts. So, to solve this conundrum, they will do “QE for the people”, which not only benefits the politicians for a few years, but the voters will enjoy buying “something for nothing” for a short while too (Santa will soon be temporarily real…just got goose bumps, you too?). Unfortunately, due to physical based atomic reality (vs Fed fiat electron reality), the velocity of money will spike quickly as the “debt peasants” will spend all the stimulus (vs the rich hoarding asset gains) and the fed inflation dreams will be shockingly finally realized, and then pick your poison. Yields could increase, stocks could collapse, or we try a partial debt jubilee, etc, etc, etc…or a combination of such forced unintended consequences. I suspect the Fed will not be seen as “The Hero” once we hit the limit of Fed ignorance, be it tomorrow of ten years from now. The Fed is simply attempting to delay the inevitable, yet unfortunately I think they are inadvertently expediting the monetary end game instead

    Just a couple of brainstorming options:
    1. Gamble in the Stock Market Casino
    2. Buy assets make you a “Rentier Class” and rent to the bottom 90%.
    3. Live way, way, way below your means.
    4. Move to a country that does not print 30% extra money supply in one year like the USA did in 2020.
    5. Get on the govt dole and get all the free stuff, while having no debt (free healthcare, free food, free housing credits, free phone, no debt payments…lots of folks find this the easy way to survive)
    6. Own land and live off the grid, grow your own food and raise livestock, barter for goods and services, etc. (This is a tough, physical life, basically my own childhood)…
    7. Buy state raffle lotto that pays seven figures with 1/20,000 to 1/40,000 odds (usually $50/$100 per ticket…rare and not many states have raffle lotto as it pays out too much vs say the 1 in 192 million PowerBall odds, etc).

    So there are unlimited options, you just have to be creative and open to massive changes in your life. Life has always been challenging since the beginning of time, and most likely even more so for prior humans in the last few thousand years. Humans adapt and survive, forced or not, that is one of our best traits. Personally my own rough times are what allow me to appreciate the good times so hang in there, the odds often change in postitive ways, if you look are paying close enough attention to what is not always obvious to the majority of people…

    • historicus says:

      ,” who do not have the capacity to spend said overproduction of the “money commodity”; therefore, we had a 20-year decline in the velocity of money that is obvious via Fed charts”

      The rich get filthy rich, but they, sadly, cant spend it fast enough.

      It is better for the economy to have 100 millionaires vs one guy with 100 Million.
      The central bankers are feeding the obese, and mainstreet starves.

      • historicus says:

        But, then again, it is not the job of the Fed to make, or break, Millionaires….now is it?

  34. lenert says:

    Since 1980:

    median hourly compensation up 16%
    per-capita healthcare spending up 233%
    CEO compensation up 940%

    • Mr. House says:

      Yes the numbers are and have been available for everyone for some time, which leads to the next question…… Is this being done on purpose? I would argue yes. Average people have been at war with the rich for decades, a covert war and as long as they continue to fight amongst themselves things will only get worse for the majority.

    • The Wizer says:

      Some inflations are better than others /s

  35. Yort says:

    I remember giving plasma for money in college, but it was a few bucks, not $1,500. I guess this could be another way to survive inflation, human guinea pig style. What next, organ sales?

    Per CNBC:

    Now, one proposal aims to help both efforts by giving people $1,500 stimulus checks in exchange for getting immunized.

    The idea comes from entrepreneur John Delaney, a former Democratic congressman for Maryland who also ran for president in 2020.

  36. Mad Dog says:

    Condos prices are falling in DC at 10%/year. and rents are falling as well. with the 10Year note at .9 %, with a stable employment. I hate to think what the prices will be when they normalize to 5% where they should be to compensate for inflation and devaluation of the dollar. Add to that the coming downsizing of Fed and State government employment. I was just by the FBI building in Downtown DC, for over two hours in the middle of the workday. I didn’t see a single person enter or leave the building, which looked empty. They must all be WFH. Small businesses going under or are struggling to stay afloat we got this going on. I have to ask how long are the taxpayers going to put up with funding this Federal leviathan when they are getting nothing back except incompetence, waste, and intrusions into our personal privacy and liberty. State governments are even more bloated and incompetent for the most part. You could easily cut 50% across the board and no one would notice it, not for a minute.

    Where is Paul Volker now that we need him. I’d like to see those 21% rates back again. That would take care of the problem, fast. We’d have a sound dollar, stable prices, and price discovery of all these bloated assets overnight. Those were the good old days.

  37. Trailer Trash says:

    Prices are irrelevant to people with empty pockets. So that is effectively deflation at the bottom of the pyramid. Meanwhile cash is pouring into the top of the pyramid, causing big-time inflation at the top as $trillions chase stocks to the Moon.

    The real question is, how long will foreigners accept payment for their goods in rapidly inflating Federal Reserve Notes?

    “We” used to have a pretty good arrangement with China. They shipped us crappy goods and we shipped them crappy dollars. Now they can make high-quality stuff, while US dollars are even crappier.

    Maybe we are headed to a day when Uncle Sam sanctions the last exporter to US, then realizes that maybe those imports were important after all.

    I expect that soon poor people will be eating stone soup while the parasite class are choking on dollar stew. Can the Fed learn to print food and fuel?

  38. Mad Dog says:

    The real estate industry is complaining about the lack of housing inventory for sale. Prices are going through the roof in some areas. Has anyone figured this may be a fallout from the stupid 2017 tax bill which it makes it impossible to grandfather your deductions if you sell your house and move up or move anywhere. If you stick with your current house you keep all your deductions in mortgage interest. If you sell and move you may lose these writoffs. So everyone is staying put. If they have to move, they rent out their house, thus preserving all their deductions. The morons that passed this tax bill hurt the middle class homeowner.

    • Happy1 says:

      Umm, the 2017 reform limited deductibility of mortgages, that tends to push back on home price inflation because it doesn’t artificially pump up what people can afford.

  39. Kent S. says:

    Amazing how Feds and others in high visibility positions seem so influenced by the Normalcy Bias. Or maybe they are just sworn to secrecy by the Deep State….

    They always want to come across like, “Well, yeah, this might change things slightly, maybe a half-percent or so, but soon we’ll be back to normal. The vaccine will come, everyone will just trust it and take it, it’ll be perfectly healthy, all the lost jobs will come back, the 5 or 6 trillion dollars in extra government debt will just vaporize, and in a couple months every person, every job, every business, and every relationship will be perfectly back to normal and no one will ever even know we had a pandemic.” Makes perfect sense to me…. After all, we built the Titanic to be unsinkable, right?! Oh wait —

  40. Concerned American says:

    Since 2008 we have seen inflation in the things we need (health care, food etc.) and deflation in the things we don’t need (flat screen TVs, call phones etc.). Of course our government’s carefully constructed basket of items that is used to measure inflation says that inflation is low – under 2%. Tell that to my health care insurance and healthcare providers! Fed stimulus alone will barely move the needle on overall inflation unless of course our wise and all powerful government also decides to monetize the debt. Most financial luminaries forecasted increased inflation coming out of the 2008 financial crisis but that never really happened to any significant degree. Now if Biden and his cohorts elect to embrace MMT then watch out as we will likely see inflation in spades.

  41. Duane says:

    Regarding inflation, when Reagan entered the WH in January 1981 the Dow was under 1,000. Today the Dow is over 30,000. I think that means the US economy today is 30 times better since the stock market is the economy. We truly live in an age of economic miracles!

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