It’s Getting Serious: Dollar’s Purchasing Power Plunges Most since 2007. But it’s a Lot Worse than it Appears

Fed officials, economists “surprised” by surge in CPI inflation, but we’ve seen it for months, including “scary-crazy” inflation in some corners.

By Wolf Richter for WOLF STREET.

The Consumer Price Index jumped 0.8% in April from March, after having jumped 0.6% in March from February – both the sharpest month-to-month jumps since 2009 – and after having jumped 0.4% in February, according to the Bureau of Labor Statistics today. For the three months combined, CPI has jumped by 1.7%, or by 7.0% “annualized.” So that’s what we’re looking at: 7% CPI inflation and accelerating.

Consumer price inflation is the politically correct way of saying the consumer dollar – everything denominated in dollars for consumers, such as their labor – is losing purchasing power. And the purchasing power of the “consumer dollar” plunged by 1.1% in April from March, or 12% “annualized,” according to BLS data. From record low to record low. Over the past three months, the purchasing power of the consumer dollars has plunged by 2.1%, the biggest three-month drop since 2007. “Annualized,” over those three months, the purchasing power of the dollar dropped at an annual rate of 8.4%:

Folks in the business of dealing with inflation, such as economists and Fed officials, such as Fed Vice Chairman Richard Clarida, came out this morning in droves and said they were “surprised” by the red-hot CPI inflation.

There was nothing to be surprised about. We have been documenting red-hot inflation boiling beneath the surface for months, with “scary-crazy inflation” in used vehicles and in commodities, such as lumber, and surging factory input costs that are getting passed on because the entire inflation mindset has now changed.

The infamous Base Effect which I discussed over a month ago in preparation, and that now everyone is trotting out to explain away this red-hot inflation reading, was not at all responsible for the 7% annualized rate of CPI inflation over the past three months, or the 8.4% annualized drop of the purchasing power of the dollar. The Base Effect has nothing to do with it.

The Base Effect applies only to year-over-year comparisons. In April last year, CPI had dipped, and comparing today’s CPI index to that dip (the lower “base”) would include the Base Effect. On this year-over-year basis, CPI inflation rose 4.2%. But this has now become a useless number for two reasons: The sharply accelerating inflation in recent months, and the Base Effect that now mucks up the conversation.

That’s why I now use the past three months “annualized.” It gives the current pace of CPI inflation and bypasses the base effect.

But actual inflation is a lot worse.

Two-thirds of the overall CPI is for services. They include many of the big things that are surging in prices, such as housing, healthcare, and insurance. Housing costs – rent and homeownership costs combined – weigh one-third of overall CPI. Housing inflation is the biggest category in CPI.

The rent component of CPI, called “rent of primary residence” (=7.8% of total CPI) ticked up only 0.2% in April from March, and has been ticking up at the same rate all year, for an annualized rate of 2.4%.

The homeownership component, called “Owners’ equivalent rent of residences” (=24.0% of overall CPI), also ticked up only 0.2%, for an annualized rate of 2.4%. But this is based on surveys of homeowners’ estimates of how much their home might rent for. It is essentially a measure of rent, as seen by the homeowner.

But the Case-Shiller Home Price Index, which is based on the sales-pairs method, comparing how the price changed over time for the same house, and is therefor a good measure of house price inflation, soared by 1.1% for the month, and 12% year-over year (purple line).

In other words, nearly a quarter of the CPI is based on this fabrication of “Owners’ equivalent rent of residences” that suggests 2.4% annual homeownership inflation, when in fact, it’s more like 12%.

CPI by major category.

Services CPI. This fabrication of “Owners’ equivalent rent of residences” is also the reason why CPI for services is grossly understated. But still, the CPI for services (less energy services) jumped by 0.5% in April from March (=6% annualized), based on the increases in the other components (purple line in the chart below).

Durable Goods CPI. Prices of durable goods – cars, appliances, consumer electronics, etc. – spiked by 3.5% in April from March (=42% annualized… the “scary-crazy inflation I’ve been talking about). Compared to April last year, durable goods CPI is up 7.3% (red line)

Nondurable Goods CPI. This largely covers food and energy, including gasoline. It jumped 0.6% in April from March, or 7.5% “annualized.” Year-over-year, it was up 6.5% (green line);

But it’s still a lot worse: hedonic quality adjustments.

These three major Consumer Price Indices – CPIs for services, durable goods, and nondurable goods – over the long-term show how much of a twisted political instrument CPI has become.

We already mentioned the economic freak show of the housing component in the services CPI.

For durable goods, there is another mechanism being applied that also makes sense on a conceptual basis: hedonic quality adjustments. But they too have been abused to force down the CPI, thereby turning the durable goods CPI into another economic freak show.

As goods, such as vehicles, are being designed with more features and improvements – such as the move over the decades from a three-speed automatic transmission to a 10-speed electronically controlled transmission – the price increases based on those “quality improvements” are removed from the CPI. The idea is that inflation measures price changes of the same item over time; and when the price change is based on improvements, it is not inflation because you’re getting more as you pay more.

But in practice, these “hedonic quality adjustments” have been stretched to obviously ridiculous levels, as you can see in the chart below, where long-term inflation in durable goods (red line) was actually, you guessed it, negative, when in reality prices have skyrocketed.

The chart shows the three indices set at 100 for 1985 to show how they have diverged since then. That massive spike in durable goods in recent months barely registers in the long-term decline and will soon be whittled back down by hedonic quality adjustments, even if you have to pay 50% more for the product are few years from now:

Used Vehicle prices blow out, despite hedonic quality adjustments. A big driver in the durable goods CPI spike was the CPI for used vehicles, which exploded by 10.4% in April from March, a scary-crazy increase that we have seen for months in used-vehicle wholesale prices, which have blown out.

This chart shows the CPI as an index, not year-over-year percent-change, and so the Base Effect does not apply. Hedonic quality adjustments are heavily applied to used vehicles, as you can see from the astonishing fact that the index in 2020 was below where it had been 20 years earlier, even though actual prices of used vehicles have soared over those 20 years. It took this massive spike in April to put the index above where it had been in the year 2000:

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  310 comments for “It’s Getting Serious: Dollar’s Purchasing Power Plunges Most since 2007. But it’s a Lot Worse than it Appears

  1. 2banana says:

    Cheese? Beer? Hammers? Gasoline? 2x4s, flour, cheesesteaks, etc.

    Most stuff (by quantity) people use (and need) don’t have any of this “hedonic quality adjustments”

    “As goods, such as vehicles, are being designed with more features and improvements – such as the move over the decades from a three-speed automatic transmission to a 10-speed electronically controlled transmission – the price increases based on those “quality improvements” are removed from the CPI. The idea is that inflation measures price changes of the same item over time; and when the price change is based on improvements, it is not inflation because you’re getting more as you pay more.”

    • Wolf Richter says:

      2banana,

      Hedonic quality adjustments apply to “durable goods,” such as cars and consumer electronics. The items you mentioned (except hammer and 2x4s) are nondurable goods.

      “Substitution” might be applied to them, but not hedonic quality adjustments. So you can no longer afford that six-pack of local craft brew? Well, you look a little further down the aisle, and there’s a Bud for less, and that’s what you buy. That’s “substitution.” And now you’re paying $6 a six-pack instead of $9, and the beer CPI actually goes down :-]

      • Throop says:

        Fed officials need to start reading Wolf Street so they’re not surprised by the numbers.

        • MiTurn says:

          They won’t as they don’t want the facts…just maintaining their destructive narrative.

          Keep swinging Wolf, ’til they ‘cancel’ you.

      • Joe Saba says:

        no worries wolf
        I’m gonna substitute low rents for higher rents in couple months
        right now I’m at 10% raise(to keep up with devaluation/inflation)
        in 60 days when I give out notices – might be 15% way things are going

      • MCH says:

        I am wondering about the hedonic quality improvement of lumber, perhaps that could explain its rise in prices.

        Let me guess…. it’s organic?

        ?

        • Donato says:

          This is a good one! :)

        • LessonIsNeverTry says:

          Those embedded microchips in each 2×4 really make things better!

        • Thomas Roberts says:

          No chips, yet. But, the 2×4’s are cut by more precise machinery, easily offsetting a raise in price of 60%, maybe even 800%. Future lumber may even have new larger microscopic holes for wifi and cellular signals to pass through, tripling the value.

        • Ensign_Nemo says:

          The non-GMO 2x4s cost extra.

        • CRV says:

          I think the prices have risen because now you can buy and sell lumber with an app. That makes it a tech item and pumps up the price.

        • Trailer Trash says:

          The wood is the same but now with financial engineering of carbon credits. “Approved By Greta” makes it worth more.

          Is there a big market yet for carbon credits and all the obtuse derivatives and default swaps and so on?

        • NBay says:

          What is the actual dimension of a “2×4” today…..it’s been a while since I did construction and am wondering if it shrank further than say in the 90s?

          And that tariff on all that timber in BC’s massive “timber rainforest” sure isn’t helping, unless you think our USA “pecker pole” logging shows are even remotely environmentally efficient. Maybe peeler stuff works out.

          It’s as sick and wasteful as our idiotic ethanol car fuel from corn show.

      • Buzz Aldrink says:

        A better substitution is to switch from craft beer to spirits — more bang for the buck.

        “Buttwiper”?? no thank you

        • nodecentrepublicansleft says:

          Bud and Bud Light are pisswater. When I went to Europe in ’97, I encountered a beer called Budvar (iirc) in the Czech Republic…the label looked very similar to buttwiper.

          I tried it and it was delicious. I asked the bartender if it was related to buttwiper. He said yes, this was the original that the US version was based on.

          I said “Why does this taste delicious and the US version is utterly disgusting?” He said “I’m not sure. For some reason, they can sell pisswater in the US and some people buy it.”

          It’s still a mystery to me why so many Americans will drink something so awful when there’s lots of good beer available.

        • 91B20 1stCav (AUS) says:

          NoDecent-never underestimate the irresistible human urge to implement the power inherent in slow-boiling the frog, be it raw materials, finished products, brand-name businesses, money itself-and-i’m have no doubt that you can lengthen a long, long listing…

          may we all find a better day.

        • NBay says:

          I remember the often asked question, “Do you drink for taste, or for effect?” It always had a rather senseless and stupid air about it….it seemed so to me anyway.

          But I bet it’s still asked.

          Duffy’s Ale up in BC quickly became a favorite of mine when I went up there. It had a lot of BOTH.

        • Todd Phillips says:

          That switch is commonly referred to as “going pro” in the world of piss. A decision not to be made lightly. Shrinkflation is difficult in alcohol sales, but not impossible.

      • hikusar says:

        Do Hedonic quality adjustments go in the other direction as well? Many household appliances have more tech in them today, but don’t last as long as ones from the 20th century. Any experienced plumber will tell you water heaters don’t last as long as they used to.

        • Wolf Richter says:

          One-way street. The idea is to push down CPI.

        • NBay says:

          Planned obsoleteness is part of ALL good modern business models, and has been for a long, long time. Sneaking it in subtly has become an art, especially in cars.

          Such “Reverse hedonics” are ignored by all parties (except knowledgeable consumers) as is mentioned above, and keeping them ignorant of it is also an aspect of the game.

          “Fashion” is a business that actually celebrates it….weird, eh?

      • Tankster says:

        Barry Ritholtz had an interesting take on the declining value of the dollar over time. He just wrote, essentially, who has kept their assets and investments in cash since 1900? If you invested in dollar denominated assets, e.g., the Dow has risen 1507.867% since 1900. That assumes of course that your wages haven’t been crushed in the past 40+ years and that you had money to “invest.” Then take some capital gains off the table and buy that crappy washing machine that doesn’t go WHOOSH! anymore. How he got that I don’t know, but they don’t make spare parts anymore so they head to landfill after 8 years….

        • NBay says:

          Thanks, forgot about the “spare parts” aspect of planned obsoleteness. Sometimes an after market will spring up if the original is good enough.
          The 85-95 Toyota pickups are an outstanding example!!!!! They are EVERWHERE! The electronic and vac control systems aren’t hard to learn, the ECU is bulletproof, the 22 R-E motor is legendary, and they look good and can be modified in many different ways, or left stock.
          There is nothing one can’t get on the aftermarket for them, and fix it/modify it forums are all over the internet telling you everything you need to know.

          I wish they would start making a modernized version of them, sales would be through the roof, and all car companies know it.

      • Michael Gorback says:

        Bah! What a scam. In the 80s an IBM PC with dual floppy drives and a monochrome monitor and no mouse could set you back $5,000. Today my tablet does way more at 1/10 the price. Your cell phone is a zillion times more powerful than the computer that put us on the moon. Actually so was an Atari.

        More features and lower cost. That’s deflation and it’s a GOOD thing.

        • Wolf Richter says:

          Michael Gorback,

          That’s why hedonic quality adjustments make sense on a conceptual basis, and I always say that. Consumer electronics have gotten cheaper and better. But cars have gotten more expensive and better. Cars are a much bigger budget item than consumer electronics. Furniture didn’t get any better and might have gotten cheaper (couch used to be made in the USA, now made in China for less).

          So it’s complex to figure out in an overall index what is loss of purchasing power and what is quality improvement.

        • K says:

          Respectfully, you apparently are conflating two different trends which are not truly related. The efficiencies created by advances in technology and separately, the transfers of our jobs to China, where the quasi-slave laborers who are not allowed to form unions and have few rights, work in CCP-subsidized factories to sell us goods at below-US-cost prices form one price-reducing trend.

          The other, independent trend is the corrupt creation of inflation to benefit its owners by the “Fed.” The “Federal” Reserve is a deceptively named entity that is actually privately owned by the banksters through their ownership of the privately-owned banks that in turn own the “Fed” district banks and thereby, the “Fed.” It has been creating US legal tender to transfer US taxpayers’ (and non-taxpayers) wealth to its bankster owners for decades.

          For example, it turned itself into the banksters’ wet dream: a “bad” bank that would buy their bad investments, which had become worthless and uncollectible and take the loss, so the banksters would not suffer any losses. The “Fed” did just that starting in 2019, as to MBS: aside from the Repo market interventions, it bought over $2 TRILLION in worthless, uncollectible, mortgage-backed-securities (“MBS”) from the banksters by creating that amount in US dollars and thereby created inflation that will be perceptible when the economy slowly recovers.

          Indeed, it is still buying $40 BILLION A MONTH in MBS to bail out its banksters EVEN NOW! Thus, expect increased inflation. I guarantee it. The fact that the CCP might decide to give more subsidies to its Chinese factories to price US airplane makers or price more US computer, appliance, and phone producers out of business in the coming months changes nothing.

          The CCP’s use of its national resources again, as it already has done to solar panel, TV, and other producers, to destroy their foreign competitors in the US and EU, is totally UNRELATED to the inflation that the CCP’s bankster allies are creating to steal Americans’ savings. The former is allowing the latter to partially hide the inflation, which will become more evident as demand picks up later. That is the only link.

          (Incidentally, the “Fed” banksters benefit from their “Fed” taking the MBS garbage out of their hands not just because they do not have to take losses on their uncollectible MBS. Their billionaire-fortunes are also benefitted if they own any real estate: I predict that their “Fed” will NOT foreclose on any bankster or bankster-crony who is currently in default on their mortgage payments FOR DECADES(!!), because this is another form of theft from the American people. We are now subsidizing the properties owned by the ultra-rich by the “Fed” not foreclosing on their factories, malls, etc., secured by MBS bought by the “Fed” to protect their banksters (and their cronies) in TWO ways: (1) not just to protect them from having to suffer losses on the value of their banks’ MBS but (2) to prevent foreclosure proceedings against banksters and their cronies.)

        • K says:

          Do not count on any price deflation in some technology items continuing for long. Keep in mind that by 2031, if the “Federal” privately-owned by banksters’ “Reserve” keeps creating dollars to gift to its banksters and cronies, a million US dollars may just be enough to buy yourself a nice dinner or if we are lucky, a small Honda. Of course, that is assuming that hyperinflation does not take off as I have predicted.

          It may yet shoot skyward as the “Fed” creates more and more US dollars to transfer all Americans’ remaining wealth to its banksters before they move to their allies’ country to avoid paying US taxes: the CCP’s China.

        • ru82 says:

          @Wolf I agree with your hedonic quality adjustments. The cell phone, TV, and computer analogy is usually not a fair agruement.

          My first desktop computer that was actually used productively ( it had a Word processor, Spreadsheet, etc) cost me $1100.

          I need to spend about the same amount now to get a computer that lasts about 4 or 5 years. Sure you can get a decent $500 dollar computer / laptop but it will almost be obsolete at the next windows update every two years. So spend $1000 for a computer to last 4 or 5 years or $400 dollars twice over the same time period.

          Also everyone talks about how Cell phones do everything. So sure I can get rid of a $20 calculator, and alarm clock, a watch..etc. I maybe saved $150 in other things. But when I grew up we had one phone that cost $20 a month for a family of 4 for communicating. Now I spend $160 + tax a month for a family of 4 on cell phone bills. Sure I was able to get rid of my $20 calculator because I have a cell phone but what else do I use my phone for except text reading email, text messages, and games. It really has not brought about to me any increase productivity but it sure costs about 1000% more. Actually sometimes I can argue I am less productive. Sure I can group text people instead of calling 5 people but I am in a lot of group text messages I do not need to be and those waste time. The cost to communicate because of cell phones has skyrocketed ($170 x 12 = $2040) versus $160 in the 1980s. I can still get a landline for probably $12 to $30 a month. So the benefits of a cell phone and all it does is actually inflationary for the communication purpose it serves. I also have to add another $70/month for broadband for communications such as email or online games. In the pass I used to just mail letters via USPS or play board games with friends. So there is another $840 year cost I used to not have. Then add all those extras you need for a phone. Battery packs, cases, cables.

          Thus in my mind I need to spend almost $3k more a year on communications as opposed to pre-cell phone days.

          Also, I grew up watching a 20 inch TV that cost $400. At the time there was not anything better so my experience as I recall was very enjoyable. That enjoyable experience of watching Cheers or Seinfeld was just as good as watching anything today on my $400 65 inch LCD. Back then you just did not realize it could be better eventually.

          Now would I go back…..no. I am used to a 65 inch HDTV over a 20 inch TV. I do like play Civilization IV on my computer instead of the board game Risk. But I do have to say it was much cheaper to live that way.

        • Frengineer says:

          Nice piece Ru, makes a lot of sense. Let’s play some Civ sometimes ^^

    • Dan Romig says:

      2banana,

      Being a motorhead, for years I’ve closely watched the websites of the local BMW & Porsche dealerships. I can say without a doubt, the prices for used performance coupes – of a few years to ten or so years old, but not changing from new model year to new model year where “hedonic quality adjustments” would come into play – have gone up quickly and by quite a lot.

      Plus, they do not last long at the dealership. Higher prices and being moved out the door faster is the potent combo of a weaker dollar and the FOMO of high-end buyers who want to get that used 911 GT3 RS today before it costs a lot more tomorrow – if they can find one.

    • Wisdom Seeker says:

      I’d love to see a whole series of historic data graphs of things like “how many hammers can I buy with $10” (instead of “price of hammer”).

      Basically, get the graph flowing from top-left to bottom right (“downhill”) to demonstrate how things are getting worse and worse.

      The problem with price-index graphs is that they rise left to right, which “feels” visually like “progress” even when it’s decimation of the currency.

      And we need to start framing the discussion in terms of “progressive dollar devaluation” rather than “inflation”.

      Even financial assets can be cast this way. How much does it cost today to buy $10,000/year in retirement income? How much did it cost 20 years ago? 40 years ago you only needed about $50,000; today you need about $200,000 AND the $10,000/year is only worth 1/4 of what it used to be. Between the devaluation AND the decimation of expected future returns, there’s a double-whammy on savers.

      As the easy credit wears off and inflation clobbers financial “wealth”, producers, on the other hand, are likely to be valued properly again soon…

      • Wolf Richter says:

        Wisdom Seeker,

        “I’d love to see a whole series of historic data graphs of things like “how many hammers can I buy with $10” (instead of “price of hammer”).

        “Basically, get the graph flowing from top-left to bottom right (“downhill”) to demonstrate how things are getting worse and worse.”

        Yesssir, my very first chart on the purchasing power of the dollar does EXACTLY that, from top left to bottom right, “downhill,” which is why I included it, and which is why I call inflation “loss of purchasing power.”

        • Wisdom Seeker says:

          Exactly! I’m hoping it can be a running theme, like the WTF spike charts.

    • Nick L says:

      and what happens when there is a problem with that ’10 speed transmission’ that is either “out of warranty” ??? Transmission repairs are not cheap. And all that OBDII thing does when check engine light comes on is give you a code it doesn’t do the repair, and it doesn’t pay the $500 – $2500 of what auto repair costs now.

  2. Hard Worker says:

    Just paid $28 for a burrito and bowl, no drinks, at chipotle, wow. It wasn’t that good either. Kid had a gift card that he wanted to use up. Thankfully we started cooking more at home over the past year.

    Had an alternator replaced for $760. It broke 3 days later, they used an AcDelco alternator. I paid an additional $160 to get a refurbrished OEM reinstalled. Normally I save by doing my own home / misc repairs but I needed car fixed. At these prices, I’ve gotta do even more.

    Overall, I’m experiencing massive inflation – on the ground – with food, services, products so I’ve responded with less products, imperfect foods, and more DIY. Only downside is that it takes a lot of my time.

    Most frustrating part of all this is that the money policies have long punished savers like me, and now it’s punishing actual work.

    • Petunia says:

      My occasional lunch of chicken fried rice went from $6 to $11 and not incrementally. We got Chinese takeout for dinner last week and that went from $35 to almost $60, also not incrementally. The cheap takeout is no longer cheap.

      • Petunia says:

        It’s funny that I have too much w****priv by just barely affording some chinese takeout. In my defense, we picked up the takeout ourselves, real w****priv gets uber eats to deliver it.

        BTW, I am not complaining, just reporting real boots on the ground information.

    • NBay says:

      “actual work”, “takes a lot of my time”, “more DIY” VS “punishing savers” price inflation” are sorta like two different categories of personal hardships for most today. The former category I have been lumping into “forced austerity” for lack of a better term, while the other comes under the “inflation”, “saver’s repression” and “wage problems” Wolf addresses.
      Like spending 1 or 2 hrs fighting with a phone menu, being cut off, etc, etc, just to get your TV working or a bill straightened out, would be the “forced austerity” that I’m struggling to define as a different problem.

      Maybe there are no differences here, I don’t know, but “now punishing actual work” made me think of it.

  3. Will H says:

    Since squeezing labor is generally understood to combat inflation, I don’t see this lasting very long. Eventually unemployment +$300 goes away, people go back to work to even lower real wages thanks to this devaluing of the dollar going on now and straight up labor arbitrage (e.g. Ford Mexico “trading” with Ford USA) isn’t going anywhere.

    Printing a ton of money and arbitrarily handing it out will definitely create a ton of short term WTF spikes but how does this sustain when 60% of the population goes right back to subsistence wages and competing with automation and offshoring in the next few months?

    • Degobah Smith says:

      It does not sustain. Inflationary depression ensues when the nail salons and pet spas and such go out of business because disposable income has dropped to zero or less. Same with food delivery and all of the other “luxuries” that free money has enabled. The reckoning will be epic. We are meddling with the forces of nature, Mr. Beale.

      • Petunia says:

        Twelve states have announced they are cutting off federal unemployment benefits, PUA & PEUC, in the next month. Expect a SHTF moment when this news filters down to the downtrodden.

        BTW, as people begin to travel and go out more, I hear they are seeing and experiencing more “thuggery” out there.

  4. Old School says:

    That first chart is a good one showing the decline in purchasing power. It would be very easy for the Fed to draw a target line down and say that we are going to stop easing when we hit that line, but they always want to speak in shape shifting language so they can do what they ‘feel’ needs to be done which is keep the debt ponzi going.

    They have screwed up by facilitating the debt bubble and are buying time now.

    • ee says:

      why do you think they screwed up.. could it not have been a choice between to evils and they chose this path with eyes open?

      • Bobber says:

        What is the other “evil” you refer to?…..holding bankers and Wall Street accountable for their speculations? A normal recession? These things are not evil.

        All the Fed did was kick the can down the road in negligent fashion. The problems get worse when you do that.

        • Nathan Dumbrowski says:

          I used to steal a couple of quarters from my dads change drawer. Now my son takes $50 from my account to buy this or that without asking. The government is now borrowing a couple Trillion of USD today. EPIC can kick. But once they look back I am sure that the Trillions “printed” will look like my quarters

      • Old school says:

        I think they screwed up because printing money allows the state to direct the economy. But history tells us they are stealing from the citizens. Long history of disasters. At first you can go back. Well at first. We are in it too deep now, like Japan.

        At some point we are going to have to go through a phase change where we acknowledge our sorry financial state or choose decades of financial repression.

        • Cashboy says:

          Old School,
          You said that the “USA is in too deep like Japan”.
          Japan has been in this situation for a couple of decades now, so the same can continue in the USA as well as the EU Zone.
          I can see this going on for a lot longer especially as most countries are unilaterally doing the same so no devaluation of a currency.

  5. Winston says:

    “these ‘hedonic quality adjustments’ have been stretched to obviously ridiculous levels”

    Don’t forget the other trick: substitutions. Can no long afford beef? You’ll eat chicken.

    Also, the weights within the CPI calculations are off. The weight of medical expenses is about half of what is reported in national surveys asking what percentage of household incomes are spent on various things.

    • Winston, I always found the idea of substitution to be appalling. When you’ve substituted down to shoe leather for meat and dirt for vegetables, how do you go down from there?

      • Petunia says:

        Substitution doesn’t just go on in specific categories, like they teach in Eco 101. It also goes on across categories, like I learned the hard way. You don’t just trade beef for chicken, you trade shampoo for chicken, or soap for chicken, or new shoes for chicken. Substitution is a downward spiral.

        This downward spiral is why the really poor can’t save money. There is always something essential they have been doing without for a long time.

        • 91B20 1stCav (AUS) says:

          Petunia-have always wanted to shine that light on the issue, but couldn’t afford to replace the batteries in the torch…

          may we all find a better day.

    • Tom S. says:

      Yes, the weights are insane.

      Next question is will businesses cave and raise wages or will we just continue to have over 10 million unemployed and crazy inflation at the same time.

      Then, if wages go up, will more inflation follow? The fed absolutely refuses to be transparent about their intended policy, probably because they have no idea what they are doing until after the fact.

      • Jacob Hunt says:

        This is what I wonder too?
        I’m Australian, and trying to not follow news to much, but what’s going on with the $15/he minimum wage?
        That will help inflation along.
        I’m so torn between seeing this inflation as transitory, but knowing they want to inflate away the debt. I guess there will just continue to be ‘unforseen event’s that continue to stoke inflation, e.g. the evergreen doing a right angle, cyber attacks on gas lines, drought, war, earliest coastal storm ever…. big hurricane season, back to work bonuses, next stimmie cheque, and on, and on???
        I’m all in gold and commodities so want this inflation to continue, but understand the enormous deflation undertones?????

        • BigAl says:

          @Jacob Hunt,

          “All In”?

          Use that term carefully…

          Don’t say you are “All In” unless you actually have take physical delivering of the stuff. Plenty of grifters out there will want to sell you worthless paper proxies….beware!

        • Lars Gustafson says:

          I’ve been reading about the deflationary undertones and I could see the argument for “transitory” inflation.

          Look at the DXY. It has curved up over the last 4 days. The argument I keep reading is that foreign entities are buying and holding a lot of dollars. That keeps pushing the dollar value up in the DXY, which is the opposite of what I would think would happen if there was inflation. Wouldn’t it’s value go down?

          But I have also read the argument that a emerging market sovereign debt crisis could have these countries using their dollars. Which could lead to some nasty inflation.

          Best of luck.

        • bungee says:

          Jacob Hunt,
          i agree with bigAl. buy physical and store it yourself. no one’s gonna collect physical from a paper contract going forward. and when the hyper inflation is on like donkey kong, all vaulted items (for small guys like us) will be stolen. plan on it.

          Also, funny that this is the first mention of gold. it should be on everyone’s mind.

        • Thomas Roberts says:

          The minimum wage earners, even if minimum wage was increased to 15, wouldn’t earn enough to significantly increase inflation. The bigger problems are supply chain issues and lack of competition.

          Precious metals are mainly about ignoring inflation, not as an investment. They are more akin to savings. Right now, their values may have been suppressed so they could break out of that though.

          Storms happen every year, but devoloped countries will get more prepared for them over time.

          Most of those other things are one off or rare events with little long term effects, though devoloped countries prepare better over time, the more they happen.

        • Fat Chewer. says:

          The biggest chance of deflation comes from wages not keeping up with prices and people being forced to consume less. That is a terrible outcome for everyone, but it is anyone’s guess as to whether or not that is the intention of the masters of the universe.

          The bigger chance is that we will just drift along this crazy path until something breaks. When it does, it is difficult to say how you should store your wealth. I have thought through many scenarios and all of them have at least one major drawback that is enough to consider it not worth doing. Many others here at Wolf Street have come to the same conclusion.

          You would have to think that if the government cannot honor it’s promise to back deposits, then something of nuclear grade destruction has occurred in the economy and our biggest issue will be basic survival. So it’s cash in the bank and pray to whatever god takes your fancy.

    • polecat says:

      Just wondering .. if there will ever be any sardonic adjustments applied to the Lord Bank$ter$ .. who have giventh, er, I mean ‘takenth’ from their charges .. so much?

  6. Seneca's cliff says:

    Don’t worry folks, the dollar as a reserve currency is in as strong a position as ever, and will never be usurped. But soon, you will not be able to buy much with it.

    • Petunia says:

      I’ve been in the market for a mattress for years now, but no matter how much we save those hedonic adjustments keep it out of our reach.

      • Wisdom Seeker says:

        Amen. “I bought the mattress on credit but then when I couldn’t make the payments, I couldn’t sleep at night!”

        I’ve never been truly desperate, but I did have a year when my cash ran low and the substitution choice involved getting a decent blanket (to survive winter in an unheated attic room in an old house) vs. replacing holey underwear. I told myself no way in hell was I going to go into debt for either. The blanket won out, but my head still got cold so I was really glad I already had a good winter hat…

        And I was lucky, my fortunes turned around the following year.

        I’m less surprised at the revolutionary spirit in the air, and more surprised how long it’s taken people to realize they’ve been had for the past 30 years.

        • Thomas Roberts says:

          The issue is that too many yet, are still satisfied with the status quo. The fact that almost everyone got fat and lazy doesn’t help either. Alot of non-sense could go quite a bit further yet.

        • Trailer Trash says:

          Millions of US peons are denied access to the necessities of a decent life while they are surrounded by immense wealth.

          That is not a recipe for a stable society.

          I spent one winter dumpster-diving for scrap wood to supplement fuel oil paid for by Salvation Army. After a six year struggle Social Security finally agreed I was too sick to work. Even at that they stiffed me for 1/2 of the retroactive benefits they were supposed to pay.

          We live in a sadistic society that laughs in the face of the desperate. The basic organizing principle is that everyone is lazy and will do nothing without the threat of the lash. Today’s lash is financial deprivation instead of a public beating but the purpose remains the same: Work or Starve.

          Now the chickens are coming home to roost and they have been well earned.

  7. Mark R says:

    Great article, Wolf. Two further things strikes me about the “transitory” argument: first, the Fed appears to think that commodity/economic recovery-type inflation will just disappear, when what actually happens in the world economy is that type of inflation takes 12-18 months to filter through production chains into consumer prices. So, that momentum will not dissipate in H2 2021. More like H1 2023? Secondly, services inflation is, as you say, key in the US. Much more so than in Emerging Markets, where CPI figures are more rampant, now. As well as what you write about already unfolding in services inflation now, I can see much stronger year-on-year impulses appearing in services inflation from June-July onwards, as the collapse in flight ticket prices, hotel rooms etc falls out of year-on-year comparisons. And, probably sometime in H2 2021 or H1 2022, prices in these COVID-affected categories jump again as consumers re-engage with these services.

    • Beardawg says:

      MARK R

      So despite -700 in DJIA and 2 straight down days in the stock market, you believe we will see assets continue to inflate for another 18 months ?

      • sunny129 says:

        Three days of indexes in RED is an omnious sign! No one predicted 220K jobs or the flare up of inflation! What else SURPRISE is coming down the pike!
        Keep one foot near the exit!

        • nodecentrepublicansleft says:

          Try to be sitting down when the music stops!

        • Robert says:

          Vix term structure has not inverted and bond yields are contained. Buy the friggin dip mentality still wins out.

          No is worried yet…

      • Mark R says:

        Beardawg: Assets? No, I don’t think assets will continue to inflate. The cost of capital (i.,e. bond yields and eventually interest rates) will rise and that ruins the prospects for most risky assets (most credits, government bonds, Private Equity, most listed equities (in the US), real estate (especially commercial). All these assets will all have to generate yields greater than the inflation rate to be attractive. As for right now, the NASDAQ is in a valuation “air-pocket”, so it can quite easily drop further. NASDAQ is full of “long-maturity” assets (= high P/E ratios) and is very vulnerable to changes in inflation/interest rates

    • Jacob Hunt says:

      Good point, those year on year increases will be massive after the drops last year!

  8. John Vermeer says:

    Wait awhile, I’m old enough to remember the last big bout of inflation.
    We were paying 13% on mortgages and borrowed money and we were lucky it wasn’t 18%. Meanwhile, savers got rich but we had no savings then.
    But we had Paul Volcker, and he isn’t around anymore so nobody knows
    what could happen this time. Maybe we’ll get lucky and have DEFLATION?
    I’m now old and no longer need to buy anything but food, everything else is paid off. The stock market could go either way.

    • Winston says:

      “But we had Paul Volcker”

      But the current gang can’t do what he did to fix things – raise rates to the moon. The interest on the national debt last year was $523 BILLION.

      • Aaron says:

        Interest on the debt is relevant but not material as to whether the total debt can be $1T, $10T, $100T at whatever interest rate.

        As far as the Federal Government is concerned with regards to a revenue stream, they would probably prefer higher interest rates. If need be, they can issue debt that ultimately the Federal Reserve System will purchase. The monetary cost involved with issuing the debt is substantially less than the income tax returned to the treasury on the interest.

        What does matter is the value of the securities held as collateral for all the debt in the system. Seeing as the price of the securities is inversely proportional to interest rates, as the value of collateral drops, margin calls come into effect, which further lowers the price of the securities. That means significant contraction in credit, which results in the federal government issuing more debt, and the Fed engaging in more QE to try and stop the contracting credit.

      • Heinz says:

        That is why the end game this time around is a ‘currency reset’.

        Raising interest rates is kryptonite to a highly leveraged economy and a government that relies on taking on more and more debt to prevent the whole thing from imploding.

    • Wolf Richter says:

      John Vermeer,

      “But we had Paul Volcker…”

      And now we have this dude…

      • Phoneix_Ikki says:

        With the amount of money I have in the bank, I would much prefer Volcker than this clown in charge. In fact I would be happy to be earning 5% interest in savings.

        • Wolf Richter says:

          Treasury securities called I-Bonds (designed for savers) are going to pay 4.2% interest for at least 6 months, depending on when you bought them. Their interest is pegged to CPI.

        • Phoneix_Ikki says:

          Can’t reply to your post Wolf, unless I am reading it wrong, I-Bonds would be perfect but sadly only limited to $10K max per year. Knew it would be too good to be true for people that cashed out on stock and just sitting on the sideline and avoid inflation eating through the value like acid

        • Lisa_Hooker says:

          3.54% for i-bonds issued May 2021 – October 2021: Minimum purchase: Electronic bond: $25 Paper bond: $50 : Maximum purchase (per calendar year): Electronic bonds: $10,000 Paper bonds: $5,000.

          3.54% is better, but limited to $10k not much help.

        • Wolf Richter says:

          The idea with I bonds is that they’re savings product not a hot-money product or a trading product.

          You sock away $10K every year, and if you have a spouse, they (universal singular) sock away $10K a year, and if you have a little corporation, it socks away $10K a year, for $30K a year, and when inflation hits after 10 years, you have some of your assets in something that is hedged against CPI inflation (though it won’t be hedged against actual inflation).

        • Anthony A. says:

          Give me 5% CD’s and I’m golden at 77 years old. The heck with the stock market.

        • Wisdom Seeker says:

          In a time with hyperinflation, government default-via-printing, and currency-reset scenarios all being openly discussed by sensible people (including those here!), I’d rather own tangible productive assets than low-yield long-term debt/savings vehicles.

          Beneath the financial superstructure there’s always a physical economy, and some elements of that economy always have value (provided it isn’t taxed or confiscated away). Own those as your second goal. (First goal, for non-retirees, is always to maximize your own productivity so you can earn enough to pay for whatever you need, with whatever currency is in use that day.)

        • NBay says:

          Let me add to the I-Bond thing. They are about the best deal going for SAVERS who don’t have a LOT of money. I buy them. And no taxes till redeemed. Yeah, the CPI-U is mis-measured, but it beats a poke in the eye with a sharp stick.

      • Artem says:

        LOL. Priceless.

      • YacosModernLife says:

        Wolf, much needed laugh! you should get back together with Marco and put together a J-super pop-Pow garden gnome. I think we all know garden-from-home is the last ‘IPO’ in the pipeline.

        And then…when the apes get to churning up gods green earth and we can no longer reach the site. there will be your gnomes scattered about everywhere and we will remember the light you shined in rocky harbors.

        Never give up!

    • Old School says:

      Jim Grant said he had learned you can never be sure about money and markets. People goof up trying to use statistics sometimes like long term capital.

      Mix greed and fear and politics and grey markets and black markets and computers and war and you better have some cash and precious metals for when things go crazy.

  9. David Hall says:

    They are reopening saw mills that were shut down. This takes time. They may expand existing saw mills. There are enough trees for awhile.

    Shutdowns in foreign lands may disrupt trade for a time. China is licensing its vaccine to its partners around the world.

    • 2banana says:

      Except no one wants to expand capacity and then have the bubble pop and be left holding the bag.

      So – they will be slow and conservative.

  10. Winston says:

    “show how much of a twisted political instrument CPI has become.”

    The Boskin Commission report. Surprise, surprise, they found that CPI calculations were too high:

    Toward A More Accurate Measure Of The Cost Of Living
    FINAL REPORT to the Senate Finance Committee from the
    Advisory Commission To Study The Consumer Price Index
    DECEMBER 4,1996

    https://www.ssa.gov/history/reports/boskinrpt.html#exec

    Executive Summary

    5. Changes in the CPI have substantially overstated the actual rate of price inflation, by about 1.3 percentage points per annum prior to 1996 (the extra 0.2 percentage point is due to a problem called formula bias inadvertently introduced in 1978 and fixed this year). It is likely that a large bias also occurred looking back over at least the last couple of decades.

    6. The upward bias creates in the federal budget an annual automatic real increase in indexed benefits and a real tax cut. CBO estimates that if the change in the CPI overstated the change in the cost of living by an average of 1.1 percentage points per year over the next decade, this bias would contribute about $148 billion to the deficit in 2006 and $691 billion to the national debt by then. The bias alone would be the fourth largest federal program, after social security, health care and defense. By 2008, these totals reach $202 billion and $1.07 trillion, respectively.

    • lenert says:

      Is healthcare weighted 4x more in PCE than it is in CPI?

    • historicus says:

      Executive Summary…
      now there is a red flag.
      The only “summary” to ever declare CPI overstates inflation.

  11. John A says:

    This is exactly what Alasdair Macleod has been warning about–a depreciating currency with low interest rates and rising twin deficits (budget and trade). At some point he claims the more money the Fed prints the more the dollar will blow up and the bond market will take over.
    At least in the past you could park your money in US Treasuries and have stable value or even see the dollar rise. This time no one in their right mind will accept such low interest rates while the currency keeps falling.

  12. Long gas lines and soaring prices. Ah, the 1970s all over again! Maybe we’ll also get the 10% -15% pay raises, too.

    • rich says:

      By the end of the 1970s, the stock market sold off, and money went into real estate, which served as an inflation hedge. Once Volcker raised mortgage rates into the stratosphere, folks were buying less real estate. Then we had that severe recession in the early 1980s.

      • Spencer Bradley Hall says:

        @rich

        Volcker never tightened, he let the economy burn itself out.

        • rich says:

          @ spencer

          “Consumer prices skyrocketed 13% in 1979 and then by the same pace again in 1980. Working relentlessly to bring prices under control, Volcker raised the Fed’s benchmark interest rate from 11% to a record 20% by late 1980 to try to slow the economy’s growth and thereby shrink inflation”

    • Swamp Creature says:

      There’s a country western song “The gas line blues” that just hit number 1 on the country western music circuit in Georgia.

  13. eastern bunny says:

    People in charge of the money aren’t thinking about thinking.
    Who needs to think anymore, we are all woke.
    That is how Fed will be fighting inequalities going forward, by not thinking about thinking.

  14. John says:

    Wolf,
    Thanks great analysis!

  15. OutWest says:

    I don’t see how they can keep rates this low for much longer considering this shocking data.

    I’d appreciate the opportunity to make at least a few percent on savings accumulated after four decades of work…

    • Swamp Creature says:

      OutWest

      Forget it. Take your 1 basis point yield and be thankful you didn’t get a negative rate.

  16. The 800lb gorilla in the room is energy. Nat gas is still plumbing lows. Are solar panels more expensive? Yields are taking a jump today, and that isn’t usually the case while the market is down. If the dollar is dropping so is everything.

    • Dan Romig says:

      Ambrose,

      That is a great point regarding how inexpensive Nat gas is. Dec 2005 saw it at $16. Today it is just under $3.00.

      Living in Minnesota with a century old home to heat in the winter (newer & efficient furnace though), it is certainly something I keep an eye on.

  17. Onionpatchkid says:

    “Folks in the business of dealing with inflation, such as economists and Fed officials, such as Fed Vice Chairman Richard Clarida, came out this morning in droves and said they were “surprised” by the red-hot CPI inflation.”

    “Surprised???” It never ceases to amaze me how stupid most of our leaders in the government are. Do your job! You shouldn’t ever be surprised! You should constantly be analyzing what’s happening and be tweaking the controls. That’s what leaders do.

    We are doomed. I may have to come out of retirement just to survive this. 8% annual inflation wasn’t in my game plan. Prepare for your standard of living to retreat….

    • Old school says:

      In my opinion central bankers realize the only thing holding things together is their communications.

      Like Draghi saying we will do whatever it takes and Powell saying he will buy junk bonds, these are words, but is the bubble to big for them to stop the panic next time. Maybe just in case you will be first out the door and let others see if heeans it.

      It’s not going to take too many Druckenmillers, Gunlach’s and Larry Summers saying the government s screwing up before the market panics.

      • RightNYer says:

        And that’s exactly why Bullard took to specifically criticizing Druckenmiller. People who are that confident in their position don’t attack people who dissent.

        Bullard and the others are lying.

        • Mr. House says:

          “People who are that confident in their position don’t attack people who dissent.”

          This applies to everything in life. Things that make you go hmmmmm

    • Auldyin says:

      OPK
      They’re not.
      It’s PR, they have to say they are surprised, otherwise they would give the game away that that’s what they’ve been trying to get for ages, since QE began.
      Get ready for a stream of politicians coming on TV every night to tell you how hard they are fighting to control inflation while secretly doing nothing, because it’s the only way they can get rid of all their debts. CPI is the PR version of inflation. What the Wonks care about is the ‘Gdp deflator’ which covers all the money spent in the economy. They’ll be happy as Larry if they can keep it sailing along at 3% without having to put up rates. Watch this space.

    • Depth Charge says:

      Surprised my asz. The FED knew this was coming, that’s why Weimar Boy Powell has been talking about “letting inflation run hot.” He was warming people up to what he knew was coming, and preparing them for the fact that he’s going to do nothing to combat it.

    • Retired Beancounter says:

      My understanding is that Fed officials do not work at the pleasure of the President. That means they can’t be fired when they are lazy or wrong. Which happens a lot.

  18. Artem says:

    Transitory. Base effect. Demographics.

    I hope no one replies to this comment.

    • CuiBono says:

      I won’t respond.

    • Beardawg says:

      Artem

      You are funnneee !! I can almost see you sitting at your computer screen clenching your face awaiting threats and derogatory comments from your WS cohorts. ;-)

  19. Brent says:

    Dedicated to Jerome-$-Slayer Powell:

    A candid Fed Chairmn confesses
    That the Secret of half his Success is
    Not his Science, as such,
    Nor its Marvels so much
    As his bright irresponsible Guesses.

    • VintageVNvet says:

      Good one B! here’s one answer:

      A good old boy named Powell
      Does his best to make the Wolf howl,
      But we all wish he were
      Wise enough to infer
      It’s time to throw in the towel.

      • Brent says:

        ?

        I acquired a taste for limericks in the military from my Mick buddy and remained a limerick fan ever since.

        Some limericks are so non-PC that they could be only uttered in low whisper-after checking for listening devices first.

        Well,since many normal states like FL & TX already started prohibiting Marxist Critical Race Theory at schools-here is a ready-made opinion on this subject:

        An example of Marx’s sterling wit.
        Was his theory that farts could be lit,
        And it’s said that all night.
        By the flickering light,
        He composed his “Critique of Pure Shit”.

        • Xavier Caveat says:

          There once was a Realtor from Nantucket
          Whose clientele could throw a buck at
          A Cape Cod escape pod
          From a Covid hot spot

        • VintageVNvet says:

          There once was a man from Racine
          Who thought he could fart “God Save the Queen.”
          But instead of soprano
          Out came a banano
          And his pants were unfit to be seen.

          Seems like the idea is to ryhmn
          No matter the subject in time, eh, xc?

        • Frengineer says:

          I think the exact genre would be poetic epigrams. Another infamous one :)

          L’autre jour, au fond d’un vallon
          Un serpent mordit Jean Fréron
          Que pensez-vous qu’il arriva ?
          Ce fut le serpent qui creva !

      • Frengineer says:

        Nice one vintage

  20. wkevinw says:

    When real wages and real disposable income start to drop (price inflation>wage inflation), the big problems start.

    This month, that happened. If it continues, there will be a lot of turmoil financial and real economy markets.

    Small businesses have low political power. Those are the ones most impacted by wage inflation (when that starts to respond, as it has). Chain restaurants, retail, etc. will beat the smaller/mom&pops, and that’s just fine with the people in DC.

    • jon says:

      This is happening for last 40 years where wage growth has kind of stagnated but prices of everything has gone up.
      I don’t see big problem other than rich people getting richer and others suffering.
      How would this be a problem this time ?

      • Harrold says:

        Have you SEEN the price of yachts lately?

        • Lisa_Hooker says:

          It’s not the price, it’s the waiting list.

        • Dan Romig says:

          Every time I see this comment, I have to reach for one of my two albums by a Liverpool power pop/new wave band The Yachts.

          “She’s gone, she sure deceived you
          She’s run away with the yachting type ..”

      • 91B20 1stCav (AUS) says:

        Dammit, LisaH., coffee expectorated over the keyboard AGAIN!

        may we all find a better day.

  21. davie says:

    Back at it again, banging the inflation drum without addressing the root causes.

    Wasn’t it obvious the “pent up demand” was going to rush back into the market and causing an impromptu bidding war?
    If we had “pent up supply” rushing to meet it, nothing would have changed.
    But in an economy so centralized and anti-competitive, who could have reasonably expected them not to withhold production and price gouge where they could?
    This is the case with timber, and the case with shipping companies, and the case with hair salons, and commuter vehicles, and restaurants that don’t find staff.
    Essentially every sector, and god knows China sees this as a prime opportunity to slow down exports.

  22. rich says:

    The CAD hit a 3.5 year high this month. Might be time to invest in commodity currencies to hedge the weakening USD.

  23. gorbachev says:

    The people at the top are sharp-don’t fool yourselves.
    What they are trying to sell us is -don’t worry
    be happy.
    The only way they can repay that debt is to print
    or inflate. Inflation might be better as a wage increase might come along with it. That’s the happy part.
    America will be fine as long as creditors
    accept the American currency as payment. It hits the fan
    when they don’t.

    • Old school says:

      The people at the top are smart, but not as smart as they think they are and that is the problem. Most likely the people trying to prevent the next SARS outbreak created Covid-19. Most likely the Fed trying to preserve the world’s reserve currency will destroy it. Musk saving the environment from greenhouse gas will poison the environment with rare earth mining. Maybe there is a name for it other than hubris.

      • 91B20 1stCav (AUS) says:

        Old-nay, it’s long been a human trait, even before the Greeks coined that term…

        may we all find a better day.

      • YacosModernLife says:

        Someone call Elon and let him know ‘it’s simple physics’ force equals mass x acceleration and all of his cars are obese. LMFAO

  24. Phoneix_Ikki says:

    Still boogles my mind that the actual CPI exclude home prices, honestly what good does that do other than to constantly create this false narrative of inflation is under control. However, given how incompetent the FED has handled everything, even their own crappy way of measuring CPI is now starting to haunt them and the only thing they have left is to move on to jawbone 2.0 to the public and insist on it being transitory. Keep calm and move along.

    Makes me wonder if Weimar Powell and most in charge at the FED are just bunch of giant narcissists since they all use the same gaslighting tactics favor by narcissists.

    • Lisa_Hooker says:

      I have wondered, since 2000, why, as they continually prompt us consumers to regularly invest to fund our retirements, they don’t include the price of equities in their CPI. Oh – that’s because equities are volatile and unnecessary – like food and shelter and fuel for heating/transportation. Duh.

  25. jon says:

    Personally the inflation would last long if the below conditions are true even after say 6 months:
    1) People still getting extended unemployment benefits and stimulus checks.
    2) The supply chain disruption is still there once people in certain geographies are fully vaccinated and resume their normal life
    3) We still have 16 million people on unemployment benefits. Most of them have found good jobs.

    IN essence, if the govt stops pumping money in people’s hands for free, I don’t see inflation lasting..

    If FED is forced to raise rates, it’d increase mortgage rates, how would this impact real estate ?

    • Beardawg says:

      jon

      The traditional theories suggest when you raise interest rates, real estate prices will drop. With inventory so low, an interest rate hike might produce a flattening of prices, but unlikely there would be much of a drop unless foreclosure moratoriums are lifted simultaneously. Even then, that is likely to affect the lower end segment of the market and Hedgies and other investors will swoop in and pay competitive cash for those homes.

      • Old School says:

        Just read half of the billions going to universities have to go directly to students especially those in need and if you are here illegally that’s ok which is new policy.

        Many trillions being pumped out. If you get your share you might beat inflation, if not you are going to take a hit.

        • Petunia says:

          The il.legals have always gotten student benefits from the govt and the schools. They get more on average than other poor students because there is more private money allocated just to them.

      • Phoneix_Ikki says:

        I find it interesting that RE bull or actually most people somehow view RE will only go sideway at worst even though history has proven it not the case at least 3 times in the last 100yrs, yet these are the same people that somehow think stock market can only be going straight up or down and sideway is likely not possible. Myopic to say the least, both do act quite similar to each other, except they work on different time scale. I guess one way to explain it is that RE has definitely got more of an emotional attachment to people than stocks and bonds hence the myopic view.

        • jon says:

          I feel the same. Many of my friends holding rental properties are sufferings because of rental eviction ban and thus can’t even sell the property. They are looking to exit the market as soon as the ban is removed. The ban may or many not be removed for 1 more year or so.
          Bunch of my friends on other side are not paying any rent to their landlords and govt to providing rental assistance to them to the tune of 80% of the rent.

          Also, some of my friends are shopping for homes based on monthly payment. If the rates go up, they are priced out.

          It’s gonna be interesting.

        • Beardawg says:

          Phoenix

          I agree RE has a longer timeframe to adjust vs equities. Lack of inventory has been real, however, for a long time now, several years in many markets. I don’t have a crystal ball, but I’ve been through a few RE downturns (1980’s, 1990’s and 2008).

          The low inventory factor combined with lots of available investor cash for the low end foreclosure stuff AND the Fed moving predictably slow with rate increases would lead me to believe a sideways move in RE is more likely than a precipitous drop.

        • historicus says:

          In 1999 and 2006, CPI had increases near 3%…
          30yr mortgages were 6%.

          Now, with the readings of today, 30 yr mortgages are 2.95%.

          And the Fed continues to buy MBSs.
          The Fed is the culprit here…they have skewed all markets with their fake interest rates…promoted a rampant inflation….and no one seems to care….yet.

          Because of building material inflation, people with houses have seen the replacement cost of their house rise, what, by 35% in 6 months? The Fed and J Powell are insane, and unaccountable. A bad combination.

        • ru82 says:

          Real Estate is a hard one to figure out for me. In 2006 through 2007 I new a collapse was coming at some point because Trillion of loans were given to Subprime borrowers that had no means of making payments once the adjustable rates changed. This time all the loans have been made to people with pretty good credit ratings. Prices have certainly outpaced wages but that was because of low interest rates.

          What happens if rates rise? Most loans are fixed rates so for current owners, they are okay. For new buyers, if rates go up, a $1500 monthly payment buys a lower priced house. I am not so sure new homes can drop in prices much just because input costs will not drop much. Labor won’t, land won’t, lumber and some other material might some. So if new home prices do not drop much, how can existing home prices drop much? In my mind they will only drop if you have a lot of foreclosures and like in 2008-2012. Will we have foreclosures?

  26. Spencer Bradley Hall says:

    re: “The Base Effect has nothing to do with it.”

    Exactly. You don’t measure inflation y-o-y. You measure it depending upon the distributed lag effect, which is over a 2 year period.

    • Wolf Richter says:

      Spencer Bradley Hall,

      Nonsense. If you measure inflation over a 2-year period, then you completely miss the current burst of inflation and have no clue what is going on. And you remain clueless until about 12 months later.

      So yes, if you want people to remain clueless about the current bust of inflation, just pull a bag over their head and trot out 2-year or 10-year or whatever numbers.

      • The old Core inflation. In some ways Powell has the same “Don’t shoot till you see the whites in their eyes..” adage, calling it transitory. Just about everyone agrees we are entering a period of sustained inflation. By extension adding a little money to the system regulary produced modest inflation, adding a whole lot more money should produce more inflation. Clearly investors are dumping cash. Yields at the long end are getting the most action. Might be time to buy FRNs

  27. Yort says:

    From the most detailed analysis I can find, $1 USD in stock market purchases in America will move the market up $5 in value…thus it would seem the most useful purpose, in terms of purchasing power, for the USD is to manipulate the stock market up higher for the top 1%.

    • Old school says:

      Might only take $1 to move stock market down $20. Got to find a buyer, might have to be the Fed.

      We will probably go from not enough assets out there to invest in to I can’t find a buyer for my asset. Anyway, that’s usually the way it works.

    • Robert says:

      “From the most detailed analysis I can find, $1 USD in stock market purchases in America will move the market up $5 in value…”

      You’ve got to back this statement up with something. I’ve never heard this before. This might be true in an extreme bull market where no one is selling. And only in thinly traded stocks.

      It’s the bid price that is the true value of your shares, not the ask.

  28. Spencer Bradley Hall says:

    Inflation doesn’t subside substantially until Feb. 2022.

  29. Willy2 says:

    – No, any one expecting the FED to increase rates is dreaming.

  30. MonkeyBusiness says:

    A friend just sent me a link to a blog. According to the later, Powell and Yellen are playing 4D chess against the CCP. In other words, inflation will remain high till the CCP capitulates.

    I think hell might freeze over first. But what do I know?

    • Phoneix_Ikki says:

      Sounds like something straight out of an “article” from Zerohedge

      • MonkeyBusiness says:

        Unfortunately no. Mind you, according to this blog both Amazon and Walmart are CCP covert operations designed to destroy the American middle class!!! There are not just mindless allegations, there’s all sorts of “proof” provided to back up the author’s claims.

        What a great country we live in!!!

        • Phoneix_Ikki says:

          Does this blog also comes with a free Tin foil hats with subscriptions? Don’t get me wrong, there are plenty to be outrage over what the FED and big corps like Amazon and Walmart are doing to destroy what we consider as middle class prosperity but to blame it on some CCP convert operations, that’s just plain disservice to the whole argument.

        • Lisa_Hooker says:

          Actually the CCP is a clandestine operation that Truman put in place through the OSS. It was later inherited by the CIA which is responsible for everything. How’s that?

    • Petunia says:

      Where can I buy some digital yuan?

  31. SocalJim says:

    Select well located houses where families feel safe will outperform for an extended period.

    • NoEasyDay says:

      Safe from inflation or wokeness?

      • nodecentrepublicansleft says:

        I know!

        What could be worse than being slightly respectful to somebody?!

        Imagine the unmitigated gall of a person quietly kneeling and then saying “My life matters.”

        Those bankers stealing your children’s futures are not nearly the monsters as the “woke”!!! Boogie boogie boogie!!!!

        Woke just means being a little bit more aware/respectful. But if racial animus/lies is all 74M folks care about…..have had it!

        • NBay says:

          I liked “bleeding heart” or”snowflake” better than “woke”, but then I don’t get to write the script for cable news shows.

  32. B.A.C.A.H. says:

    I have a logbook in my truck, of every gasoline purchase I ever made since I got the truck on March 31, 2006.

    Today (May 12, 2021) I paid $3.499 per gallon for 87 octane at Gas And Shop, 1590 McKee Road in San Jose. Moe’s across the street was same price.

    On May 15, 2006 I paid $3.319 per gallon at that location, 18 cents per gallon less. Fifteen years ago. But the gasoline tax in the People’s Republic of California was less in 2006 than it is now.

  33. Jarhead John says:

    Avoid the price increase….Buy your wheelbarrow to hold those inflated dollars now.

  34. Jdog says:

    Having lived through the run away inflation of the 70’s & 80’s the one thing I can tell you is once it gets started, it takes drastic measures to shut it down. The government has been lying through it’s teeth about inflation, because it knows what happens when the phycological effect of inflation becomes the normal mindset. Once people begin to plan for inflation, the momentum begins to accelerate. People quickly accept faith that inflation will continue and raise prices in advance to prevent losses. This quickly turns into a stampede of rising prices, and the only thing that will stop it is to stop the lending, which means drastic increases in interest. I guess if you live long enough you get to see everything come back around as the cycles repeat…

    • Jacob Hunt says:

      That’s the aspect I can’t factor into my inflation/Deflation ponderings.
      The spending going on in Australia is relentless, and it has nothing to do with people believing inflation is upon us. Over here we are not yet getting crazy spikes in inflation readings, and the talk is still that we need more inflation.
      If we start to see people chasing prices higher it will get stupid.

      • Old School says:

        From the people I know, most of the people spending have the current income to spend, but they are not really in that sound of a financial position. They are screwed if we have a recession and they are out of work for 6 months.

      • Fat Chewer. says:

        I fear it will…uh, has become stupid already. We voted for Scomo. As long as the Australian populace believe this bunch of crackpots and grifters are “the world’s greatest economic managers”, we are heading towards banana constitutional monarchy status.

    • BigAl says:

      @jdog,

      Cutting back on lending by raising rates won’t work.

      Unlike 40+ years ago, many businesses are heavily-leverage hand-to-mouth operations that rely on low-rate business loans or revolving lines of credit to survive.

      Raising interest rates could well make inflation *worse* – because credit has basically become an “input of production” if you will, so if you raise its cost to businesses – those businesses will need to pass it on somehow.

    • historicus says:

      Jdog
      Agree.
      The 32 year old stock broker, hedge fund manager, etc….
      wringing their hands over 1/4 pt moves in interest rates…
      they are in for a rude awakening…
      I remember the Prime Rates being raised by the banks in the 70s…sometimes 1/2 a point at a crack…and the Fed following ..not leading.

      • Fat Chewer. says:

        Ah yes, but at least the bankers will be bathing in Bollinger for the foreseeable future, Or our money. Or our blood. So all is well in the world.

        Since I have never experienced it, I wonder whether being paid outstanding amounts of interest on my savings is, in actual fact, me partaking in profiting from the misfortune of others. I believe so, but damned if I won’t be grinning like the Cheshire Cat! Especially if they raise wages before deflation sets in! Oh, now I see. I am just dreaming.

    • Auldyin says:

      God no Jd!
      Not all these bl**dy politician’s speeches again every night on TV telling us how hard they are ‘FIGHTING’ to stop this terrible inflation.
      I can’t take it again!
      No way!

  35. Prairies says:

    Expect food price inflation, and if you can add a commodity graph it would be scary. Canola peaked at $12 or $13 CAD last year and farmers were pumped to see a good price, now this year it has hit the $22 CAD mark. Wheat is also up 50% from what it was last year. I am curious how it looks across the board.

  36. SocalJim says:

    This statement released today from the National Association of Realtors:

    “The median price for a single-family home in the U.S. rose the most on record in the first quarter, as buyers fought over a dearth of inventory, according to the National Association of Realtors.”

    Forthermore, they said:

    “Gains are accelerating”

    • Fat Chewer. says:

      So buy in SoCal? From a guy named Jim? Jim may be the most persistent, read: successful, RE agent in the world. I’d go with him. He doesn’t seem like the kind of diabolical guy who would nag you into making the worst decision of your life at all. My auto-spell suggested the word diabolical. Who was I to argue?

      • Wolf Richter says:

        Fat Chewer,

        I don’t think Jim is real estate broker. From what he said, he owns rental property.

        Yes, he’s talking his book (isn’t everyone?), but his job isn’t selling RE.

        • Depth Charge says:

          Wolf – the fact that Jim wouldn’t answer the question when I asked him if he is a REALTOR was very telling. I think he is. Because nobody who isn’t would quote the National Association of Liars on a continual basis.

        • Fat Chewer. says:

          He’s not an RE agent?! So what is his purpose for upping the ante like that? So he can sell his holdings for a good price later? I can’t see why he would put so much effort into that when market conditions do such a great job on his behalf.

        • Swamp Creature says:

          We get the magazine from the National Association of Realtors every quarter. There is not one piece of useful information in the publication. Just self serving propaganda and BS. I usually throw it into the recycling bin with the rest of the junk mail without even reading it.

  37. Swamp Creature says:

    With Corn and fuel going up by 100% or more that will cause an inflation in transportation and meat prices with a lag. Look forward to double digit inflation for the rest of the year and next. Nothing can be done to stop it.

    • Lisa_Hooker says:

      Beans and rice.

      • Anthony A. says:

        Red beans and rice down this way.

        • rick m says:

          Every Monday, with Savoie sausage from Opelousas. Man cannot live by bread alone, but a baguette from a Vietnamese bakery in Biloxi comes really close

        • NBay says:

          At a lot at Po’Folks back when I was in Norman OK a lot…years ago….that plus their cornbread was GREAT! Lived on it.

  38. Mark says:

    Most of this is temporary. Covid-related shortages. Oil/gas bouncing back from decades lows. People will get back to work and the stupid high unemployment benefits will end. Even now a bunch of states are saying no to that.

    The fed/gov’t is definitely messing up housing, autos, college and anything else based on monthly payment plans.

    I will add this — imagine what prices would be without 3rd world outsourcing and wage suppression.

    • Fat Chewer. says:

      imagine what prices would be without 3rd world outsourcing and wage suppression.

      Mark, I did just that and it made me feel nauseous. It always makes me think about median wage vs median house price ratios from the real good times, back sometime when the dinosaurs were young. But then, I suppose when I am a dinosaur, I guess young whippersnappers like me will be saying that about our current ultra low interest rates and our (formerly) ultra low CPI. It is clearly the best of times right now! Ride on, masters of the universe! Ride on! May the laws of economics never hinder your path!

  39. Yort says:

    CPI would have been 8-9% today versus the 4.2% print if house prices had been used instead of owner rents. Thank God for manipulated inflation data…else the masses might get concerned and force changes sooner than later at the Fed…

  40. Tim says:

    Annualizing the CPI doesn’t really make sense. As you have mentioned in previous posts regarding GDP Wolf, the media reports GDP as annualized (most recently as 6.4%) and that’s not really a reasonable way to report it. Doesn’t the same apply to the CPI?

    • Wolf Richter says:

      Tim,

      Well…

      1. Year-over-year inflation is mucked up by the Base Effect. So it’s useless.

      2. The BEA, when it reports GDP, reports along with it, annualized quarterly PCE inflation (= 3.8% in Q1). So this is a very important way of looking at it.

      3. The surge in inflation didn’t happen last year, it happened this year, fairly suddenly and unequally distributed, so the most important rate is the current rate of inflation, the last three months, not what happened last summer or fall.

  41. Brinda says:

    Hey, Editor—include this addendum to my yet-approved comment on the State of Things:

    • Wolf Richter says:

      Brinda,

      I deleted your comment, and a couple of your other comments, and I deleted what you asked me to “include.”

      I understand that you’re a Biden hater. Lots of people here are. And lots of people here are Trump haters. But this is a non-political site, and everyone is trying very hard to bite their tongue.

      It’s like going to a holiday dinner where you will be with a bunch of family and friends and some people you don’t know. You stay away from politics and enjoy each other. If the Trump haters and the Biden haters suddenly start letting it out, people will end up fighting each other with drumsticks.

      Here are my commenting guidelines; they explain it:
      https://wolfstreet.com/2017/10/07/finally-my-guidelines-for-commenting/

      You’re welcome to comment here. But your comments about Biden or other partisan political stuff will be deleted.

      • Lisa_Hooker says:

        We could discuss religion. It would be less inflammatory. (Just kidding about the religion part.)

      • Kenneth Bertoson says:

        Thank You! Wolf.

      • rick m says:

        Your moderation is appreciated, and makes the lair a nicer hang. If some future Chief Executive shows real fiscal responsibility, it would be well worth commentary, but I’ll be busy selling gold on that day

      • 91B20 1stCav (AUS) says:

        Wolf-now YOU’VE got me spraying my cafe along with LH (…and when the ‘…fighting each other with drumsticks…’ ends, all look around and wonder where the main course went…).

        may we all find a better day.

      • Swamp Creature says:

        A gas station in Northern VA just posted a sign $7.00/gallon. A line of cars 50 deep are lined up to purchase the gas at that price. I would too if I needed the gas. May have to.

        Now that’s what I call INFLATION.

  42. fred flintstone says:

    So between low rates on investments and high food, housing, auto and fuel inflation if you are retired………cut cut cut spending.
    but of course……this is all designed to stimulate the economy.
    the real answer its not designed to stimulate anything…..its designed to destroy the middle class and create an economy of wealth ruling the poor…..which is most of us.

  43. MonkeyBusiness says:

    It’s funny seeing both crypto and gold drop after inflation is reported. My sense is the USD will rally soon.

    • Rowen says:

      Forced deleveraging.

      Every fund manager and their mother copied the ARKK playbook, which was good, until it wasn’t

      • BigAl says:

        @Rowen,

        I don’t entirely-agree.

        a) Typically, gold/silver decline when US treasury yields rise (as it’s perceived as having a knock-on effect that raises interest rates and reduces spending)

        b) The crypto sell-off is being driven by a few things – among them: i) Loss of BTC’s market-leading position ii) DOGE’s failure to reach escape velocity iii) Fears that if equities sell-off, the crypto market may not be far behind. And the run-up in Crypto this year has been break-taking iv) We are reaching the point where market positions are getting liquidated to cover losses in other asset classes

        Much of this is *not necessarily* good news for inflation, btw, because the cash raised from these liquidated positions could be used to purchase tangible goods.

        I am seeing talk of inflation in lots of countries, btw, not just the USA.

    • Wolf Richter says:

      BTC is now trading at $46,900, down about $10K from this morning. About 17% dive. ETH is getting thrown off the cliff too. Cryptos are a great hedge against inflation for sure for sure.

      • SnotFroth says:

        Musk apparently announced today that Tesla will no longer accept Bitcoin for payment. That didn’t last long.

        Allegedly it’s because the electricity used to mine it comes in part from no-good very-bad carbon-rich sources. Hard to believe The Dogefather didn’t understand the energy details before getting in.

      • Old school says:

        Not sure if he is right, but Harry Dent days bitcoin is going to be the leading indicator for the asset bubble busting mainly because it’s the most speculative asset out there. Time will tell.

      • Depth Charge says:

        These crypto thingies are nothing but speculative tools. They have absolutely zero intrinsic value.

      • historicus says:

        What will CRYPTOs do when and if Fed Funds return to historical norms of equal to the inflation rate/
        Cryptos have really never seen an interest, a fair interest, paid on a nationally backed currency. (not since 2007)
        IMO, Cryptos will crash if that happens.

      • Swamp Creature says:

        Michael Burry just shorted TESLA via millions worth of Put options. Watch TESLA closely. He must have some inside information. It could take the whole NASDAQ with it.

  44. Micheal Engel says:

    1) Intel and other US high tech are seriously deflating in Israel.
    2) QQQ beached the cloud, on high volume. T&K in a bearish flip.
    Options :
    3) QQQ actual deflation will get worse.
    4) QQQ will rise on the cloud cliff.
    5) QQQ will osc under the cloud flatbed.

  45. BigAl says:

    Not surprised at all.

    For the first time in 40 years…”Tenant at Will” arrangements are back in retnal agreements in the Boston area. For those of you not familiar with this – it means there is neither a lease duration nor a fixed rental price.

    Obviously….no landlord wants to lock in a 12 month lease with galloping inflation.

  46. Paulo says:

    I guess I’ll just plant more potatoes and put extra salmon in the freezer this summer. Seriously.

    Gas here, (and we supply 2X our domestic use/needs), is the equiv of $5.70 US dollars per US gallon. The only reasonable need in our budget is Hydro at 9 cents kWh, 1st tier.

    This article and reader’s comments are scary. If people aren’t making plans for rapidly rising prices and possible restricted cash flow…….well, they need to be. The criminals in charge are NOT your friend.

    The rich become richer and the poor become poorer is a cry heard throughout the whole civilized world.

    Friedrich Schiller

    They are doing it right out in the open, and calling it something else.

    • Brant Lee says:

      Right. The best thing a person could do for themselves these days is flip through the book: ‘The Grapes of Wrath’ every so often.

      But, it couldn’t happen in these more sophisticated times, right? I can’t imagine a new Ford F-150 loaded down with belongings (Xbox, flatscreens, etc) heading for a better life in the Ozarks hoping the bank don’t find em to impound the truck.

  47. Spencer Bradley Hall says:

    Chairman Jerome Powell: “there was a time when monetary policy aggregates were important determinants of inflation and that has not been the case for a long time”

    The CPI in January was up 0.3%. It was up 0.4% in February, 0.6% in March and now 8% in April

    Long-term, ex-ante, money flows, volume times transactions’ velocity, proxy for inflation:
    12/1/2020 ,,,,, 1.26
    01/1/2021 ,,,,, 1.31
    02/1/2021 ,,,,, 1.40
    03/1/2021 ,,,,, 1.51
    04/1/2021 ,,,,, 1.54

  48. BigAl says:

    Now the punchline….

    The dollar appreciated against most major currencies today and gold/silver prices…dropped.

    The motivation, apparently, was the increase in US treasury yields spurred by the inflation report.

    • GotCollateral says:

      Yup, easy to see if you live overseas and still use USD…

      Core CPI (despite its obvious failings) going back to 1985 shows that everything after 2008-2009 looks weak… including now.

      Obvs to see when you look at all the wheels spinning to keep this ship afloat… lol

      “Transitory” means that even bailout olympics will eventually end…

    • Auldyin says:

      BA
      If the US actually does raise (?) rates before everybody else your dollar will go so far through the roof you’ll be able to buy a luxury flat in Thailand with your pocket change. Yellen just has to say the word ‘rates’ to knock every other currency and stock market, although I’ve noticed the Rouble and the Renminbi seem to be on a different game at times?

  49. broke millennial says:

    As a broke millennial, what can I do to hedge against the inflation? Stockpiling cash doesn’t seem to be the most efficient nor effective way.

    • Wolf Richter says:

      broke millennial,

      If you’re “broke,” you don’t have assets and therefore don’t need to hedge them against inflation. Inflation only hurts your assets if you have assets.

      But you need to hedge your future income against inflation. Invest your time and sweat in your career/education to maximize your income so that you can out-earn inflation for the rest of your working life. That can be hard enough to do.

      If you’re successful at it and pile up assets, then you have to worry about how to protect them from inflation.

    • DR DOOK says:

      Broke Millennial. Here is the best advice you can get that will compliment your cash. It’s from an un-likely source ,The Bard. Neither a lender nor a borrower you be. As a millennial you need to keep the lyrics by the Rolling Stones in your head. Time is on my side,yes it is.

    • Lisa_Hooker says:

      broke millennial – if you are truly broke you need to stockpile some cash as you can end up worse off than broke. Cash is not a bad place to be for the short term while you figure things out. Like the rest of us here.

      • Seen it all before, Bob says:

        Good point.

        If you have a year lease on a rental or a fixed rate mortgage, you know exactly how much cash you will need to cover that for one year. That is a fixed amount (Except for insurance or property taxes), and does not matter what the dollar does, or how much your assets go up or down.

        Have at least that much in cash for a year and wait it out before investing in anything else.

        No matter what happens, you won’t be homeless.

        • Seen it all before, Bob says:

          The second thing I would do is save to buy a condo in the city with a fixed rate 3% mortgage.

          1) Condo values are depressed now but I believe people are social and will eventually move back. It may take a few years but you will have fixed monthly payments forever (30 years) and you should keep a year of cash in the bank to cover it. As a side benefit, it is likely property taxes will be decreasing on the condo.

          2) I want to be like my parents did in the early 1970’s. Buy a place to live before inflation explodes with a low fixed rate mortgage(low was 4.5% back then) and survive comfortably during inflation making 12% in a short term CD with cash and constant wage increases. I believe leveraging on a place to live is acceptable.

          3) As people move back to the city, you can decide whether you want to cash out on that condo investment that you made 10 years before and ladder up. You will be eternally grateful you made that investment at a low and it is now worth at least 2X what you paid and your neighbor is paying 2X your mortgage to rent an identical unit.

          Or you can just stay for 30 years and never have to worry about rent again.

    • Hernando says:

      When everybody looks left then look right. if everyone is looking both directions look forward. For example,

      Real estate? Everyone is looking at single family homes… so look at condos, land and manufactured homes on land. Compare the comps to land values from 2 years before.

    • Artem says:

      Invest in whatever crypto Elon Musk is going to launch. Probably renewable energy coin (mined exclusively using renewable energy) or straight up teslacoin.

      In all seriousness, your best bet is to follow Wolf’s advice.

    • People are selling cash. If you are broke your life is simple. Keep your expenses low and bank those inflated wage gains.

    • historicus says:

      Speaking of Millennials…
      True, the environment is important and pollution is bad. And the millennials certainly are aware of that.
      BUT, wake up millennials. The FINANCIAL ENVIRONMENT being left to you by this “emptying out the future to fluff the present” is leaving your generation a financial environment that is a mess.
      It is your generation that should be at the doorstep of the Federal Reserve with your protests.

      • random guy 62 says:

        Plenty of us are watching with great but calm frustration… Bout time to start dusting off the pitch fork.

    • Auldyin says:

      BM
      If you spend half of what you earn and save the other half, you need only work for half as long. Not easy but pure math.

  50. DR DOOM says:

    I hope this will push the “press” to have a pointed focused interchange with Powell such as Sen. Paul had with Dr. Fauci over gain of function loop hole exploitation by the NIH. We the people may then make up our own minds on the the issue at hand. Powell needs to be badgered from several reporters that are in the room to cut the bullshit. The cats outta the bag.

    • Phoneix_Ikki says:

      hahahaha don’t keep your hopes up on that one. This is straight out of CNBC’s headline…nothing to be worry about, all is well..

      “April’s inflation surge wasn’t as drastic as it looked, but the real test is still ahead”

    • josap says:

      Always with the political digs, you just can’t help yourself.

  51. Brent says:

    Does anyone remember Carter Bonds (US Treasury Bonds issued in 1978 and denominated in Swiss francs) ???

    Maybe it is time now to issue US Treasuries denominated in quintessential American currency-wampum ?

    Meanwhile health-conscious Jerome Powell jogs around Eccles Building every morning screaming his favorite running cadence:

    Trillion 1…. Just for fun
    Trillion 2…. Good for you
    Trillion 3…. Good for me
    Trillion 4…. Lets print some more !
    Trillion 5…. I feel alive !
    Trillion 6…. Just for kicks
    Trillion 7….I am in Heaven !
    Trillion 8….I feel great !
    Trillion 9….I feel fine !
    Trillion 10..Lets do it again !

    • historicus says:

      One Billion seconds = 32 years
      One Trillion seconds = 320 CENTURIES!!!
      Does Nancy Pelosi know this? na

      • Brent says:

        According to “Revelation” Nancy,Hillary,Jerome Powell & George Soros are 4 Horsepersons of the Financial Apocalypse.

        Everybody is scared of them and accepts the inevitable.

        • NBay says:

          Agree with josap….if you guys can’t see past the red/blue cable TV fodder, then at least try to practice more nuance….it makes you look smarter, too.

  52. Finster says:

    Terrific article, Wolf. You’re performing a valuable public service in deconstructing the official narrative that inflation is merely a minor nuisance.

    Your argument against dismissing the recent rise in even the heavily doctored CPI as due to the infamous “base effect” is especially cogent. While the year over year comparison can be susceptible, blaming it for the surge in over the past three months is a stretch too far.

  53. hernando says:

    I believe that this inflation game is actually a stealth wealth tax meant to conduit savings to those who would otherwise work at lower paying jobs. In turn, the money would spread out to other underdeveloped countries as a stealth-global-UN tax.

    So there you go. If cash is a store/battery of labor, how does the government access it without obvious legislation? They reach in and grab it through inflation. The rich get richer and the middle class, fix income, and aspiring investors transfer their wealth via an inefficient system of non-insulated conductors where money pours out in every direction and is sucked up by the buckets of the rich.

    Sucks.

    • Hernando says:

      And I mean how they are boosting inflation this time around by giving away the house literally. Free rent, free mortgage, free stimulus, free enhanced benefits, free tax credits, free, free free free free.

      • Ensign_Nemo says:

        At some point people will go to buy food at the grocery store, and there won’t be any on the shelf because the workers got tired of getting paid less than the non-workers and decided to stop working.

        The newest change that makes it even *less* attractive to have a job is what appears to be free mid-level or Silver Obamacare for the unemployed. I know that Wolf hates links in comments but in this case I think that some proof is needed to convince people that this is real:

        “Health Insurance Options for the Unemployed

        Marketplace insurance plans. As mentioned above, if you get unemployment benefits for at least one week in 2021, the American Rescue Plan Act guarantees that you can receive a mid-level Obamacare plan for 2021 at no cost to you. This is because the law will disregard any income you earn over 133% of the federal poverty level this year. And that, in turn, locks in the highest level of financial assistance under the Affordable Care Act.”

        https://www.legalconsumer.com/obamacare/topic.php?TopicID=53&ST=PA

        Why work if you can get all of the essentials of life for free, with no work? Until, of course, the people who actually are working to provide those essentials drop out of the workforce too.

        Ay, there’s the rub.

    • historicus says:

      Herando
      Indeed. We have an unelected body, the Fed, laying an inflation tax on the citizenry. They answer to no one.

      The Fed is INSTRUCTED per their “stable prices” mandate to FIGHT inflation. Yet, Powell gets before a crowd and says they are promoting inflation, and not a word of inquiry as to the wisdom or the authority to do such at thing. Why?

      • Dan Romig says:

        historicus,

        The Fed answers to Congress. Of course, in reality, the Fed is a system of 12 Regional Member Banks which are owned by commercial banks in each district.

        The problem is that Congress is composed of members who seek to maintain their power above and beyond all else. Senators & Representatives of Teams Red and Blue are bought and paid for by Wall Street & K Street as they get reelected again and again.

        • historicus says:

          The Fed answers to Congress? Nope.
          Congress asks them questions, yes, if that’s what you mean.
          But, so what?
          Congress is allowing the Fed toe TAX the citizenry.
          Congress is allowing the Fed to “digitally mint” money.
          Only Congress has those powers, Article I, sect 8 US Constitution.
          Yes, the problem is that the Fed has turned the Lender slave to the Borrower. Who is the largest borrower in the world? What entity empowers the Fed? Same answer.

  54. Bob says:

    eff em… I’ve gone on a total buyer’s strike. No take out, no travel, not shopping beyond the bare minimum. I refuse to contribute to this BS economy. Every restaurant and store can shut down and every homeowner that’s out there trying to get double what their house was sold for a year ago can get hit by a car and die.

    • historicus says:

      Bob…
      funny you say that.
      I have been on a buyers strike also. Havent bought an item I didnt need for almost two years. Necessities only.
      Sadly, my wife doesnt feel like I do.

      • 91B20 1stCav (AUS) says:

        historicus-i hear you, my revolutionary brother…

        may we all find a better day.

  55. BigGov is ~150 trillion $ in debt; &
    the easiest way to pay it off is to ensure
    that a rat-infested shack sells for trillion$.

    To buy control, BigTech, BigMedia & BigGov steal from taxpayers.

    Eventually, there’ll be no more taxpayers to steal from, &
    “the patient” (America) will be dead.

  56. Cashboy says:

    What I do not understand with:
    1) asset and commodity price increases
    2) the printing/creation of money

    Why is the price of gold not even moving up at the same rate as commodities?

    • Hernando says:

      Because when you buy it there is a least a 10% premium. It’s like discount points on real estate. Further, if you buy bars you will have a harder time selling them.

      As I understand it, you are better off buying mining stocks from becklen.

    • Finster says:

      Different assets respond to inflation at different parts of the cycle. Gold prices tend to correlate better with bond prices, while copper prices tend to correlate better with stock prices. Notice for example how prices of both gold and bonds peaked last summer.

      Over long periods of time, the prices of elementary commodities like copper and gold rise in like amounts as currency depreciated. But within the cycle, copper does better during expansionary phases while gold does when recession fears dominate.

    • Brant Lee says:

      Two years ago you could buy 1oz Silver Eagles for less than $18 ea. You will pay at least $40 now to buy and rising.

      1 oz Gold Eagles are going for over $2000 now. Some Canadian Maple Leafs out there for a little under $2000.

      The bullion coin markets are hot, no one is selling. And a word of caution, if you don’t know rare coins, beware, the fakes abound, both silver and gold.

  57. Franz Beckenbauer says:

    This is becoming a global phenomenon.

    The U.S. main export these days is reckless inflation.

    House prices go through the roof (literally) in Germany.

    And of course pliticians are coming to the rescue – they want to ban exports of raw materials.

    It’s time the world went off the U.S. dollar.

  58. Diogenes says:

    CashFellow:
    Two gold markets: (1) physical gold (bars, coins) and (2) paper (futures prices). Paper is merely a contract between buyer and seller with no actual physical ever exchanged.
    Physical actual world is about $7t total.
    Paper total contracts many times $7t.

    Supply in physical is fixed. About 1.5% increase per year.

    Supply in paper is unlimited.
    Why?
    Paper contract not backed by physical (although theoretically is backed), and therefore can be issued in unlimited supply,
    which is OK by the CFTC (Commodity Futures Trading Commission).

    Supply of paper contracts are issued by bullion banks that make the gold market. Mainly 4 banks: HSBC, Deutsche, Barclays, UBS. (JPM no longer, it’s flat the market)

    So when buyers enter market as they did on Thursday and Friday, the paper market 4 banks issue more supply (go short) to keep the price rise down.

    Why keep the price down? 2 reasons:
    (1) protect the dollar with respect to gold as world reserve currency,
    (2) protect the 4 banks’ existing large short position built up over time and also built up, e.g., on this past Thurs and Friday when bullion banks issued offsetting short contracts opposite of (selling to) the long buyers when longs entered market Thurs and Fri.

    Then, when trading is light, as in midnight to 5:00 am, the bullion banks together drive the price down in light trading when no buyers around. Then banks immediately cover their prior short positions taken when they offset the buyers’ longs.
    Nice profit. Rigged game.

    Been doing this for decades. CFTC knows, but does nothing.
    Is a US govt approved scam.
    Volcker in early 80’s said his main mistake was not controlling the gold price. US govt no longer makes that mistake. It now keeps a firm lid on gold price.

    But every now and then US gets blind sided.
    Then has to slam the market.
    Look at January 8, 2021. Exactly at 3:00 am EST the Fed came into the market and sold 40 TONS of gold in exactly 1 minute,
    in one minute!
    100s of contracts were traded in milli-seconds (that’s 1/1000 of a second).

    As they say, “Be careful out there.”

  59. Chris Coles says:

    Wolf, I think you have missed out an important aspect of what is going on; something we see here in the UK; that there is a sector achieving prosperity which is directly linked to the employment of people working for government, whose wages will always match inflation, while at the same time, their year old vehicle is replaced new, again as a part of their income. Essentially, that there is a considerable raft of government employment that will be protected from any inflation created by government policy. Have you factored this into your calculations and ongoing thinking?

    • historicus says:

      Indeed. Government workers and even pensioners are inflation protected.

      So what we have here is the inflation protected, including central bankers and Fed people, pushing inflation on the unprotected.

      What we have here is an unelected body pushing an inflation TAX on a citizenry that has no representation on the Federal Reserve Board.
      That’s taxation without representation…ring a bell?

      What we have here is an unelected body stealing the minting powers from Congress. The Fed is to deal with short term liquidity issues, not have complete control over the money supply.
      Sadly, it is the politicians in Congress that enjoy the free money for their vote buying schemes.

      • OutWest says:

        “Indeed. Government workers and even pensioners are inflation protected.”

        Not so. The average government employee and the average pensioner are being severely undercut in this inflationary environment along with the rest of us. Your other points I believe are spot on.

        • historicus says:

          In IL, the government / public pensioners to whom I refer get a 3% annual bump….and have been getting that even when inflation was muted. In twenty five years they will have increased their pension receiving by 100%.
          COLA is woven throughout government compensations.

      • Heinz says:

        You seem to think pensioners are living large on pension largesse and enjoying inflation-adjusted COLAs. I would beg to differ with your thesis.

        Not all government pension systems give out COLAs– mine doesn’t. The annual retirement benefits you were given when you separated from employment are thus fixed– come high inflation or not.

        SS recipients do get a COLA– but it is of course based off government inflation figures, which we know are grossly mangled and tortured to understate true inflation.

  60. historicus says:

    Wolf..
    Have Fed Funds ever been this far under the CPI readings?

    Would like to see a chart of CPI vs Fed Funds….
    tough to find one.

  61. RedRaider says:

    Except if you’re wealthy and buying luxury items isn’t food and energy (nondurable) the one that people on a monthly budget (me) should be paying attention to?

    • RedRaider says:

      P.S. Although, today I went to the dentists… ouch! So maybe services is second most important?

  62. Crush the Peasants! says:

    It seems like these hedonic adjustments work in one direction only. For example, if you increase your skill set at work, by increasing your education or obtaining a certificate for a training course, but your pay remains the same, shouldn’t it be hedonically adjusted down? And so when productivity rises but wages do not, aren’t workers actually making less?

    • Winston says:

      Ha, good point. However, as always, the advantages are to those making the rules, not to those against whom those rules are made. A great point is also made by johhnnygeneric above about the “substitutions” trick. That’s an open ended one.

      “Winston, I always found the idea of substitution to be appalling. When you’ve substituted down to shoe leather for meat and dirt for vegetables, how do you go down from there?”

  63. historicus says:

    The dollar has been buying less and less, losing purchasing power, in the stock market for quite a while.

  64. Dave k. says:

    Hey Wolf

    Are we going to start hearing “stagflation”. I threw out my college Econ books recently since nothing I was taught seems to apply nowadays

    • historicus says:

      The world changed in 2009, when the Fed began QE. Temporarily. (ha)
      For the 20th century and until that point, Fed Funds equal or exceeded inflation.
      https://www.bourbonfm.com/sites/default/files/users/PatrickBourbon/fedfundsratevspriceinflation.jpg

      Now Fed Funds roughly 4% below inflation!!!!

      The Fed has gone from temporary liquidity to permanent digital minting.
      The Fed has gone from “stable prices” to promoting inflation. Not a word from anyone about them no longer following the rules.

      All the MBAs and Economics PHDs are worth less than knowing in 2009, for certain, that the Fed had changed from what they were to what they are now.

    • Wolf Richter says:

      Right now we have economic growth (recovery phase, getting back to where we were), and we have inflation.

      If growth stalls and inflation persists over a longer period of time, we would have stagflation. But stagflation is a longer period of time, not just a few quarters such as a recession. This would be a period of a few years.

    • 91B20 1stCav (AUS) says:

      Dave k.-if i go into my archives i know i still have a slim paperback college Econ.101 text circa 1978 entitled ‘Stagflation’ (can’t recall the author’s name), the prof. was quite passionate on the subject (clear and present at the time…).

      may we all find a better day.

  65. Xabier says:

    The financial/military elites are now putting Asia ahead of the national interests of the US (or EU, the UK, etc) in the context of the global resource and energy crisis, which will come to a head roughly 2025-45.

    The US dollar, and before that the £ sterling, has merely been one of their tools, and of only transient importance.

    Be forewarned, prepare.

    And, above all, seize the day: for they will only allow you to survive if it suits them, and they are very powerful.

  66. Turtle says:

    I had to see this for myself so I punched in the Kia I bought in 2019 and Kelly Blue Book says it’s worth $3,000 more than I paid. Kias generally lose value faster than other makes, not because they’re lousy, but because people remember them as being lousy 10+ years ago. Amazing that any used car’s value would increase but especially a Korean car.

    That’s major inflation!

    • Xavier Caveat says:

      When the first Hyundais showed up in the 80’s for $5k brand new, the cars would often be scrapped after a few years on account of the motors crapping out, and yes thats what a lot of people remember about Korean cars, but they’ve improved so much since then, even if a KIA still provides chuckles in it’s acronym.

      • NBay says:

        I remember the first Subarus on display in a shopping mall in ’66. Being JC kids, it was our duty to piss off the salesmen by picking them up, and moving them around, so we did. They were very tiny.

  67. susannah wedgwood says:

    This morning I saw the news that Amazon and McDonald’s will raise their wages to attract new talent. It has suddenly dawned on me, This must be Biden’s winning strategy to raise the minimum wage. (:

    • Heinz says:

      “This morning I saw the news that Amazon and McDonald’s will raise their wages to attract new talent.”

      Clearly, they want to attract the most talented burger flippers and fries fryers out there.

      More automation in fast food industry is coming.

      • crazytown says:

        My money is on this being a great excuse to jack up prices. “Labor costs have increased so much, our billions in profits will take a 3% cut if we don’t do something!”

        Customers moan about it for a millisecond then get used to it. Then swap out the employees for automation and keep the higher prices while drastically cutting input costs.

        Good business strategy, terrible for workers. Unfortunately, nobody will rise up and say “you fired us all, we will not send a single dime your way.” The money will continue flowing into a select group of concentrated megacorps since nobody has the balls to break up obvious concentrations in industries.

      • Lisa says:

        It already has. Most of the workers stripped from the customer facing roles, like cashier. The giant screens do all the work these days.

  68. Phoenix Rising says:

    Some of those “hedonic quality adjustments” in vehicles had better start including sleeping quarters because that’s exactly where an increasing number of people are going to end up as their purchasing power erosion accelerates. You’ll know it’s a problem when the Fed starts including vehicles in the primary residence category.

  69. B.A.C.A.H. says:

    …. 6500 board feet.

    … and the question is, that I typed into the URL bar of my browser: “how much lumber in a typical coast redwood tree?”

    If you have one on your property in the Bay Area, the timber is worth a lot of dough. But! you must get a permit to take it out. Good luck getting a permit for taking out a Legacy Tree.

    Lots of redwood trees on public lands in our urban forest: parks, schools, “strips” between the city owned sidewalks and streets. No permit required for the government to “harvest” those. In the past week two residents of our region, one on Peninsula and one in Oakland Hills, have shared with me that they saw crews taking out huge, healthy redwood trees from public land.

  70. Anton says:

    I am sure someone brought this up before, but looking at the market dynamics I am perplexed by a couple of things. If inflation is in fact surging, then why are (1) rates not reacting very strongly to the surge in inflation and (2) why are hedges against inflation like gold essentially flat?

    I know you can explain away #1 by saying something something federal reserve, but what about #2? Could it be that the broader market just does not believe in persistent inflation is on the way? Meaning people have totally bought into the temporary inflation idea floated by the fed. And isn’t it just possible the fed is right about that? Once things settle out, we still have to deal with climate change and declining birth rates, both of which drag down economic growth. The population of China is in deed decline and will start losing people soon just as Japan has for years, so where will growth come from? All of that seems deflationary to me.

    • Swamp Creature says:

      We have deflationary forces in work at the same time as the inflationary forces. That explains #1. The economy is a wreck contrary to what you hear on the main street financial press. Just look around here in the Swamp with all the closed businesses and empty malls. #2. Gold is essentially flat because it is manipulated and is competing with the other bubbles including Real Estate, Stock Market , Cryptos etc.

  71. Clarke Acton says:

    Everyone likes to say “this time it’s different” but 90% of the time it’s pretty much the same. This looks A LOT like 2007 with a pandemic thrown in to disrupt the supply chain and fuel speculation even more.

    I expect a big exogenous event probably due to easy-money fueled malfeasance to take everything down just like last time. Even though the system is corrupt and rigged it still has some elements of a self balancing system.

    90% chance stock market/crypto/commodities all get hammered just like 2008. Demand crashes and we return to annualized 3-4% Fed controlled burn rate on US dollar

    10% chance system keeps working with stimulus fueled malinvestment and malfeasance unexposed and Fed not tapering and inflation remains above 4%

    • ru82 says:

      I read last week that the crypto world is valued at 2.4 trillion. Go back 5 years and you would probably say the value was $100 billion or less? Where did all this money come from?

      2 Trillion that really has no functional value except for money launderers and crypto traders. Sure a few place will let you buy something with a crypto but is this number very low.

      Is it just people putting money into cryptos instead of banks?

      I wonder how many accounts in crypto exchanges are leveraged to 30% or 50%?

  72. Andrew says:

    Nice graphics.

    I’m impressed that most folks’ rent is considered to only be 7.8% of their spending, according to the CPI index. In BC here, rent is typically 50% of a tenant’s costs.

    • Wolf Richter says:

      That’s 7.8% of TOTAL spending by everyone in the US, including by the 65% of the people who don’t rent but own. It’s not 7.8% of what renters spend.

  73. kitten lopez says:

    Dear BRINDA,

    if you’re still here i was outside smoking and watching the birds in my neighbor’s water thingie, and you came to mind because you started some conversations here at home.

    James thinks your take on not working because it doesn’t pay is also childish (like an earlier commenter), but like others who thought you made sense, i think i agree with you, too. because you have to go into sociopathic mode sometimes to get the ENERGY to comply with things you don’t believe in your bones, just to eat, and that kind of dissonance does a number on everything else, not to mention your soul.

    so what?

    well, i started reading Cal Newport’s book on “A World Without Email,” and while i doubt i can reach much more from someone who slings corporate jargon with a name like “Cal Newport” without thinking of tennis and sweaters arms tied in front, i actually got my answer before finishing his introduction:

    looking around, we no longer have or even WANT the attention span to think ourselves out of the proverbial paper bag. we get off on the hyper hive mind. it’s not about The Thing anymore.

    globally, we’re not so much like people in hell suffering with really long chopsticks like i’d thought; we’re like those shots of wild animals stuck with their heads in plastic jugs from foraging in the trash, and (shrug)… who’s gonna take it off our head when they’ve got jugs of their own tightening around swollen panicked heads.

    well, i think that’s why you’re stopping. i just got the nicest fan letter i’ve gotten in years, from someone at a call center in saskatchewan. no time to spell it right, this is about what came to me IF my book was once relevant when there were shreds of adventure left..

    MAYBE IT IS A GOOD IDEA TO JUST STOP AND HAVE FREE TIME TO FALL BENEATH THE CRACKS WHILE YOU’VE GOT THE MUSCULATURE AND WILL TO CRAWL BACK UP AND OUT TO BEGIN OR TRY SOMETHING ELSE… ANYTHING ELSE.

    because until SOMEONE waits this mess out and can think clearly, it’s gonna be impossible to stay afloat the way things are flushing down the toilet.

    will you make it? what’s “making it” now? what choice do you have? this is where the road trip is OFF ROAD especially in the MIND.

    i’m saying pencil out HOW you’d “drop out,” or “go around” or even WITH, because you younger ones are very much not only ON YOUR OWN, but are also figuratively having all your options and powers zip tied behind your backs as you’re being pushed in the water and told to swim for it.

    you could claim “victim” status, but get in line. it’s long and the victim position is a boring trap and it doesn’t pay. fame is fickle if your victimhood isn’t in fashion.

    there. that’s all i’ve got. for whatever it might be worth. don’t focus on hating ANYONE. it’s a form of being forever BETA and at the mercy of their existence to feel any kind of passion.

    pick the one that gives you the energy to fight your way out of proverbial paper bags. you’ll either be alone or lead. but true leaders ARE lonely.

    good luck with that.

    x

    • 91B20 1stCav (AUS) says:

      Kitten-as always, bless your living, living heart…

      may we all find a better day.

    • Brinda says:

      Hi Kitten Lopez,

      I just went back and read my comment—wow there are a lot of replies! I shoot from the hip, don’t care if the lightweights don’t like it.

      Some of the replies were thoughtful and grounding. Some cracked me up—“You Americans stay out of the EU!” LOL, I could have gotten citizenship there because of my grandparents’ births! Joke is on them—I sure as sh/t don’t want to move there.

      I should have expounded on my desires, as others requested I do. I’d like to move to perhaps a South American country where one can live among “real” people (like you, Kitten Lo-pez!).

      I’m surprised I didn’t hate mail for saying I’m not a minor-ority (OK, I actually am in one sense, but I’d never fill that oval in looking for employment!). I speak Spanish (not fluent)… I think I’d have a joyful time down there somewhere, maybe!

      I said it to bring realization to the fact that “yt” men are literally pushed back, ESPECIALLY today. I have several sisters who have benefited career-wise being female (getting into college, grants, loans; getting into medical school; getting physician position)—knowing that they would get a job over me just because of their gender is ______defeating?________ (I can’t think of the English word).

      Don’t worry though, I’m signed up for the war draft to protect y’all should one break out—dropping that card into the mail box, a feeling some will never feel. The illegal aliens? Immigrants like Wolf? Maybe the men of America today won’t rise up to defend her should the need arise???? Check out global affairs…. just sayin’!

      Wolf deleted a couple of my replies to sharty people, so it’s hard to decipher some things…

      Now on to your comment :)

      Interesting to know I’m bringing about discussion at your place. I’m delighted you’re “on my side”! And James, well, I’d have to know his past to go further. And, since he’s your friend, I shan’t say no more!

      I need to go sociopathic…. I’ll research that thought! A friend I’ve been trying to help just told me he’s discovered he’s a narcissist… that makes sense… sucking my energy dry, I feel I do need some sociopathy!

      Indeed, if I’m reading you right, I no longer have the drive to get out of the paper bag, that’s why I’d like a peaceful life among people who enjoy the real things as well. I know it isn’t all rainbows in poverty, but………. surely you get what I’m saying.

      I have some Native American music playing really loud, so my rambling might be incoherent. If W even publishes this mess…

      Instead of hating/beta, what is your suggestion? Go full alpha?! What is alpha—“ghosting” someone? Going sociopathic?! :)

      Alone but not lonely!

      End. I’m not even proof-reading this. Write more, Kitten, will read!

      • kitten lopez says:

        you’re doing just fine as you are and drop the labels for you and your friend. you’re just alive, trying to enjoy the world.

        going alpha means you stop looking to others for answers and accept that everyone else is existentially afraid of Life and all their advices and reactions to you will be based on fear, which tends to come out as anger or control now. like calling someone narcissist etc. / all of my life anyone who calls you something, accuses you of selfishness narcissism, usually it is because they are that and they want to control and define YOU.

        avoid such people. / even if they’re “right” they wouldn’t call you that. kind people will have their own boundaries and be able to take care of themselves without belittling you.

        read more books. old books.

        and no, no rainbows in poverty. that’s why you have to get your head and your body in shape for venturing into what poverty does to you and people, be it here or south america or anywhere.

        hang out here but be respectful./ you will get advice from the most amazing hearts souls and minds here IF you take care. practice this for the real world because you’ll need the humility sociability and empathy for struggling and striking out into your New World.

        never kill the laughter and your humor, though. ever. that is paramount because your ability to make jokes in the midst of moments of despair will save you and others more than you’ll know even at the time.

        there. that’s all i’ve got. i cannot belong to you because you have to settle down a bit and pay attention to others here and not just strike and run, but face what you’ve started, for good or for bad.

        (smile)

        you’ve got enough to plan out without me or internet distraction. pencil it all out with the assumption that you and your friends are just beautifully alive and wanna LIVE and SURVIVE and dare to THRIVE.

        the world is what it is. / read old books in paper til they’re tattered. there are many adventure books and we all get the same nauseous excited stomach aches of terror. court THAT.
        good luck.

        it’s a gym/errands day so i’m off. the gym is where i crawl to in order to have a coherent thought or actual muscular optimism.

        maybe lift weights to focus?

        x

        • NBay says:

          “Don’t follow leaders, and watch the parking meters”

          All I need to know……..other than believing in “knowledge for it’s own sake”.

      • kitten lopez says:

        but most importantly, Brinda, i dare you to BE THE REAL PEOPLE you are planning on going “elsewhere” to meet. / that’s that american buying “give me” / “feed me” stuff where we think we can go BUY something… like “real people.”

        you have to first BE these “Real People” yourselves, and the only real relevance is BEING THAT WHERE YOU ARE.

        if there was somewhere, anywhere to go, i’d be there, too. but i’m it. where i am is “it.”

        but yes! do travel to learn and see other ways. but unless you invest in these new south american people, you’re just a tourist, just a john.

        if and when you realize this, then you ARE an “alpha.” the top, the boss, the daddy, the leader. the first one outside without a mask.

        so i challenge you to make where YOU are, full of Real People. yes, i am Real People, and i’m down to doing that myself even though i first came to san francisco to partake in the party already going on.

        one of my many, many mentors in this life has been Peter Maravelis at City Lights bookstore, and when i used to complain, “where’s the UNDERGROUND???” he’d shrug and say calmly, “your job is now to MAKE it.”

        that was a decade ago./i’m still trying to get people to meet up offline without them having a nervous breakdown about spontaneity and not knowing where conversations (and feelings) will go.

        you have to have a strong stomach for rejection, but you are like a big sloppy leaky PUPPY with all your energy and frustration coming through on HERE.

        that energy will save you, along with a dose of your true vulnerability. it’ll throw people off their game when they try to belittle you, but your vulnerability will not make you weak– but strong as they’re off balance.

        what you do after that is up to YOU to try and see how it’s going.

        good luck. now i’m off. i suggest weight training because it focuses you and your muscular carriage will do a LOT for you that is and will remain unspoken. TRUST THAT. it’s animal. alpha dogs don’t flail. they focus.

        pencil it out. make it real, Brinda. don’t just be dramatic!

        good luck and report back.

        x

      • kitten lopez says:

        and no, you’re not lonely yet because you’re not a focused leader… yet?

        i realized that Wolf’s commenting guidelines are a perfect place to illustrate BOUNDARIES and rules for yourself, while allowing open dissent which sometimes devolves into chaos or diversions, but Wolf struggles openly to keep it “clean.”

        people feel SAFE with that, with how he does it.

        same thing happens when i’m in public having an intimate or intense conversation with someone who’s willing to be vulnerable or speak openly with me, and if i see someone coming up to casually say “hi”, i hold up my hand and keep them away, and PROTECT what i’ve courted: A REAL CONVERSATION WITH A PERSON DEIGNING TO BE REAL WITH ME.

        you have to make your world before you go elsewhere seeking someone else’s. that’s kinda what got us all into this mess if you go back to origins of pain and feeling a sense of home or belonging in our communities.

        so Wolf has made this world and if we wanna be in it, we (sometimes begrudgingly) go along with his ground rules. and others do the same with ME (like not checking their phones while talking to me), or i walk away and don’t TRUST them to maintain focus and protect what they have with ME.

        so it’s all in the definition because by THAT definition, most people in the world are heroin addicts nodding in and out like narcoleptic goats with their technology, and few are in control of their own time and attention.

        it’s why i think work-from-home is going to be a disaster because it only takes away true spontaneity and the back and forth kinetic energy of not only SOLVING problems, but coming up with NEW ideas.

        that’s why i think, Brinda, if you can figure out a way of unplugging from the constraints of your life as a frustrated, but charismatic, young man in america, you can think up a way AROUND the upcoming future of people doubling down on NOT being “real”, and being only more isolated and atomized.

        YOU are that kind of outgoing, emotional, frustated alive person who can REFINE all that puppy dog fearlessness and audacity, and FOCUS it into a plan. something you’ve tested out on the low.

        i used to go out to parties and test out lines, jokes, IDEAS. the more people WINCED, the more i knew what i had to DARE to write about. it’d be rich.

        just like the most interesting part of any conversation is the part where someone is uncomfortable or wants to change the subject or their eyes grow big… go THERE. the dreams are in the big eyes. pull it OUT.

        that’s what REAL PEOPLE do in REAL LIFE.

        you can shock and awe with your ferocious energy (like me you also don’t edit because you probably didn’t wanna tone it down like you might’ve) and just hit comment boards, or you can channel it and while everyone else is acting like they know what they’re doing, you plan plot scheme test ….WATCH.

        everyone’s panicking. you’ve likely panicked a lot longer and harder than regular people if you’re this frustrated and tired. go more. push. that’s another thing. alpha’s say what no one else will and they own the room.

        you have to push and go too far to know what too far IS.

        test. apologize. be sweet about it. they’ll hate AND love you for what you’re doing.

        there. you got three writings from me. now i’m exhausted. must bathe and get outta here!

        i’m not gonna write more here or to you for fun to take over these forums. you’ve gotta do this in REAL LIFE. it’s all a waste here. nothing’s on the line like it is with someone you’ve gotta deal with on a daily basis.

        go get stronger. you’ve got the sense of humor and shamelessness to make it on the other side with your big heart in tact. and yes. you have a big heart. so does your narcissist friend if he’s your friend.

        own the labels. that’s all you can do if they’re coming from women. (men don’t call people narcissists unless they’re therapists with female clients paying to complain about MEN.)

        own being a sociopath, too. just own it. if you’re a man they won’t believe a thing you say in your defense anyhow.

        now REALLY “good luck.”

        (smile)

        and be good here. they’ll suffer you like a puppy. there are many alphas here. it’s their watering hole. when you’re one of them, THEN you’ll know “lonely.” for now you’re still in puppy “love me!” mode. it’s still apparently “cute” where you are. prepare for after that day. don’t be like a pretty girl who forgets about the “character” part also for her own middle-aged “later.”

        x

        • Brinda says:

          K-Lo,

          I’m not a sociopath, but I’m going to research the term because you told me to be one :D

          My friend called himself a narcissist, not me, just to solidify. I think he’s mostly right, but I too don’t really do labels.

          I wanted to send a quick reply so you knew I read your soliloquy. I wish it were available in old-timey paperback so I had it in front of me non-digitally! I read it once and will read it later when distractions are lessened. Cell phone beeping that today is the day I get to meet Baby Relative named after me, 7 months later, thanks C0R0NA. Female Relative said “If unvaccinated, must wear mask and remain socially distant”. I can’t hold the child named after me. LOL.

          When I said “More!”, I meant not only more to me, but more specifically to this site (pending W approval of course ha ha).

          I will try to write more when it’s just me and tea, should you decide to revisit your comment.

  74. Swamp Creature says:

    David Stockman just posted that inflation is running at 7% and if you adjust housing inflation for sale prices vs rents its running at 8%. That’s pretty close to double digit inflation.

    Went out to get gas today and every gas station was OUT OF GAS!

    Welcome to Jimmy Carter’s America version 2.0. Enjoy!

    • Wolf Richter says:

      Wolf Richter posted YESTERDAY in the first paragraph:

      “For the three months combined, CPI has jumped by 1.7%, or by 7.0% “annualized.” So that’s what we’re looking at: 7% CPI inflation and accelerating.”

      And in the second paragraph:

      “Annualized,” over those three months, the purchasing power of the dollar dropped at an annual rate of 8.4%” … followed by a chart.

      :-]

      • Swamp Creature says:

        Wolf,

        Thanks for the information. Re-read the article again and printed it out for good measure. I see the Case Shiller index for housing prices went up 12%. That will go into our reports.

        Noticed properties are selling in the Swamp in far out high crime marginal DC neighborhoods without any problem. Investors are renovating these old homes and Vets are buying them. They are the only homes that are affordable and that is driving the market.

  75. Rubicon says:

    We think this IS the BOTTOM LINE as to WHO BENEFITS AS THE US DOLLAR LOSES ITS Value:
    “So how do these multinational companies benefit when the dollar falls? Let’s say a U.S. company does a lot of business in Europe and the euro is strong against the dollar. The company’s profits from Europe will be denominated in euros and when those euros are converted against a weak dollar, there are more dollars for the American company and a nice jolt to the bottom line. Better profit margins usually translate to better results for shareholders.” (Investopedia)

    Meaning, that common citizens in the US lose out. Naturally, with the rise of “inflation” once again, the common citizens lose out there, too.

  76. Auldyin says:

    Great stats, great logic and great discussion as always. Just one minor aside from an old economy watcher :-
    When you chuck a huge boulder(covid) into a pond(the economy) the water level(prices) goes all over the place immediately and there’s not much point in trying to measure it too closely until it settles down at the new level which will reflect the size of the boulder. Economics has two basic modes, short run, where all sorts of things move rapidly, and long run, where a different set of relationships come into play. We shall see what we shall see when the water hits it’s new static level. Assuming nobody chucks another boulder in, of course.

  77. ML says:

    The price of real estate has gone up because instead of a door knocker they fit a ring doorbell so the house can be sold for a premium as a tech asset. We have a ring doorbell but most delivery people don’t see it so bang on the door or its glazing with their fist instead.

    ——

    Here in UK we have RPI, CPI and CPIH. RPI – Retail Price Index – is not longer an official statistic but is still published monthly because it is widely used, especially with rent as it is considered more favourable to landlords. CPIH includes housing costs.

    My contribution to the world of working hard and longer hours so as to be able to afford less if only I had the time to spend it is on my website. Where quite possibly my inflation and rent calculators (it doesn’t have to be used for rent; could be for the price of anything) are the only ones on the internet where you can select any two months in any two years to calculate the percentage difference. And then if you want apply that percentage to the amount of rent or whatever to see that the inflation adjusted figure would be.

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