Fed’s Lowest Lowball Inflation Measure “Core PCE” Spikes Further. Highest 3-Month Rate since 1982

“Way above target”: Fed Chair Jerome Powell.

By Wolf Richter for WOLF STREET.

As push came to shove toward the end of the FOMC press conference on Wednesday, Fed Chair Jerome Powell, fidgeting on the hotseat of inflation and struggling with “transitory” and “temporary,” admitted that the recent rate of inflation was “not moderately above” the Fed’s inflation target but “way above target.” Today, the inflation measure that the Fed uses for this inflation target, annual “core PCE,” spiked further.

The Fed uses the “core PCE” inflation measure because it is the lowest lowball inflation measure that the US government provides. It excludes food and energy, which can be volatile, and it is structured differently than the Consumer Price Index, and it is nearly always below “core CPI.”

This Personal Consumption Expenditures price index without food and energy jumped by 0.45% in June, from May, after having jumped by 0.5% in May, 0.7% in April, and 0.4% in March, according to the Bureau of Economic Analysis today. This lowest lowball inflation measure available in the US was up 3.5% from June last year, the highest year-over-year rate since May 1991:

The run-rate of core PCE over April, May, and June, and annualized, was 6.7%, the highest run-rate since July 1982. This shows how fast inflation has suddenly heated up this spring. This is a phenomenon of 2021. There are not that many people still working in the finance industry that have experienced this type of inflation as adults:

The headline PCE price index, which includes food and energy, also released today, jumped 4.0%.

Inflation has surprised the Fed to upside this year. About every three months, the FOMC meeting is followed by the release of “Projection Materials” which show where FOMC members think the economy and inflation are headed. The median projection for core PCE inflation is now way behind reality:

  • In December, core PCE projection for 2021: 1.8% (actual =1.5%)
  • In March, core PCE projection for 2021: 2.0% (actual = 2.0% and surging on a monthly basis)
  • In June, core PCE projection for 2021: 2.1% (actual 3.5% and surging on a monthly basis)

As Powell was getting politely hammered at the press conference over the surge in inflation, and as he was getting pushed to explain what exactly “temporary” and “transitory” mean, even he admitted that there was nothing temporary or transitory in the current inflation: That loss of the purchasing power of the dollar is permanent. Prices won’t go back to where they were, even he admitted.

What is temporary or transitory would be the current growth of inflation, meaning that next year prices might be 6% higher, and that loss of purchasing power is permanent, but inflation might not continue to rise at 6% year-after-year. It might rise 3.9% or 5.8% or 8.4% or whatever. And so each rate is temporary in that sense.

Sure, some of the price spikes, such as the ridiculous price spike in used cars, are likely to get unwound partially. But housing inflation, including rent inflation, which is part of the inflation measures and directly and indirectly accounts for about one-third of CPI, has not made it at all into the inflation measures. And that biggie, rent inflation, which has been heating up, will be a factor in the inflation data to get ready for.

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  146 comments for “Fed’s Lowest Lowball Inflation Measure “Core PCE” Spikes Further. Highest 3-Month Rate since 1982

  1. Minutes says:

    My home insurance increases have been brutal. As is flood insurance. These seem to be compounding. No longer linear. Painful. Yes I shop them but flood cannot shop. Its fixed by government no matter who underwrites

    • FROMKS says:

      Isn’t flood insurance heavily subsidized? Just be glad taxpayers are there to help you out. Some estimates are market rates would double.

      • Nacho Libre says:

        Yes, FEMA underwrites 5 million policies. Perhaps with a good intention, but results are disastrous.

        Not only it’s a great loss making endeavor, it also incentivizes people to build houses in higher risk areas.

        On topic of inflation, purchasing power of my emergency funds have reduced to diddly squat. Time to replenish it.

        • Joe Saba says:

          we’ve had record rains in July(Tucson)
          none of my properties were given thought about it when rain hit
          then again I pick properties that don’t have
          ‘special circumstances’ – ie flood plain, etc.

      • David Hall says:

        The Federal govt. tried to raise flood insurance rates years ago. Some flood zone home owners got very upset. The price hike was cancelled.

        2020 saw a record number of named storms, 30 in all. Some of these did damage. Florida allowed insurance companies to raise property insurance rates in excess of 20% this year. It also affects auto insurance as storms dented cars. The bigger the house, the larger the insurance payment.

      • Thomas Roberts says:

        FROMKS,

        It is heavily subsidized, but very unevenly. Some people pay way more than they should and some way way less. Because floods can be part of large natural disasters, private insurance companies wouldn’t be able to cover all the payouts, when large floods or disasters hit. That’s a big reason why the federal government has the flood insurance program, it helps reduce the risk of the federal government being pressured to pay in, if private insurance companies couldn’t/wouldn’t cover.

        The problem is that too many people aren’t charged a market based rate based on their actual risk for a house with that value.

        • Wisdom Seeker says:

          If even large insurers can’t afford the cost of a big storm, seems like a very strong reason to shift people and infrastructure out of flood prone areas.

          A lesson currently being learned by China this year.

          P.S. Substitute “financial crisis” for “big storm” and the same lesson applies. Bankers get federal protection against market “floods”. All at the expense of the rest of us who live safely.

        • Thomas Roberts says:

          If people are charged a proper rate for the risk, there is no issue. There are of course some places (mainly small areas) just too disaster prone, that shouldn’t be rebuilt if destroyed. Also houses on stilts and other terrible or designs not suited for the area should never be built. In some areas for instance, there shouldn’t be basements.

          Too much land in America is prone to some sort of disaster, whether it be earthquakes, hurricanes, or anything else to simply not use it.

          As far as China goes, the problem is that the CCP likes vanity projects and so it will fund unneeded skyscrapers, instead of building flood management control systems in the cities. Because flood management is mainly unseen, CCP officials often just steal the money set aside for it.

          In Chinese culture, building dams is a very big deal and a vast network of poorly designed and even more poorly built dams and levees were made. Alot of those dams have reached the end of their service life, most of those dams aren’t going to be fixed. While China is a country more prone to floods than most, most of the damage is caused by the terrible policies of the CCP. Large dam failures are in the future. A leaked government memo estimates that the flooding in Henan (a province) has already killed over 50,000. That number is impossible to fully verify, however the CCP instead claims an impossibly low instead. It without question, is at least in the 5 figure range.

    • Old School says:

      Financial repression causes insurance companies to earn a negative real yield on their pot of money. That loss of income has to be passed on to customers. Fed stimulus policy is not a free lunch.

  2. Meanwhile China is going deflationary? Is that whats dragging down yields? The difference between inflation and deflation, the loss or purchasing power in the currency shows up in prices.

    • georgist says:

      the doom loop:

      1. increase in rentier activity, drop in real activity
      2. increased land costs make real activity less competitive
      3. economy starts to falter
      4. Fed cuts rates
      5. rentiers win, wealth creators lose
      6. wealth creators spot this, goto 1.

      Initial state for this feedback loop: Americans don’t distinguish between wealth creation and rentier activity, unlike every single classical economist.

      • kam says:

        “wealth creators lose”

        Inflating asset prices is not wealth creation. Economic input resulting in greater economic output is Wealth Creation. Value-added in manufacturing is the heart of Wealth Creation, all the rest is mirage to keep the People from seeing the crooked table

        • georgist says:

          yes that’s what I said.

        • Roger Pedactor says:

          Aka the fallacy of a “services economy.”

          You either make stuff or you don’t. The entire financial industry doesn’t and with the smartest people heading for hedge funds immediately out of college, you get a grasp at how bad things are. Subsidization to facilitate manufacturing is garbage as well. From the broadest, most macro perspective, globalism has destroyed the global economy.

      • YuShan says:

        Even many companies that are admired for disrupting technologies etc are now to a great extend rentiers.

        For example, Apple makes massive profit from “rentier” activities. As owner of the platform, they charge app developers (the actual value creators) 30% just to be not excluded from the Apple platform. This is not that much different from the old landowners that charged massive rent to peasants for use of the land.

        In case of Google, Facebook, Amazon, this is even more obvious. They largely “own” the internet (= digital land and real estate) and are extracting rent.

        • Thomas Roberts says:

          The 30% rate is the standard across the industry for digital sales on closed platforms, it should be lowered, but it is far less than the rate for physical items (B&M or online). For physical copies of digital items the store and middle men can collect upto 70% of the sale. There has been growing pressure to lower the 30% rate.

          Apple makes the vast majority of its money from selling products. Only a small part of its revenue is the app store.

          Google and Facebook are monopolies, but Apple is not. Anyone can switch away from Apple with relative ease. Apple does overcharge a little, but Apple doesn’t really have any negative effects on anything else.

          Apple is trying to switch to its own services, because eventually, in under 10 years or so, the revenue from selling consumer electronics will collapse. None of its services will actually lock people in, as opposed to Microsoft services. Apple services are based around personal entertainment, where as Microsoft’s are based around business and work stuff.

          Stuff needs to be done about Google’s control of its search and it’s politicalzation of it as well as Facebook contol of social media though. The issue is how to deal with it. Once you ad in that one political party could benefit from that politicalzation, you will have difficulties even talking about making changes.

          It’s important to focus in on exactly what needs to be fixed.

        • Auldyin says:

          Spot on Y
          The ‘Cloud’ is just renting somebody else’s hard drive and software. The ISP rents the data up & down.
          Some folks think it’s a magic thing that happens for free in the sky.
          The road to serfdom, own nothing, rent everything.

      • DR DOOM says:

        My question is if rates were normalized would # 4 on your list break the feed back loop on the road to serfdom as Hayek pointed out. I think it would. I also believe the Rentier Economy would be properly throttled.

      • Why do investors favor income over assets? One I guess is the consumer mentality, which the robber barons didn’t have to worry about, and what happens when inflation takes a bite out of the income stream? We have had asset inflation but most of it isn’t owned. If you own this stock market you are only a short ride from nothing. Of course all assets are liabilities, especially your multimillion dollar prepper compound in NZ. You create a company that lives off ad revenue, what is that?

      • wkevinw says:

        georgist- I don’t see the cause of 1.

        There is nothing wrong with any “legal” activity, including “rentier” activity, as long as there is proper, “competitive free enterprise”.

        All prices, including “rent” prices (e.g. interest rates, dividend rates, rental rates, etc.) are appropriately set by proper competition. The problem is lack of proper competition, therefore faulty prices, non-productive activity/inefficient economic allocation.

      • MIKE-SANTOS HOLLIDAY says:

        Powell the greatest LIAR of them all waiting for his elite friends that controls him to get rid of pumped-up real estate deals. An average house wife can tell you everything has gone up for a long time, and this LIAR lies blatantly and receives a paycheck that he does NOT deserve a penny along with his so called governors who follows an agenda that would make the last economic debacle a picnic.

    • Wolf Richter says:

      I’d love to have a little deflation right now :-]

      • georgist says:

        Interestingly not everything is going nuts.

        I was after a couple of 4TB hard drives recently and you can see from this graph that the price has dropped steadily over the year:

        https://ca.camelcamelcamel.com/product/B083XVY99B

        Similar for a monitor I’m thinking of getting. You’d have thought this kind of kit would go up with all the working from home.

        • Wolf Richter says:

          georgist,

          Because everyone is switching to solid state hard drives, which are semiconductors (SSHD)? My little-bitty laptop has a 1/2 TB SSHD, instead of a regular disk drive. So sweet, so fast, so quiet.

          But yes, tech products constantly get cheaper in relationship to performance. My first PC and daisy-wheel printer cost $4,000 in 1985 ($10,301 in today’s dollars). It had two floppy drives, no hard drive, 640k memory, and couldn’t do anything I do today :-]

        • TimTim says:

          Anyone remember the Amstrad CPC 464….?

        • Auldyin says:

          g
          Memory is vicious, Samsung is clinging on to top spot after their mega-merger/takeover of Toshiba a few years back gave them scale.
          Hdd may go the way of floppy soon. I even remember cassettes!
          My first 20gb Ssd around 2010ish cost the same as a 500gb Hhd. Only your vast 4tb competes now and closing fast.

        • Don says:

          Wolf,
          “Because everyone is switching to solid state hard drives”. In terms of storage cost, only tape beats the hard drive. And this is not going to change in the near future. Even as SSD storage gets cheaper, hard drive storage cost is dropping as fast or faster. You may not want to put a hard drive into your laptop, but the laptop market is puny when compared to the size of the data storage needs of data centers. The disk is not going away or being threatened by SSDs.

          Actually, most hard drives incorporate SSDs as cache (temporary) storage to help speed up read/write operations.

        • Swamp Creature says:

          All the desktop PC’s manufactured prior to 2016 are practically useless. They cannot be upgraded to Win 10. I have 3 Win 10 machines manufactured in 2019/2020. They have optical hard disk technology, faster Intel chips and faster memory, and are lightning fast. Once you use these machines you won’t want to go back.

        • Swamp Creature says:

          My first PC was an Apple II, purchased in 1983, running CP/M operating system.

        • Pea Sea says:

          It’s coming down from a temporary spike caused by cryptocurrency mining (specifically Chia). That’s not deflationary.

        • Winston says:

          “All the desktop PC’s manufactured prior to 2016 are practically useless. They cannot be upgraded to Win 10.”

          As a Windows Insider for Win10 who did so on a 2009 technology AMD CPU system, I disagree. And “useless” depends upon what one needs to do with a PC. I think you may mean Win11 and its TPM requirement although that valid gripe is being addressed by MS.

      • YuShan says:

        More than a little actually. Based on an average inflation target and massively understated inflation in the past, we would need quite a bit of “transitory” deflation to get back to the level where people could again afford normal basic stuff like housing, education and healthcare.

      • Poor like you says:

        Well, you’ve got my vote for Fed chairman.

        • Swamp Creature says:

          I nominate Depth Charge for Chairman of the Federal Reserve to replace J Powell.

      • DR DOOM says:

        Amen and a witness for some deflation .

      • Djreef says:

        Just broke 1 trillion on the reverse repos. Don’t think you’re going to get your wish Wolf.

  3. Depth Charge says:

    But he has not even taken his foot off the accelerator. He’s still doing everything that created it. These people are the most reckless financial terrorists in history.

    • Cas127 says:

      They know it and they know we know it (god bless you internet).

      That is why they get that “I am about to be ripped apart by a mob” Tim Geithner googly-eye look.

      DC is filled with incompetent people who are not stupid when it comes to their own skin…they know they are riding a tiger that has been battered and abused for a long time.

    • Trucker guy says:

      Just to play devil’s advocate here…

      Where does anyone have to go at this point? Seems like they’re deathly afraid of doing anything to pump the brakes because they know the shit’s going to hit the fan and what happened in spring of last year will likely pan out but with a farther fall and no easy way to flip it around like we did in the past year. If bureaucrats are sitting at the top level saying this is worse than we planned it to be, they’re in front of everyone eating crow. They aren’t even lying or pretending anymore. If they act now it all goes tits up from the panic selling and everyone trying to cash out of the everything bubble. If they sit and do nothing and keep pumping out free money they aren’t the bad guys until decades down the road when they get ripped apart by history books. Their current path means they cause horrible inflation that smothers everyone from top to bottom as a slow burn.

      People wanting their cake and to eat it too. Capitalism innately has booms and busts. That’s just how the game goes. They want to think they can minimize the busts and keep the booms going. They want to get ripped without ever feeling the pain at the gym. Oh well, we’re all powerless to all of this so no point in wringing out fists at the sky. Hopefully it won’t be too bad.

      • Raging Texan says:

        This thing you see in America is not capitalism. Has not been for over 100 years.

        • Trucker guy says:

          What exactly is it then? Seems like a pretty capitalist society to me. Are the libertarians of the world pulling the “no truly communist country has ever existed, that’s why they’ve never been a utopia!” card?

        • carolinus says:

          there are no true scotsman

        • Rowen says:

          It’s concentrated capitalism; not enough competition so that the capitalists can take all surplus, but not enough of a monopoly to be regulated.

        • Cem says:

          To trucker guys comment.

          It’s a plutocracy according to the world bank. Capitalism? Since when?

          Ever played monopoly? The game was designed to show the dangers of capitalism. Somebody ALWAYS runs away from the other players. Once a little edge is made there is no hope for the other players outside of pure blind luck.

        • Saltcreep says:

          carolinus put it succinctly.

        • 91B20 1stCav (AUS) says:

          With Raging, here. Adam Smith presented a capitalism of ‘well-regulated’ markets. Actual prime business directive, even before the Robber Barons of the Gilded Age, was to suppress and dodge as much regulation, (‘well’ or not, each with its own relative and self-aggrandizing issues) as possible. No surprises, here, ol’ Adam was as guilty as ol’ Karl in overestimating the ethical spine quality of we average humans…

          may we all find a better day.

        • Pea Sea says:

          Lol

      • YuShan says:

        A lot of corporate debt can simply be cleared up by issuing stock. That is what stockmarkets are for. Taxpayers (or savers, through inflation) bailing out market participants has always been absurd.

        When a bubble crashes, what basically happens is that you get a wealth transfer from the incompetent to the competent. It is just property titles changing name, but the assets are still there. It is not like the place has been nuked or anything.

        When a bubble bursts, a lot of “wealth” disappears, but it was never really there. All a crash does is expose losses that were already there, but were hidden from plain view.

        • Old School says:

          Yep. Anyone buying the S&P at these levels is getting a earnings yield of 3% and a div yield of 1.2% in a 5% inflation world. I’ll pass.

      • Nathan Dumbrowski says:

        Trucker. To your first question. Where can we go from here except more of the same. Lies beget lies. They can no longer return to the status quo. Really ask can the FED stop manipulating? If so the question is equally as daunting. How. Once you cheat/lie/steal on a friend, company or spouse you can only try to get better but old habits die hard. The FED can’t even begin to undo the damage. Some will say sure they can. Now ask how they can do it. Do they begin to raise rates? Let the QE basket of goods drain back to the market? Stop reverse repo action? They have painted themselves right into the corner.

        • Sierra7 says:

          Nathan D.
          Bravo!
          Yes, the FED has painted itself into a corner from which it cannot exit.
          To others who ask what kind of economic system we have?
          “Crony, criminal capitalism”.
          Adam Smith also stated that…(para) “Society must be protected from the ravages of ‘free market’ capitalism'”
          Once the idea of “well regulated” markets got a bad name we were screwed.
          Nobody should trust anybody that is a “spokesperson” for any part of our economic system.
          They are all like, “The Scorpion and the Frog”. They all lie.

  4. Nemo 300 BLK says:

    As a small chemical manufacturer, we’ve had three 5% price increase since March, and there will be at least one more before the end of 2021. Our typical global competitor is going up 6-8% per increase.

    • georgist says:

      Input costs or output prices? If input are you passing on all of it on output or eating some?

    • tom21 says:

      Some of our plumbing products have increased over 45% ytd.
      And no…we do not eat the cost increase.

  5. SocalJim says:

    All we need is a little slowdown in economic growth, the equity market will get a little shaker, and the housing market will get one more booster shot. Then comes the stagflation. Last time that happened, housing was the winner. Equity was a dog.

    • Seneca's cliff says:

      I am not sure about your stagflation boosting house prices idea. I purchased a house in 1985 for $45,000 ( 3000 square foot craftsman) and the person I purchased it from payed $57,000 back in 1977 just as stagflation was getting going. I think this time RE investors will be hauled out of the room feet first, as they say.

    • Saltcreep says:

      Stagflation is fine for some types of equities and bad for others, but, yeah, it also appears to boost housing.

      A terrible development from a societal perspective. Just one more step towards serfdom for ever more people…

  6. Putter says:

    In 2013, I paid $185k for a repo’d home in Sacramento. Just received an FHA approved appraisal of $530K. Crazy! I could not imagine buying at these levels.

    • SocalJim says:

      If your FHA appraisal is $530K, you are higher than that. Good job.

      • Depth Charge says:

        “Good job.”

        What exactly did he do? He’s a beneficiary of reckless monetary policy. “Good job?” Pfffft…..

        • SocalJim says:

          Assuming he put 10% down, which is $18,500, his return on the downpayment 44% annualized.

          If he put 20% down, the return on the downpayment is still 32%

          And, it is tax free.

          That is what I call a good job.

        • Depth Charge says:

          “That is what I call a good job.”

          One person’s “good job” is another’s “dumb luck.”

        • DougP says:

          What he did is he saw opportunity and acted on it. He took the risk of which there was plenty, held it, managed it, paid for it, and he gained from his willingness to take a chance. How many here just sat and watched things fall apart and now just whine?

        • Putter says:

          Depth Charge, It was not dumb luck. I follow charts daily. My previous property, I bought in 1994, at the bottom of that cycle. Sold a little early in 2005. That cycle topped in 2006. Then bought in 2013 (this home has an ADU that I rent out). This cycle has topped out. I sign papers for reverse mortgage tomorrow. I am 72 now and I am done. Follow Case Schiller! It is not different this time.

        • Wisdom Seeker says:

          It’s a good trade.

          It ain’t a job.

          Someone else took a loss.

          No wealth was created by any of the activity involved.

        • BP says:

          “What he did is he saw opportunity and acted on it. He took the risk of which there was plenty”

          Ha! There is no risk anymore!

        • Yeah DC, a house is a liability and with inflation a growing liability at that.

        • NoPrep says:

          “Don’t be a sucker” N.N. Taleb. “good job” means he wasn’t a sucker, did an astute deal at the right time. Stephen R. Covey always advocated win-win as one of his seven habits. Worked for some. But at its core I think business is actually and always has been win-lose. And more so, in these strange times.

          Trump understands win-lose at his core as well. Cue soundtrack “Mean Old World” – Robert Palmer (RIP)

        • Old School says:

          These asset bubbles are corrosive to society. Zirp inflates assets but doesn’t increase wealth. Instead of profiting off of increase in wealth as defined by potential long term future cash flows, speculators profit by short term purchase and sale of assets.

          Stockman called it when Zirp started saying all Fed was doing was replacing capitalism with gambling. Of course, we have to play the hand we are dealt by the Fed as best we can.

        • Depth Charge says:

          He didn’t know the FED would do this and that we would see a pandemic and the most stimulus in history. C’mon. Give me a break.

        • Old School says:

          Depth Charge. Watch some of his videos from 2010 -2013. He knew enough that when the you give Wall Street access to free money they are going to leveraged it up and try to gamble themselves to riches before the party stops.

  7. kam says:

    Hump ? What Hump ?

    Monetization is the final liquidation event of the elimination of the once mightiest manufacturing nation on earth. Now, an economic pipsqueak of government and services.

  8. Catxman says:

    The question is what level of inflation is tolerable: 1.5%? 3%? 4.5%?

    People behave most energetically when they believe something important is on the line. The question of inflation is one of those litmus tests for your belief-system that determine how much of a fighter you are. If the Fed is full of fighters who are deeply concerned about inflation, we will see action before inflation really starts to bite. If they are just sinecured bureaucrats whose lunch has made them slow and slovenly, they’ll do the minimum necessary to give the appearance of being inflation-fighters, while not straining themselves overly and unnecessarily.

    The Fed is an institution that is not nimble on its feet. Like all government arms, it seeks to protect itself before it seeks to do its job. The optics of inflation creation will go a long ways further to determining its response over the reality of the situation. What cable news says on the topic will redound in the halls of the Fed more than any objective stack of prinouts with hard data.

    • Gattopardo says:

      “The question is what level of inflation is tolerable: 1.5%? 3%? 4.5%?”

      How about 0,01%, +/- 0%? Why intentionally erode purchasing power?

    • jon says:

      The real inflation out is ~14%. So I’d say 15% is OK.
      ofc, no official figure would acknowledge 14% current real inflation

    • sunny129 says:

      The next BIG worry will NOT be inflation but Delta variant and it’s effect on the economy in the months!

      CDC put it’s mouth by ignoring WHO on Delta and mask wearing!It’s credibility go hit!

      Dr. Mariângela Simão, the W.H.O.’s assistant director-general for access to medicines, vaccines and pharmaceuticals, emphasized at the briefing that even vaccinated people should continue to consistently wear masks, avoid crowds and maintain social distance from others, make sure they are in well-ventilated spaces, wash hands frequently, and avoid sneezing or coughing around other people. NYT July 8th’21

      • VintageVNvet says:

        Just read a report that 74% of 830 + or – people, at some cape cod event, who got covid were fully vaccinated.
        Apparently the difference is vaccinated folks usually get less bad symptoms and usually don’t have to go to hospital, though clearly some die.
        Going to be a long haul for many, no matter what.

  9. Keepcalmeverythingisfine says:

    Been saying it for many months, hope all the people that voted for the current administration enjoy the coming recession, losing their job, losing their house, going through divorce, end up totally broke, sitting in an old lawn chair, eating Taco Bell, watching CNN on a second-hand TV in a dilapidated apartment in Canoga Park. Got exactly what they voted for. On the bright side it will be another opportunity to make a lot of money in the stock market. Thought I would have to wait 10 years.

    • Putter says:

      Both parties are responsible for this shit show! Pay attention.

      • HotTub says:

        Absolutely dead on, Putter.

      • 3D Modeler says:

        You’re right Putter…both parties. Remember the stupid tariffs that ultimately got passed down to the end consumer? Those tariffs are what lit the match on the inflation resurgence we’re seeing today. It’s just that no one seemed to care much about it back then.

      • MyLadyHumps says:

        Yup, agreed.

        The problem could only be solved if people started casting votes for candidates of substance instead of the candidates wealthy donors give money to buy ads. Of course the media will back whichever candidates gives them the most ad dollars. This is how our system works

        This is the message that was fed to the public by to the media: 1) Fox viewers – Trump is an heroic man of the people 2) MSNBC viewers – Biden is an heroic man of the people 3) Fox and MSNBC viewers – Tulsi is a terrorist.

        People don’t know shit so they will vote for whoever their favorite media outlet says is the right choice. Does the media care that they are destroying the nation? Not a fucking chance.

        As Mr Wolf’s short article states, people will get a lower standard of living forced on them through inflation and they will be fed lies telling them how wonderful everything is, so if they aren’t living on easy street it’s because the screwed up. In this case people will get what they deserve.

        • 91B20 1stCav (AUS) says:

          MyLady-longstanding prime directive of media “…if it bleeds, it leads…”, and boy, history shows it’s almost GUARANTEED to SELL, whoever, or whatever is bleeding. Again, to reference the late, great Walt Kelly’s ‘Pogo’: “…we have met the enemy, and he is us…”.

          may we all find a better day.

        • Dan Romig says:

          Very true My Lady,

          If I could have, I would have cast a vote for Tulsi. I have never missed a vote in my life, and I have never cast a vote for the Executive Branch that was Democratic or GOP.

          Tulsi would have broken my 40 year record, but the media would not allow her to make her case to the masses and she was discarded by the wayside.

      • Dave says:

        And this is why I closely follow financial blogs. Want to know anything….follow the money.

        Politics can muddy the waters all they want but math can not be manipulated. And the travesty happening today can clearly be placed on D.C. as a whole (partisanship/politics just decides who gets the payday).

        It is quite literally, theft.

    • Trucker guy says:

      Except most of this is all fallout from Trump’s administration. Powell was nominated by Trump. Instead of letting the economy go into a real recession in 2019 Trump and his administration did everything in their powers to rain free money to cause the most rapid run up of markets and assets in recent history.

      Trump knew if the economy died down he wouldn’t ever have a shot of reelection so he pulled out everything to keep it running. The reality is that the majority of this asset bubble lies on Trump and the republicans with the democrats being complicit fosters because they benefited from it all just as much as any rich person has. I have no doubt Clinton would have done the same as Trump but let’s not pretend like this would be any better with Trump in office right now. No politician or government lackey wants to take away the punch bowl.

      Get off the partisan BS.

      • jon says:

        Totally agree. I am non partisan but liked Trump for his strict immigration policies.
        I know for sure, when it comes to fiscal/monetary policies, both sides are same.

      • Thomas Roberts says:

        Both parties are active contributers to the current FED behavior. Blaming one or the other is pointless, there is a massive ponzi scheme that most people believe in, about how money stashed away should grow infinitely at a rapid rate, even if the economy is stagnant. Until the fantasy pops, both parties will pursue mostly the same policies in regard to the economy, though dressed up VERY differently.

        I do wonder if it would be overall better to replace Powell with an algorithm. I don’t think the parties would go for it, but it might be possible after the fantasy pops.

        #ReplacePowellWithAI

      • MyLadyHumps says:

        Trump and Biden are two different flavors of vanilla (mild and bland).

        Biden, Trump, Powell and Yellen are pushing 80 and don’t give a shit about tomorrow, they care about today, the future doesn’t matter to them because they don’t exist in the future.

        What about starting to elect leaders who are not fossils, leaders who will have to live with the consequences of their actions. We could all shake our fingers at Biden/Powell/Trump/Yellen after really bad inflation ruins our lives except they won’t care – because they’ll be dead in a couple years.

        The consequences of run away inflation are much worse than Americans imagine. Many Americans think they’ve lived through hardship, they are mistaken. Americans don’t know hardship but they will.

        Karma is coming. Karma can be a bitch.

        • 3D Modeler says:

          Well obviously not enough consumers agree with you about the perils of inflation. Otherwise, there’d be massive buyers’ strikes in all facets of the economy, which would effectively nip inflation in the bud in a heartbeat. CEOs hate explaining to their shareholders that their price increases resulted in a dramatic drop in volume and market share. So it looks like much more pain is required before consumers figure out they’re headed into a death spiral.

      • Depth Charge says:

        What are you smoking? The bubble was massive when Obummer left office. Get a grip.

    • SocalJim says:

      Twenty five or so years ago, the Red Onion in Canoga Park had the hottest valley girls. Those were the days.

      Are the apartments around Warner Center still nice?

      • Keepcalmeverythingisfine says:

        Well, they are getting long in the tooth like everything else in the valley.

    • OutsideTheBox says:

      KeepCalm

      Wow

      And after all that….not hanging oneself in the closet !

      Good show !

      • Keepcalmeverythingisfine says:

        Have any of my calls on here been wrong? Nope. You’ll see.

    • Gomp says:

      Stay away from Canoga Park, wherever that is.

    • sunny129 says:

      NOT if Mr Powell can heli-cop drop of 3-5 Trillions, like he did last March (’20)!?
      Cannot rule out any insanity act from this Fed incahoot with Banks and Wall St!

    • Nick Kelly says:

      ‘A federal appeals court has rejected an attempt by former President Donald Trump and three of his children to force arbitration in a class-action lawsuit accusing him of fraud during the decade he spent as a pitchman for ACN, a business services company featured on “Celebrity Apprentice’ Politico

      AGAIN! Trump U, Trump Foundation, now this and we haven’t even got to the main course, the just received tax records. But as a piece in Vanity Fair lays out, the whole Trump persona was a fraud, (not a legal one, one of artistic license) invented for TV by the producer of The Apprentice. Portrayed as successful mogul, Trump was on the verge of bankruptcy AGAIN. (It is a matter of record that he narrowly escaped BK in the 90’s, saved only because banks thought the properties would be worth less if renamed.)

      One of America’s problems now: PTSD. It is slowly dawning that an illusionist achieved its highest office, the most monarchical in the western democracies. Pick your desert: is it ‘just find me 11, 400 votes’ on a call to the Georgia elections commissioner, a statement recorded and being investigated as a potential crime.

      Or is it my favorite: Trump is on his way to Japan and while stopping in Hawaii makes the obligatory trip to the Arizona monument at Pearl.
      On the ferry he turns to chief of staff Kelly and asks: ‘so what is this about?’

    • Fat Chewer says:

      But, wait Keepcalmeverythingisfine, Isn’t everything fine? Is it time to lose our calm? Is it time for you to get a new handle? Does Thedemsareinsolosetheplot work?

  10. doug says:

    And the local news had a story on major beer brands raising prices along with some processed food mfgs doing the same due to whatever excuse they wanted to give. I seriously doubt this inflation is transitory. It is just getting revved up, and I suspect our ‘betters’ know that…

    • Dan Romig says:

      Beer is going to cost more soon from barley issues. I don’t get updates from my Ag Business weekly news reports on hops, but barley is way down in yield and maltsters are looking at serious quality issues regarding what they can or cannot malt. Two-row is in better shape than six-row from the drought.

      FWIW, Dr. Blake Cooper took over from my Dad as the wheat breeder when we sold out, but prior to that he’d been the barley breeder for Anheuser-Busch. And our partner in the seed business, Pete Friederichs of Friederichs Seed in Foxhome, Minnesota, was recently the president of the National Barley Growers Association.

      As Pete testified to Congress in D.C. a few years ago, “No barley, no beer.” That’s now the NBGA’s trademark slogan, but it may play into a shortage of malt soon.

      • Wolf Richter says:

        If there is a beer shortage, I’m going to pull the plug on this economy. That’s one shortage too far :-]

      • Nick Kelly says:

        I don’t know but suspect that the barley input to the retail cost is very small, I’d guess a cent in a standard can, but it will be used as cover to raise the price by 5 -10 %. This story with coffee goes back decades. The climb from the 50 cent coffee to the point where even sludge in a ‘greasy spoon’ is 2.50 was always in jumps based on a headline about ‘a early frost in Brazil’ pushing up the wholesale price. True, so the retailers’ costs rose by a cent. Coffee is by far McD’s or anyone’s most profitable item. Not that I begrudge all operators the price. It helps to offset the real increases in inputs, like rent.

  11. andy says:

    Wolf,

    Is this not the time to go short?

    All bubble boxes are checked. Chinese FANGMAN equivalents are down 40-60% in under 6 months. Momentum is stalling.

    I’m in, and adding more.

    • Wolf Richter says:

      Still licking my wounds :-]

      • andy says:

        You will make it all back and then some. Once in a generation oportunity (if done right).

        If I’m within 2 months, I will buy you a drink, Wolf. There is Old Saloon on Battery near Broadway.

        Well I will buy you a drink anyway : )

    • jon says:

      The market can remain insane longer than you can remain solvent.
      Smart people who tried to put reasons to this have been losing big time for last 10 years

      • andy says:

        Should’ve waited 10 years to get timing right. Like right now.

        • jon says:

          you never know this sht show can go on for 10 more years. FED is hell bent on printing money as much and as fast as they can. T

  12. Swamp Creature says:

    Inflation is under control. Wolf’s beer mugs are still available for a small donation. No price increase. Got my second mug the other day. Was suppose to be used for guests to celebrate the end of Covid-19. Not happening. Mrs Swamp opened the box and marshaled the mug before I could even see what was in the box. Instead of using it for beer she’s using it for Cranberry juice.

  13. David Hall says:

    From the BLS: “In June, the Consumer Price Index for All Urban Consumers rose 0.9 percent on a seasonally adjusted basis; rising 5.4 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.9 percent in June (SA); up 4.5 percent over the year (NSA).”

  14. Brent says:

    Blast from the Past:

    “The United States could well declare unilaterally that we have ‘won’ in the sense that our armed forces are in control of most of the field and no potential enemy is in a position to establish its authority over South Vietnam, and that such a declaration would herald the resumption of political warfare as the dominant theme in Vietnam.It may be a far-fetched proposal, but nothing else has worked.”
    Eder, Richard. “Aiken Suggests U.S. Say It Has Won the War.” New York Times. October 20, 1966, pp. 1, 16

    Mark the year-1966 ???

    Henry Kissinger was even more brief 5 years later:
    “Declare Victory and withdraw !”

    “Inflation” is a thing of the past,something like hook worm,consumption,”Old Jebbard died ftom whoopin’ cough”,never to be mentioned in polite society.

    What we see now is strongly positive and beneficial “asset appreciation” flourishing all over the place.

    Food,sick care,educay-shun,homes-sweet-homes,consumer goods-lets everything skyrocket and keep soaring.

    Because nowadays it is not “spending” but actually “investing” in the unique,special,one-of-a-kind,priceless asset-YOU !!!

  15. Spencer Bradley Hall says:

    The problem is that inflation is predictable. So you can target whatever level you want, whenever you want. But the FED’s Ph.Ds. are vacuous.

  16. Micheal Engel says:

    1) Fred : Real PCE ex food & energy :
    2) In 2020 we had an earthquake with the highest Richter scale.
    3) Q2 2020 plunged to minus 36.2% from the previous quarter, which was down 8.8% from Q4 2019 @2.1%.
    4) Q3 2020 was up +46.3% above Q2 2020.
    5) The Real Core PCE is still moving up, but at a slower pace : Q3 2020 +4.5%, Q1 2021 +11% and Q2 2021 +12.5%. No NR, not yet, but 12.5% is not too far above, because the system is extremely unstable.
    6) The Core PCE might be peaking soon.
    7) It will revert to the mean, with few negative readings.
    8) The after shocks will cont, but with milder pulses on the Richter scale.
    9) If the pulses will grow, instead of reverting to the mean, the system
    will break.

  17. MF says:

    It’s OK. All’s well. We can just make some hedonic adjustments to plastic forks, to reflect the increased utility resulting from the extra splines that needed to be added after reducing total weight.

    Violà. Inflation fixed.

  18. MonkeyBusiness says:

    Look guys. If you keep searching, you’ll just find more inflation.

    That’s just the way 4D chess works.

    • sunny129 says:

      Delta variant will upsurp ‘inflation’ worry news in the coming weeks/months!!

  19. Auldyin says:

    On and on the great game goes, how it ends, no one knows.
    What makes it ultra difficult, is that, what we are seeing now was caused 12 to 18 months ago, if the 70’s is a model to go by.
    That means we’ve got a whole further year of QE and stimmies to add on before we get to next year when that will show up as inflation then. Only an almost immediate return to full supply of all goods and services can make an impact quickly now.
    Make your own guesses how likely that is, and phone Mr Powell

  20. sunny129 says:

    My 2 cents
    I read a few blogs including this one. My priority in spending my time to is filter ‘actionable’ information, NOT just whining, moaning and repeating the same again & again. Many of the good ideas I found on Yahoo/Finance – free!

    Going short hasn’t easy in this mkt where Fed’s PUT spring, works against 1-2% drop! But one can do it with hedges on the opposite direction using leveraged ETFs and also options ( NOT easy for the novice – Been in the mkt since ’82)
    With Delta variant spreading even among the vaccinated, the game has changed, drastically. Fed can drop another 3 or 5 Trillions to support, sure. But the trend is set!
    This is the reason I buy calls vs puts )approx) in 1 to 3 ratio in appropriate time frame, again NOT that easy. Without option trading, majority will lose their profit obtained since ’09!

    For the couple of days, wrote how I monitor various industries with KEY ETFs. NOT going to repeat them unless one requests. I bought PUTs on , cruise lines – not a brainer, one or two hotels/vacation resort. They did go down a bit couple days ago ( I bought more! need conviction) but the damage Delta variant going to do, is being less ackowledged. AS Wolf says ‘ Nothing goes down, straight’ Expect hiccups but the direction is set – up, down, up, down, down – repeat and rinse ( classic secular Bear mkt)
    Happy trading ( this is NOT an investing mkt!)

    • jon says:

      NOT going to repeat them unless one requests

      I request more info please

      • sunny129 says:

        Specify?
        Do you trade options?

        By my going through the comments. I am guessing that not many know how to trade options.

      • sunny129 says:

        Here they are:
        Airlines ———JETS
        For cruise lines – CRUZ
        For Hotels _ BEDZ
        Restaurants -EATZ
        Autos ————– CARZ /HAIL
        Mass entertainment – PEJ

        I use the above for MONITORING the industries, I might buy 1 or 5 shares. Airlines I buy puts directly on specific airlines + JETS

        CAUTION:Do your own DUE diligence!
        With Delta variant NOT going away, the TOURIST industry will keep collapsing. If any one thinks otherwise, be a dip buyer!

    • Old School says:

      I might take another method on this not being an investing market. Markets are throwing out prices everyday for businesses. If we are in a period where prices are way too high on historical measures, you can be patient and wait for situation to change. Eventually trading bad investments back and forth will end and it will be about fundamentals again.

      • sunny129 says:

        Been in the mkt since ’82. relied on our good ole genuine Free Market American Capitalism until March ’09. Then our true Capitalism got murdered by Fed!

        I lost ZILCH during GFC ( when S&P lost 605!) but started losing there after wards b/c of suppression of price discovery, suspension of Mkt to Mkt accounting standard, QEs ( Fed had NEVER bought MBSs before ;09 in it’s ENTIRE history!) They instituted stimulus, twist and what NOT. What we have is a corrupted CRONY Capitalism favoring the top 10%, banks and Wall St.

        I learnt options in early 2000. I started ‘position’ trading ( Not day trading) with tactical approach instead of structural or startegic ( I have MBA exposure) I started adopting a new approach.

        I use leveraged ETFs sparringly along with options. My portfolio was up 30% in lhe March of ’20 before the Fed’s dump of 3 trillions!

        I use mainly ETFs of wide variety predominantly with div + uncorrelated assets with ref S&P. Since I am retired I have 40-50% cash and most of my assets in IRAs. Every time Mkts sink my portfolio gains but at the same time my loss is limited on the mkt upswing! Lot do with my 40+ yrs investment experience. I also manage finance my family members (mainly with Etfs)

        Right now my focused sectors are Health/Medical care, Big pharma vaccine Cos, Robotics, Cyber security, Agriculture, Inernational small Cos+ Tech remains the force behind on going disinflation/deflation.

        Majority of newbies who came after GFC have NEVER experienced a true secular Bear mkt. They are in for a life time experience during the upcoming DOWN cycle (inevitable) within 2 yrs. Delta variant will accelerate beside inflation.

        Again Each to his/her own

        • Jon says:

          Thanks for your reply !
          I indeed do option trading but generally sell options and buy options sometimes to hedge positions.

  21. George says:

    It’s all so pathetic, not in the sense over paying for assets that rightly should depreciate is any indication, but a pathetic response from a clueless minded representative of an institution that has gone way out of its way to create the actual inflation they now seem so puzzled to do anything about.

    I sense it must have been a “light bulb going on” moment the day central bankers came across the notion: “let’s see, if I fix the price of currency at zero bound for a few decades, asset prices will rise to the ridiculous point inflation takes over”, or something like that.

    So what if a twenty year old Toyota pickup with 200,000 miles on it is selling for more than its purchase price or house flipping has replaced baseball as the National Pastime? We have prices on the move up and that’s what this long slog of monetary debauchment has been about.

    And as Wolf so painstakingly points out, the Fed uses the “core PCE” inflation measure because it is the lowest lowball inflation measure that the US government provides and now it is running hot so this really has to be a panacea long coming for team Fed.

    How did we let an entity like the Fed get away with owning everything by just taking the assets it bought with borrowed money, and pledging them as collateral to borrow the money to fund still more of the national debt? I suppose if banks couldn’t inflate asset prices with the money they create from bank loans we wouldn’t be in this mess to start with.

    I don’t know why I keep returning to this; over a hundred years into this and it now takes over 1,900 pieces of paper with the word dollar printed on them to purchase a single gold coin with the words fifty dollars on it. Mission Accomplished?

    • sunny129 says:

      I worry less about the core PCE and more about the new surge in Delta variant with antigenic escape across the Country and the World!

  22. MCH says:

    I love how language “evolves” to fit the situation.

    Transitory -> temporary -> near term -> mid term -> permanent

    I am sure the Fed will have a thesaurus to come up with fancier term to describe the same shit situation. Is there a problem, just define it away with a few words. And the media as well as the lack of good education over the years for the masses is totally complicit here.

    Just like:

    Illegal -> undocumented -> immigrant

    • The Real Tony says:

      The older generation will remember the term “runaway inflation”. I’m sure that term will be repeated in the near future.

    • jon says:

      Jerome Powell implied that the high prices won’t come down but it may not increase at the same rate. This according to him is transitory.

      A lot of people think that if inflation goes down, prices go down which is not true.

      Prices still go up even with small inflation

    • Tony22 says:

      immigrant -> migrant -> community -> represented-in-House -> wage suppressor -> borrower

    • Sierra7 says:

      MCH:
      “Conditional Phraseology” without which the major media cannot exist. Same as: “would, could, might, possibly, may……….”

  23. The Real Tony says:

    Here’s how Canada keeps residential rents mostly out of the CPI. Residential rents have about doubled in the last 5 years. Here’s the cockamamie definition Canada uses.

    There are, however, two notable exceptions. Rent quotes are collected from a survey of tenants, sourced from a special rent module attached to the Labour Force Survey (LFS). Dwellings are selected for the LFS using a multi-stage probability-based sampling scheme and remain in the sample for six consecutive months. Probability-proportional-to-size sampling is used to select hotels and motels for traveller accommodation.

    The timing of price collection (e.g., the first week of the month) is predefined to ensure consistency. For some products where prices are more variable, price collection is spread over several weeks.

  24. DR DOOM says:

    C19 alpha. The original has escaped the puzzle room in what virologist call immune escapement. It has escaped with a much greater ability to infect but has paid a price in its lethality. We humans force this weakening as we pass it to others and survive.This is why we have been around for a few million years which gave us the time and knowledge on how we survived and improve on it , such as vaccines.Collectively we are a beautiful thing. Individually we are assholes.

    • ivanislav says:

      Old school –

      It has nothing to do with being unnatural or not – if a virus is lethal or otherwise serious and with a limited incubation time, it is less likely to be transmitted. Thus, evolution favors mild viruses. It is typical that for really deadly viruses, humans are either not the typical host, or the incubation time is really long, as for HIV/AIDS.

  25. Tommy Boy says:

    Regarding the discussion earlier about whether America is capitalist or socialist, and how that impacts inflation.

    America is an oligarchy.

    This is the reason why a 2 party system isn’t much better than 1 party system. And the ascend of China and descent of America attests to that.

    We Americans seem reluctant, or should I say embarrassed, to admit “our democracy” (as Pelosi would put it) is nothing but an “elected dictatorship”, with the game of big money in ads, in politics and in coercion determining the outcome.

    This is often why you just don’t know if you’re ruled by the “government” or the “corporations”. Two words for the same power, with the “government” structured in a way to be an elected one, but immediately hijacked through the way election process is funded.

    In that sense, the illusion of choice between Dems and Reps is much like a “paper or plastic bag” at the supermarket of old. In the end, you may choose plastic or paper bag, but what’s in the bag is the same.

    And the reason for that is … the same clique of oligarchs controls the media, the media and the media. We’are served lies and half-truths, with the just the right amount of truth to convince ourselves they’re not so bad. Just look at the PCE. Really? Smart people talking about that nonsense as if it’s something real? Its definition is real, for sure. A self-serving one for the oligarchy. Or look at the distractions presented by the “woke” crowd, or the sheer stupidity of the so-called “conservatives”, all amplified by the oligarchy in a brilliant “divide and conquer” manner.

    And since the word ‘oligarch’ is so ugly (the only thing I can think of is ‘Russian oligarchs’ denoting rotting ruthless evil masters of darkness), but the truth is, our oligarchs are just as bad. The only difference is they are ‘ours’, so … Yeah.

    Right now, our oligarchs are afraid of the populists, both on the left and the right. And they will do anything, cause inflation, take property (of whatever form), say any stupid thing (of which we’ve heard so many recently), just to stay in charge, through subtle (and not-so-subtle) manipulation.

    Here you go folks, the truth. Not everyone can stomach it, but we’re at the stage of America’s collapse when the truth seems shocking. The “non-temporary” (but certainly not persistent) inflation is just an offshoot from a much greater story. Par for the course.

    • sunny129 says:

      I look at this way. Yes, It is oligarchy/Plutocracy and controlled by moneyed interests including corporatocracy. Nothing new here.

      There are members of the Congress who vote predominantly in favor of vested interests aka Corporations vs those who vote in the general public interest. Their voting record is public. It is your choice whom you vote.

      But I see people elect those they favor for whatever the reason, party ideology, below the belt issues and other narrow issues. As long as the greater good is not perceived by the bottom 90% and demanded same from elected lawmakers. We keep electing thesame kind of lawmakers, for whom greater good is NOT their priority.
      No surprise and nothing will change

    • Old school says:

      We have to hope in the judiciary now to protect our constitutional rights. Our founders were realists about the flaws of human nature and tried to limit government from subjugating the individual by power hungry people.

      • sunny129 says:

        ‘to protect our constitutional rights’

        Read history about the violation basic husan rights of American Natives. All MEN are created equal (Jefferson) —- Is it?

        Don’t forget that the SCOTUS upheld slavery in 1857 declaring that Black America is NOT an American citizen! This is/was supposed to be prelude to civil war!

        Dred Scott v. Sandford (argued 1856 — decided 1857), the Supreme Court ruled that Americans of African descent, whether free or slave, were not American citizens and could not sue in federal court.

        • 91B20 1stCav (AUS) says:

          For an old saying of our national zeitgeist ‘…in America anyone can grow up to be President…’, substitute ‘oligarch’ for ‘President’ -then the functioning of traditional ‘ethics’ in the populace is no longer an issue…

          may we all find a better day.

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