Americans Blow Off Fed Propaganda Inflation is “Temporary”

Inflation expectations are now totally unanchored.

By Wolf Richter for WOLF STREET.

Americans, as they struggle with the meaning of the Fed’s terms “transitory” and “temporary,” expect that inflation one year from now will rise to 5.7%, the 12th month in a row of relentless increases, the highest in the data going back to 2013, creating a beautiful record spike (red line), according to the New York Fed’s Survey of Consumer Expectations released today. And consumers expect inflation in three years to be at 4.2% (green line).

The Fed keeps saying in its FOMC statements that it wants “longer‑term inflation expectations” to remain “well anchored” at 2%. And they’re now totally unanchored and spiking to high heaven.

“Inflation expectations” is a key metric for the Fed, based on the theory that consumer price inflation is in part a psychological phenomenon – the inflationary mindset, as I call it.

It’s the theory that rising inflation expectations alter consumer behavior, such as by moving purchases forward before things cost even more, and accept higher prices, rather than balking, as they would have done before. And this altered consumer behavior contributes to higher inflation in the future.

These inflation expectations are an outgrowth of reality on the ground for consumers. For the Fed, they’re adding to a war chest of reasons for hiking rates.

Inflation expectations are much higher where people spend most of their money.

Despite a median inflation expectation of 5.7%, for the line-items where consumers spend much of their money – rent, food, gas, healthcare – inflation expectations for one year from now are at or near 10%:

  • Rent: +10.0% (new record)
  • Food prices: +9.1% (new record)
  • Gasoline prices: +9.4%
  • Health care: +9.4%
  • College education: +7.4%.

Expectations of rent increases one year out have been surging all year and eked out a new record in October:

Consumers expect home prices – which are not included in the Consumer Price Index, as two rent factors determine the housing component of CPI – to rise by 5.5%. This is below the peak of 6.2% in May.

Consumers are not very good in seeing future inflation coming though they’re very good at seeing and griping about actual inflation. In March 2021, they still expected inflation in March 2022 to be 3.2%. But since then, after continuing to pay higher and higher prices, they changed their mind. Now they’re expecting inflation in October 2022 to be 5.7%.

Inflation expectations are an indicator of how long consumers believe the rhetoric coming from the Fed and the media about inflation being 2% or being anchored at 2% or temporarily going above 2% but going back to 2% soon.

Now, as actual prices have surged, consumers can see where this is going, and they can see that even the Fed is starting to back off its mantra that this red-hot inflation is just “temporary,” and they’re not fooled by some Fed officials’ efforts to redefine “temporary” to mean the opposite of temporary.

It’s at the point when consumers think inflation will remain high that they change their behavior and contribute to even higher inflation.

And they’re supported by unspent stimulus money, repressed interest rates, cash-out refis, magnificent asset price inflation that they can leverage, and by wages that are surging in all industries at the highest rates in two decades.

There is now nothing standing in the way of inflation spiraling higher: Consumers are flush with money, and the Fed still has its foot all the way on the gas, including near-0% short-term interest rates and printing $120 billion a month to repress long-term interest rates despite actual inflation that has been above 5% four months in a row. The Fed will now back off slowly from its money printing mania, but that means that it will blow through the red lights at the next bunch of intersections at slightly lower speeds, but it’ll still blow through red lights, and consumers can see that.

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  195 comments for “Americans Blow Off Fed Propaganda Inflation is “Temporary”

  1. Depth Charge says:

    Inflation is running 20%, minimum, right now.

  2. Seneca’s Cliff says:

    How can you tell when the Fed is spouting propaganda? When their lips move!!!

    • Minutes says:

      The mass media is also carrying water for the inflation isn’t a bad thing narrative if you pay attention. Evil.

      • Depth Charge says:

        They’re spending time on the important things – viciously attacking and canceling a football player who didn’t bend a knee to them.

        • Thenothingman says:

          What does Mass Media promulgating that that inflation is transitory, have to do with the Aaron rogers of the Green bay packers portraying to the Media he was vaccinated when he wasn’t? He lied, he lost his media deals with hospitals he was a spokesperson for. Aaron Rogers deceiving behavior is more in line with the media promulgating false narratives.

        • Jake W says:

          as someone who has gotten three shots of pfizer, i really don’t understand this zeal to require that everyone, including those who are not at high risk, get vaccinated. these people should be allowed to make their own decisions.

        • Old School says:

          Narratives are the new reality. Just look at everything that comes out of DC and the Fed.

      • cas127 says:

        Minutes,

        “Evil”

        DC started the “some inflation is good/necessary” propaganda about 20 yrs ago during the 2001 recession.

        Everyone should contemplate what that means in practice,

        1) DC assigns itself the power, absent any vote or legal authority, to print unbacked money at will (exactly like a forger), immediately transferring the spending power of saved/built wealth from private savers (who are ZIRP’ed, for 20 years, by the process) to itself, which DC can then allocate at will, without having accomplished an inch of productive work in advance to generate the interest/spending power it seizes.

        2) DC has so grotesquely mismanaged the rise of China, which has added more productive capacity to the planet than likely any other event in human history (industrialization *plus* 300 million new workers in 20 yrs) that America is facing horrible *inflation* due to *shortages*.

        It takes rare imbeciles to accomplish that and rare frauds to spin the “inflation” as a positive.

        • historicus says:

          Ever notice…
          all the public servants that downplay the damage of inflation, and promote the same……
          have INFLATION PROTECTED PENSIONS awaiting them?

          Yellen has at least three….(U of C, Fed, Treasury)
          Powell, and the other Fed folk….(not that Powell needs a pension)

          The entire mess started when the Fed said they would promote inflation…2-2.5% was their acceptable range…which rips 22 to 28% respectively off the dollar in ten years.

          How is it that the Fed, put in place partially to FIGHT inflation, promotes inflation? Why was this accepted?

          People compare the 70s inflation to this inflation, and the easy answer is this…
          In the 70’s we had a Fed that FOUGHT inflation
          Now we have a Fed that openly promotes inflation, and when running “hot”, doesnt lift a finger.

        • Winston says:

          “2-2.5% was their acceptable range…which rips 22 to 28% respectively off the dollar in ten years”

          “…in 1977, Congress amended the Federal Reserve Act, revising the Fed’s purpose. The agency was charged with seeking “the goals of maximum employment” as well as “stable prices and moderate long-term interest rates.”

          And that’s where CONgress opened the door to the mess we have now. Also note how 2% inflation isn’t “stable prices.”

        • Nacho Bigly Libre says:

          As if that list of mandates isn’t ridiculous enough, soon it will also include mandates for racial & economic equity and for fighting climate change.

          These congress folk are criminal.

        • Wisdom Seeker says:

          Not to rain on your rant “absent any vote or legal authority…” nonsense, but… you need to realize that “DC” (Congress) absolutely has the Constitutional legal authority to control the national currency.

          But I totally agree with you about mismanagement of that and other authority, and the senselessness of inflation due to shortages in a nation that used to be the most productive on the planet but whose elites got greedy and lost track of the national interest vs. their self-interest…

      • Paulo says:

        Minutes,

        That, and what the FED states always reminds me of the famous medical clinic and dentist line, “You may feel some slight discomfort”.

  3. MonkeyBusiness says:

    No one, no one could have seen this coming!!!!

    • Caveman says:

      Right, it’s a supply chain problem…it has nothing to do with the trillions we printed/PPP loans or stimulus checks.

      • Jake W says:

        well, it’s not totally a lie. it is a supply chain problem, but the problem was brought on by excessive demand caused by printing.

        • Anthony A. says:

          Yeah, but you can only buy so many $80 K pickups…..well, maybe you can buy a new Ferrari too! (and a couple of houses to get enough garage space)

  4. George says:

    The only reason why the US Fed has not raised interest rates is that they understand the inflationary death spiral that the US economy/dollar is about to enter.

    • Depth Charge says:

      You are contradicting yourself. If they “understand the inflationary death spiral,” then they’d be raising rates.

      • Bobber says:

        A drug addict understands drugs are bad, but they still use them.

        • COWG says:

          Yeah, but they’re hurting ,too..

          20% more in stolen property to buy the same amount of drugs as two years ago…

    • historicus says:

      George,
      if your argument is that the Fed cant raise rates because the service on the the debt would be too big a burden…
      then you must also be supporting the notion that allowing massive debt creation cost free and subsidized by the Fed must continue…which is exactly what got us in this mess. The cause can NOT BE THE SOLUTION.

      Debt creation MUST have a real cost so as to prohibit the reckless creation of debt. IMO.

    • Just Sayin' says:

      IMHO, the FED has backed themselves into a corner.

      Quicker dollar death by raising interest rates, or longer dollar death by inflation.

      I don’t see a 3rd option, but then again finance isn’t my specialty. :)

    • Old School says:

      They are quickly coming to the decision fork in the road.

  5. Red says:

    There’s an easy way out of all this. Just kidding. We’re screwed.

  6. Michael says:

    Psych ops 101. Convince folks to spend today pulling forward demand. My response, Starve the beast. Stop spending. They will get that message.

  7. Anthony A. says:

    Local neighborhood Mexican restaurant near us, 30 years in business, just got new menus this last week. Everything went up a MINIMUM of 10%. We usually eat there Friday night (going on 20 years now). Nothing on the menu, food wise, is $10.00 or less except for a few things on the Ala Carte list.

  8. Micheal Engel says:

    1) If WTI have peaked @$85, breach the daily cloud, bounce
    back up to it’s top, WTI might end up anywhere between :
    $40 – $47. It’s basic TA.
    2) WTI will retrace the downtrend move from $85 to $45.
    3) Thereafter, WTI might end in the the low twenties, attracted to 2020 low like a magnet.

    • Red says:

      This is gibberish. Anyone translate this.

      • Wolf Richter says:

        Red,

        ME is talking about the price of crude oil grade WTI (West Texas Intermediate) from a chartist’s point of view. You might not agree with his prediction about the price, but it’s not gibberish.

        • Red says:

          I thought he was talking about a stock, obviously I know very little about oil.

        • NBay says:

          He can do some of his posts using more obscure variables and result descriptions…..not so easy to decipher at ALL.
          Being a chartist is sort of a dark art in the casino betting game, but most all trading outfits have them on staff.
          So as many have done, you can try to get out of making a stupid or silly post here by saying, “ME” made me do it”, as you can’t “unpost”.
          Just part of WS lore.

      • Nick Kelly says:

        I think WTI is more likely to hit $100 soon and more mid- term. Engel is predicting deflation.

        The doubling of oil from 2020 has happened with airlines and cruise ships offline. These are returning. Vacation travel by car has been down or even suspended, as between Canada and US. In Canada we had interprovincial car travel suspended, just now lifting.

        We have increased use coming in a period of general inflation.

        • Nick Kelly says:

          He has a better chance with this prediction than predicting that the ships waiting to unload containers off west coast are going to take the stuff back to China.

    • Depth Charge says:

      We’re never going to see those 2020 lows again, EVER. Negative $45 per barrel just ain’t happenin’.

      • Bead says:

        If supply and demand no longer apply it could happen.

      • Micheal Engel says:

        1) Crude oil WTI futures reached minus $40, but WTI in the cash market low was < $10, closing, on the weekly chart, in Apr 20 2020
        @$16.94.
        2) WTI futures, T, weekly, linear :
        Sept 22 2008 fractal high to Aug 26 2013 high to June 9 2014 high and
        to Nov 2021. A parallel from Sept 22 2008 close.
        3) Price breached this channel top, moving to $85. It might reach $90 – $100, but the results will be the same, using the same option.

        • andy says:

          Agree, both $40 and $100 are resonable bets from here.

        • Anthony A. says:

          OPEC, Russia and U.S. oil producers like crude above $80. They will do all they can to keep it there.

        • Nick Kelly says:

          Oil is not a stock or a crypto coin that is TOTALLY a function of perception. Its future price can’t be predicted with charts. It shouldn’t even be analyzed with charts. Not that this will prevent ‘technical analysts’ from trying.

          Covid was/is a fundamental that removed a large part of demand for a fundamental. That demand is returning.

          OPEC and leader Saudi, watch the US$ very closely. They know every time the Fed prints a $100 bill it makes 98$. They are not going to be suckered into supplying oil for paper that is losing purchasing power.

      • Anthony says:

        Saudi has just released a report, that due to low world investment in oil (probably due to people going green) that it will not be that long before the demand for oil outstrips the ability to produce. They said it takes 5-7 years from increased investment before the new oil is available and that the increased investment has not yet started.

        If it is true and I’m not an oil man, then oil price inflation looks unstoppable….

      • Nick Kelly says:

        No producer of oil sold a barrel except for a profit. It was all over in 24 hrs, was only in WTI and purely a war of speculators, not producers versus consumers. The thing the longs didn’t realize, the contract in WTI, not Brent, REQUIRED you to take delivery of 1000 barrels of oil if you still owned it at the end of trading.

        Seeing a huge bunch of long contracts many from newbies, a small group of young traders in London, UK, with ‘balls of steel’ risked millions to drive the price down and make a profit. As they began to succeed, the wiser longs, knowing of the obligation to take delivery, also bailed as the close draw near. Then the market closed with a bunch of contracts requiring transport and or storage. Three kids in London, two under 30 made 100 million each. Another made 90.

        I never knew about this but when you reminded me of that weird event, I entered ‘who lost money when oil went negative’ and this great bit from Bloomberg was first.

        How Nine Traders Hit a Gusher With Negative Oil – Bloomberg …

        You can read it free if under their limit.

        • Nick Kelly says:

          The point re: oil prices. This one time spec blip in only this exchange in only WTI should be downplayed in stats re oil price.

    • otishertz says:

      Teach me, Sensei.

      You are the Tom Jones of metaphysical economics.

    • TeacupDragon says:

      ME…
      David Hunter agrees with you on WTI. From Oct 22: “I still think oil & oil stocks are in the process of topping out for the cycle.I see very little upside & lots of downside over the next yr.I expect oil to fall to $25 in next yr’s bust.”

      Nov 3 on gold & silver: “I think gold & silver are completing their short, sharp pullbacks & are ready for a nice move higher. Next stop for gold is $1920 on the way to $2500. Next stop for silver is $26 on the way to $50. Just stair-stepping their way higher. Miners too.”

      • Nick Kelly says:

        ‘fall to $25 in next yr’s bust.”

        Can the frackers go bust again. Who would lend these guys money now.

    • RedRaider says:

      The way I see WTI:

      The max price range is something like $45-225. But we are currently in a price stability environment approximately $50-$65. At $80+ we are a little over extended to the upside – no biggie. In the next couple of years it becomes a price instability environment during which the oscillations become more and more manic and/or depressive. During this environment the $50-$65 range is merely the starting point.

      In short, I guess, anything can happen 🙂

  9. OutWest says:

    All I can add is that I purchased a used 2011 cargo van with 32k miles (two previous local owners) last week from a Ford dealership to replace my 1997 cargo van that had a 160k miles, because maintenance costs and reliability got out of whack.

    Everyone upgrades when they need to. I’ve been shopping for 3 years.

    I paid what I had to pay knowing that prices are going up and inventory is going down.

    Perhaps this whole mess will get better soon….

    • Depth Charge says:

      My fear is having to be in the market for a new vehicle right now through no fault of my own – a wreck, stolen, catastrophic engine failure. This is the absolute worst time in history, BY FAR, to buy a vehicle.

      • Swamp Creature says:

        A neighbor’s nanny next door to me had her car rear ended. The whole back end of the car was smashed beyond recognition. She was offered some cash settlement from the ins company which was totally inadequate. So she’s taking the money and keeping the car as is because she can’t afford a new one. Driving around in a smashed up car. Her license plate is hanging on the rear window.

        • NBay says:

          Using colored light tape, self tapping sheet metal screws, and maybe some bolts/brackets/and right shaped stuff from where the joist hangers are, a pretty smashed up car can easily be driven for a long time. Just do a good job and don’t have anything wiggly, flopping around, or looking ready to fall off, and most cops will leave you alone.
          We helped a lot of girls who worked at the last owner run coffee shop in our area over the past 15 years.

  10. Don says:

    I remember the mid and late 1970s and early 1980s. With the exception of the cost gas, this feel worse, far worse than that period.

  11. SocalJim says:

    In the zip codes I watch, which are high end SoCal beach cities and weathly Boston suburbs, the housing inventory has never been lower and it continues to rapidly decline.

    People are unwilling to sell their homes because they don’t think they can get a replacement. Other people are unwilling to sell second homes because they don’t want the cash. I have never seen anything like this. I wonder if this same pattern exists in other areas of the country.

    I was expecting home price appreciation to slow drastically. Now, I am not so sure about that prediction. I don’t know what to think about this. There is no historical data that resembles our current situation.

    • cas127 says:

      “housing inventory has never been lower”

      Call Zillow…I’ve heard a rumor they have 8 or 9 (thousand) homes they are looking to sell.

    • Jake W says:

      what you’re describing is a crack-up boom. no one wants to hold cash except for a very short period of time, so people who might otherwise want to sell their second house won’t.

    • otishertz says:

      When inventory had never been lower in 2005 Floriduh I took it as a sign that the end was nigh and sold my beach cottage where I lived for 9 years for a killing. I could have bought it back free and clear with the profits I had cleared less than four years later when it came up in a short sale.

      • SocalJim says:

        In the select zip codes I watch, inventory as measured by the number of listings is much lower than it was in 2005.

        • Anthony A. says:

          That just means not as many homes are for sale at this time. Could it be that families are actually planning to live in those houses?

    • Max Power says:

      This could be fairly easily cured if the Fed were to stop the manipulation and let interest rates rise to market-determined levels. The effect on mortgage payments would force house prices down. Nope. Instead, they continue pouring gasoline on the housing market fire, contrary to any common or economic sense.

      Basically, we no longer live in a capitalist society where markets determine winners and losers.

      • kam says:

        Once a Central Bank controls money supply and interest rates, free market capitalism is dead.
        Now we have a Cancer that is bigger than the host.
        All that debt to buy perfume for the corpse of a once productive, family supporting American economy.

      • masked ghost says:

        But Max. Raising the interest rate would hurt the “wrong people”.

      • Bob says:

        I could’ve written this comment and had to double check to see if I did :) I’m glad that I’m not alone, yet I still don’t know what to do. I’m frozen like a deer in headlights unable to figure out what to do with my life savings that’s 90% in cash. I’m viscerally angry and ready to go to war because at this rate my life is over anyway.

        • gold but make it physical. it’s hard to let hard earned cash go until you realize the coin you buy is cash in another form with real buying power which won’t disappear like that of cash

  12. Depth Charge says:

    It’s not “Americans,” it’s “wealthy Americans who got free money.” This is PPP money – almost a trillion – paying whatever for whatever because the money was not earned. Do I really care if I pay MSRP for a vehicle when the money was just given to me? Of course not.

    • cas127 says:

      “when the money was just given to me?”

      Fed/DC political printing press goes brrrrr…

    • Ron says:

      My brother got 300k bought construction equipment loan forgiven sold all equipment just saying

  13. CrazyIvan says:

    I am in the business of building Hardscape in peoples back yard. I build almost entirely using outdoor lumber. My business was a screaming success during the pandemic. The last 2 months I have experienced a sharp decline in phone calls from clients for new work. Not sure if it is seasonal but if it is, it is more than the usual seasonal declines.
    Now I am seeing lumber prices, especially pressure treated wood, take a big hit. Prices are fast approaching what they were prior to the pandemic. Transitory? I don’t know, but facts are facts.

    • Depth Charge says:

      They need to kick the legs out from underneath this bubble. They massively overheated the economy with reckless, thoughtless, irrefutably stupid monetary policy. We need pain, LOTS OF PAIN, to get back to reality and something sustainable.

      • historicus says:

        Agree
        But it will not be voluntarily.
        It will be a Black Swan, and likely a geopolitical event.
        There are several possibilities, and some will be triggered by the fully apparent ineptness of this administration.

        • kam says:

          A mock-up American Aircraft Carrier built for practice runs.
          No. Nothing to see here.

        • Harry Houndstooth says:

          China building life-sized replicas of our Naval ships in the desert. I wonder why they are doing that?

          Please take the time to listen to Charlie Munger discuss the wisdom of the Chinese to step on market bubbles before they get to the ridiculous overvaluations that we have now to avoid the inevitable crash.

          It’s just our system. When Trump was demanding $2 Trillion in cash hand out in December 2020 (Go Big or Go Home), you have to realize that both parties are guilty of being hostage to the whims of the voting populace. Virginia and Zillow show us that the pendulum has started back.

          Covid Deaths US +755,000
          China 4,600
          While our president Trump was calling out the Nation Guard in Portland, Oregon the Chinese were using the military to close the Shanghai marketplace with 40 Covid positive cases in the city.

          China has twice the nuclear warheads then we believed recently.

          Musk takes cover to sell at the top by polling Twitter.

          Time to sell.

    • otishertz says:

      That says a lot.

    • SocalJim says:

      I am taking quotes for a vinyl fence. Most companies won’t return my call and the few that do give me outrageous quotes before they tell me they can get to it in a few months at best.

  14. Speaking of those “red lights”…..
    Is the increasing employment levels a red light?
    Are the increasing wages for the bottom half a red light?
    Is the increasing size of the economy a red light?
    Shall we choke the economy to maintain a serf underclass?
    If houses are scarce then build more.
    If restraunts are expensive eat elsewhere or, heavens to Betsy, cook.
    Inflation is the price you pay for economic growth, it is not a question if inflation is bad, the question is the price worth what you got for it.

    • Wolf Richter says:

      These are all RIDICULOUSLY false choices. Period.

      “Inflation is the price you pay for economic growth…” Nope. Inflation is the price you pay for money printing.

      And who pays that price? People who spend all their money they earn with their labor just to get by… the less than wealthy. That’s who pays that price. Inflation is the enemy of the people.

      • kam says:

        A rising price should be a signal to produce more, consume less.
        But Politburo created inflation sends wrong signals throughout the economy. Is the rising price a signal to produce more? Or is it a trap to waste scarce resources on building things beyond the clearing point in a dynamic market equilibrium of individual items.

      • Augustus Frost says:

        Someone wrote the same nonsensical theme in another post, but not sure it was the same person.

        That post was equally idiotic, as it implied or claimed that currency debasement is the path to prosperity.

    • cb says:

      What economic law says economic growth requires inflation?

    • Jake W says:

      wow. such nonsense all in one post. if you have actual growth, then you don’t get inflation, as the productive capacity increased along with the demand.

      you get inflation when you increase demand without increasing production.

    • Sams says:

      Inflation is a monetary thing, it is expansion of the overall amount of money. Prices on goods, assets and wages follow at different pace, but they will all follow to some extent.

      If the amount of money is fixed, that is hard money, historical gold, but also blockchains with a fixed length there can be no inflation. Prices may still rise, but overall it will just be shifting around between different items.

    • Al Loco says:

      Avraam,
      It’s fair that you see it this way because this is what is being said in politics and the media. The actual numbers tell a different story. Jobs increases are strong but only because they were taken early 2020. Wage increases were hugely effected by government handouts and artificial demand. Record imports and reduced production efficiency are what we really have and they are not signs of a strong economy.

    • historicus says:

      “it is not a question if inflation is bad,”

      I can guess your age. You havent seen it have you?

      *Inflation PUNISHES people for saving…and purposely unaddressed inflation to do that is nothing but theft from savers to pump asset prices…which I guess you think is “economic growth”.
      *Inflation comes from irresponsible monetary policy that appeases the voracious appetite for debt in Washington DC. With that new governmental spending you get the higher GDP readings which I guess you think is “economic growth”.
      *Inflation hurts the low income people the most.
      *Inflation “spirals”, and we are on the door step. Every union in the country is about to go on strike because the cost of living is up. This will make the cost of living go up, which will lead to more strikes.
      If that is your desire, sit back and enjoy.

      • Augustus Frost says:

        Inflation isn’t bad if the advocate believes in stealing from producers and savers to transfer purchasing power to deadbeat parasites who borrow and consume without equivalent production.

    • economicminor says:

      Good economic growth should include increases in productivity. Increases in productivity should in theory drive down prices, not up.

      The entire idea that inflation is good is a made up thing like Greed is Good and The Wealthy are the Job Creators.. Orwellian Newspeak to program the public into believing that their positions in life are their own fault, totally.

  15. Prince Gbanga says:

    Wolf, your graph there has a critical mathematical error! You must fix this immediately!

    You have failed to apply the marking “inflation out the wazoo” to the appropriate data series.

    Statisticians around the world are outraged. I think your Nobel Prize chances took a plunge there.

    • Wolf Richter says:

      mea culpa, mea maxima culpa!

      • BuySome says:

        Throw three Hail Mary’s at the annual Our Faddah football event and all will be forgiven. Following the game a pancake breakfast will be served down at St. Alphonsus, where we shall all join in a round of drinking the deadly yellow snow while the Mothers Superior of Invention will lead lead a round of chanting the Phi Zappa Krappa. Praise be to Saint Frank and the dead apostle Garcia. Hippy hippy shake hands and move on.

  16. Micheal Engel says:

    In real terms, car prices are lagging. College cost is number #1,
    healthcare #2, RE #3.
    Car prices are catching up, in real terms, they might overshoot, but if the WTI option above is correct, they will deflate with the rest and high Ed will deflate the most !

  17. polecat says:

    Americans blow Fedheads off eccels pedestal.. non-temporary like.

  18. Landlord Investor says:

    C’mon. The Fed is not in the propaganda business. You think they’re conspiring in order to save their bureaucrat salary jobs so they’re not forced into the private sector where they’ll collect 5-6 digits for a one hour speech? The people in the propaganda business are on cable news.

    As for inflation, if we’re back under 3% in 12 months, I hope to see a mea culpa and not “but X thing happened which changed everything!”.

    Way too much is made of QE’s impact on bond prices. Fed buys less than 1% of bonds that are bought each day. The other 99% of buyers are buying because they think it’s a good investment/trade. And what the bond market is saying with the 10 year below 1.5% and a flattening yield curve is that long term, inflation isn’t an issue. More likely the Fed raises rates too soon and causes a recession. Then I’m sure the inflationistas will declare victory because inflation must have been totally out of control for the Fed to have to control it.

    • drifterprof says:

      Sounds good!

      If you’re right, then after a year crow will still be very cheap to eat, if someone is obligated to dine on it.

    • Wolf Richter says:

      “Way too much is made of QE’s impact on bond prices. Fed buys less than 1% of bonds that are bought each day.”

      BS. The Fed bought more TIPS than were issued since March 2020.

      The Fed owns a quarter of all publicly traded Treasury securities.

      Just in September, the Fed bought $100 billion of agency MBS — $60 billion to replace pass-through principal payments and maturities and $40 billion to add to its balance sheet. This represents 35% of agency MBS that were issued in September.

      These are HUGE numbers.

      And yes, the way to tamp down on inflation after you allow it to get away from you is to tamp down on demand by raising rates. And yes, that might cause a recession. But so what? Recessions are part of the normal business cycle, which serves an important cleansing effect that cleans up the excesses and gets rid of excess debts via bankruptcies, etc.. That’s how an economy works and is supposed to work.

      And rates should have never been this low to begin with. Short-term rates are -5% in real terms. This is ridiculous, and only a troll would ignore that.

      • Yort says:

        Eliminating the cleansing recession phase from the economic business cycle (currently a liquidity cycle thanks to Fed printing) is very similar to eliminating sleep from the human daily cycle. It works for the first 30 hours, but past that point the entire world enters the hallucinating phase in which reality is time delayed, illogically unproductive, and begging for a deep sleep reset as paranoia and shadows dance in the peripheral of deprivation induced tunnel vision…

        I’m trying hard to think of any reason the Fed would risk, or perhaps even desire, a stagflation-lite future. Perhaps to make sure team blue loses hard at mid-term (voters blame govts for high inflation)? Perhaps admitting to being wrong would burst the Fed’s ego? Perhaps the Fed wants to force the world into another system of economics? Perhaps the $30-$40 million dollar Fed long only ETF stock market gains was the main reason? Perhaps an attempt to slow down China economic dominance? Soon enough the Fed will be able to announce “Operation successful, patient dead!”… and write a book, and then we might get a hint of why the Fed is/was so hell bent on creating global “Everything inflation”….as if the “Everything bubble” was not crazy enough…

        I am very curious how they could be making such an obvious inflation blunder (for at least a year or two) when many of the world’s smartest minds have been warning them about the inflation risks for the last 6-12 months on a daily basis.

        Surreal…

        • Ensign_Nemo says:

          The key reason why interest rates are held so low is that both the federal government, and the big businesses that have borrowed massively to buy back their own stock, can not survive if the nominal rate of interest is normalized to the rate of inflation plus a percentage point, which was about the historical norm before 2008.

          If the true rate of inflation is 5%, then in a rational universe interest rates should be a bit higher, at say 6%. At $29 trillion in national debt, that implies that the federal government would pay $1.74 trillion in interest per year. The federal government collected $4.05 trillion in revenue in fiscal 2021. IOW, ‘normal’ rates would force the government to pay 43% of its revenue in interest. That would leave only $2.31 trillion to actually run the government. Congress would never allow the Fed to take away their source of power by normalizing rates like that.

          Similar issues would arise with massively over-leveraged big businesses. They would mostly be forced into bankruptcy, which would then collapse the economy, and then cascade failure will occur as the government’s revenues would collapse just when social spending skyrockets.

        • otishertz says:

          @ nemo

          What if the Fed came out one day and said hello world, we guys at the Fed, we got together and decided to just go ahead and forgive all the US.gov debt on our books. K?

          The Fed is a privately owned organization so why not? That would be awesome. Then the Treasury could issue a crap ton more debt and no one in America will need to work except perhaps some light gardening.

        • Ensign_Nemo says:

          @ otishertz According to Wolf’s October 28 update, ‘Fed’s Assets from Crisis to Crisis to Raging Inflation: Balance Sheet Update’, “Since the beginning of March 2020, the Fed’s holdings of Treasury securities have ballooned by $3.0 trillion, to $5.5 trillion.”

          The US federal government spent $6.82 trillion in fiscal 2021.

          The Federal Reserve thus holds enough Treasuries to finance about 9.7 months of Federal spending. That would be a damn short retirement before Congress is broke again.

          The real financial impact of the Federal Reserve is the manipulation of everything through *massive* leverage, and the *threat* of the Federal Reserve deciding to manipulate markets by pressing its thumb on the scale at its whim.

          If the Fed wanted to buy the entire Treasury market there’s nothing to stop them from doing that. The Bank of Japan bought enough of their government debt to kill the market. There were some days where no Japanese government debt was traded, because the BOJ had set an artificial price, and there was no profit in opposing them.

        • Landlord Investor says:

          Eliminating the cleansing recession cycle would make growth slower but also result in less economic volatility. It’s a tradeoff. If you’re retired getting steady checks from Uncle Sam and annuities, you don’t care about economic vol. But for the average person living paycheck to paycheck, they care a lot more about job security than growth.

        • Wolf Richter says:

          “Eliminating the cleansing recession cycle would make growth slower but also result in less economic volatility.”

          hahahaha, the Fed has been trying to eliminate recessions via QE and interest rate repression. What we got was HUGE volatility in assets and the overall economy with distortions out the wazoo.

      • Tony (one of them) says:

        How much of the Cayman Island / City of London / Ireland purchases of bonds do you think is the Fed in disguise? Could they be buying a whole lot more than they appear to?

        • Wolf Richter says:

          Everything the Fed does is about market hype. It wants to whip up asset prices. So everything gets announced bigly well in advance, multiple times, for maximum effect.

          For example, in the spring 2020, it announced it would buy up to $700 billion in corporate bonds and bond ETFs. Just that announcement caused the biggest bond market rally ever. And when it finally started buying some bonds weeks later, the market had rallied so hard, it never really had to buy much. It just bought $13 billion in total, and has sold them by now into the hottest bond market ever.

          That’s how the Fed operates. “Forward guidance” is the official term. It’s jawboning the markets. It’s manipulating the markets with its verbiage. That’s how the Fed operates. Doing anything secretly wouldn’t have any effect on the market if no one knows about it.

          The Fed opens its mouth, especially if it’s something bullish, and markets surge. Doing anything secretly would destroy the effectiveness of it.

          BTW, the Fed is such a big player in the government bond market that I could not keep its movements secret. It bought 60% of the debt that the government added since March 2020. This is HUGE.

      • Landlord Investor says:

        Every day $550B of Treasuries are bought. Of that, about $4B is the Fed. How is the Fed manipulating the price the other 99% of those treasuries are bought and sold at with their 1% of purchases? Those people are buying the 10 year below 1.5% from their own free will. No one is making them buy Treasuries instead of commodities, gold, real estate or whatever you think is a good inflation hedge. Long term inflation is not a concern for the people with assets who form the marketplace.

        The Fed’s balance sheet is tiny in comparison with the total amount of financial assets. Assets are fungible. If people thought Treasuries were expensive relative to other assets, they would be buying those cheap assets rather than expensive Treasuries. Spreads between risky assets and Treasuries should be wide if Treasuries are overpriced. They’re not.

        Bottom line is the Fed can control short rates because they have complete control of overnight rates. They can only exert minor influence on the long end. And the long end is saying no long term sustained inflation because the Fed likely raises rates to get it under control.

        • Wolf Richter says:

          Your first line… This is such an idiotic argument because $550B in Treasuries are bought AND sold — traded back and forth mostly by traders, which in itself doesn’t impact price much. But the Fed ONLY buys. It creates money (credits) and buys with these credits. And it NEVER sells. And it buys a lot more than $4 billion a day because it also replaces the securities that are maturing. This has a huge impact on the market.

          “The Fed’s balance sheet is tiny…” an idiotic statement. The Fed owns 25% of all publicly traded Treasury securities. It bought $3 trillion, or 60% of the increase in the public debt since March 2020.

          Your last paragraph… good lordy.

        • Landlord Investor says:

          Yes, of course, there are sellers for every buyer. That doesn’t change the fact there are $550B of Treasuries bought every day by people who are happy to buy them at these low rates. They don’t have to buy Treasuries, they could buy something else that provides a higher return. But they think that it is a good use of their money. The Fed’s $6B of bond purchases per trading day is peanuts compared to the total size of the bond market (Treasuries, IG, HY, asset backed, and collateralized) and even smaller peanuts compared to the size of the market for financial assets. Like I said, if Treasuries were manipulated and rates artificially low, then we’d expect to see spreads high, whether IG spreads, HY spreads or stock earnings yield spreads. But they’re not. They’re all historically low spreads.

        • Swamp Creature says:

          Landlord Investor

          If the Fed’s balance sheet is so tiny lets see what happens when they try to unload it. I’ll fill you in. Depression.

    • Jake W says:

      the other buyers are not buying because they think it’s a good investment, but because they think they can front run the fed. it’s that simple.

    • historicus says:

      Landlord…
      *”The Fed is not in the propaganda business.”
      Sure they are. Powell admitted to controlling “perceptions”. What would you call that?
      *”As for inflation, if we’re back under 3% in 12 months”
      So, we have 5% increase, which stick…..then we are glad to have 3% ON TOP OF THE 5%?
      3% inflation in ten years rips 33% off the dollar.
      *”too much is made of QE’s impact on bond prices.”
      Are you making the argument that it is essentially unnecessary? Let’s find out.
      *” what the bond market is saying with the 10 year below 1.5% and a flattening yield curve”
      The Fed purposely flattened the yield curve to, as former Fed Gov Fisher said in the PBS special “The Power of the Fed”…..”to FORCE investors take more risk.” ie, that is an admission that the flatness of the curve IS BY FED DESIGN.
      The Fed buys 120,000 MILLION dollars of federal paper EACH MONTH. (120 billion) 40 of that is MBSs by which they purposely lend money long term to the mortgage market 2.5% or more below inflation. Who would do that other than an entity that can PRINT?
      The ten year is an indication of one thing……Federal Reserve manipulation. Lets remove that which you say is “too much is made of” and see what the ten year is, then we can maybe use it as an indication of something real rather than managed.

    • Augustus Frost says:

      I’d say they are mostly “chasing yield” due to TINA (there is no alternative) because the asset mania has turned the financial markets into a casino where you either gamble on the most overpriced assets in history or lose purchasing power every year at a currently increasing rate.

      The one thing I can definitively tell you is that they aren’t buying due to sound credit quality. More credits than ever are actually junk. Actual USG credit quality is easily the worst since WWII and likely the civil war with yields lower than ever. That makes a lot of sense, doesn’t it?

      Don’t remember the name but that Chinese bond rating agency which rated UST was a lot closer to reality than their US peers who rate it “AAA” or “AA+”.

      So, the USG can’t default. Big deal, either way at current yields you are virtually guaranteed to lose purchasing power unless successfully speculating on interest rate movements.

      So what difference does it make? Few defaults end up in a total loss either, so it’s little to no practical difference.

    • economicminor says:

      Why would the FED keep rates this low?

      Could it be that they all have huge portfolios in stocks love the wealth effect they created to benefit themselves and do not want their party to end?

      Inflation transfers wealth from the working class to the financial class. Who runs the government? Not the working class.

      Everything else is just Kabuki Theater to distract the masses while the elite continue their plundering.

  19. DR DOOM says:

    The Fed is Congress’s political bitch. The Congress ain’t gonna take the blame for inflation. The Fed and Congress had an opportunity 11 years ago to not be in a no win situation. They all decided to get rich instead.

    • historicus says:

      Dr Doom
      Dead on.
      The Fed has been in constant violation of 2 of there 3 mandates, and not a word from the Senate Banking committee…..
      In accordance of Rule XXV of the United States Senate this committee they have oversight on Federal monetary policy, including Federal Reserve System;
      If the Fed is in constant violation of 66% of that which are their mandates, dont you think we would see some blowback from the Senate committee that oversees the Fed?
      I guess they are all fully invested.

      • economicminor says:

        Unless or until the Justice Dept enforces Congress’ subpoena power, Congress is just a Paper Tiger.. Lots of theater and nothing more..

        Except to borrow and spend like there are no consequences

        • polecat says:

          That’$ (They’re) quite rich for so-called ‘Paper Tigers’..

          Nice Gig .. right?

  20. Xaver says:

    I am watching gold carefully because I am long. It’s right at resitance now and was up for a few days.
    IMO it used to be relatively weak because all the money went into stocks.
    With all these inflation expectations gold “should” go.
    Once the stock mania ends it will get really interesting.
    Love the long term protection against inflation and the low correlation to stocks.

    • qqq says:

      There is too much gold on the market, “paper gold”

    • Jos Oskam says:

      The only gold worth being “long” in, is the kind that goes “thump” when you drop it.
      At this moment in time, too much paper wealth exists altogether. Watch it go up in flames when things get seriously pear-shaped, as they will.

    • historicus says:

      BTC is the key.
      IMO, if BTC meets a sell off this should take the weight off of gold.
      Until then, it is the second play and probably the short for people trading BTC.

    • Old School says:

      I accumulated about $10,000 in silver, gold and platinum coins over the last year. With real yields going so far negative and not owning real estate I decided to take the plunge and put about 15% into the second largest gold miner when gold was around $1750.

      You have to understand that profits are leveraged to gold price, so a 1% move in gold means about a 3% move in earnings. It’s my insurance if Fed continues negative real rate policy for years to come.

      • Old school says:

        I should have said I put 15% of my portfolio into a gold miner and kept the coins stashed at the house.

        • Mikey says:

          The miners always buy more mines at peak and evaporate the profots

        • Old School says:

          Mikey,
          I did my research and think I bought the right one, but the industry has a terrible track record. It’s probably not a permanent holding though. Depends on Fed policy.

  21. polistra says:

    “Reasons for hiking rates”.

    Does this mean that interest on savings will rise all the way to one TENTH of one percent by the year 9000000000000?

    • historicus says:

      here is the question I would ask Powell

      “Mr. Powell, did your family/parents ever save money, back in the day , to perhaps buy a house or a car? And if so, were they intentionally punished by the Federal Reserve policies for having done so?”

      (5% unaddressed inflation, zero return on savings)

      • Depth Charge says:

        Here’s the question I would ask Powell:

        “Mr. Powell, why are you such a scvmbag who enjoys destroying the young, the working class, savers and the old on fixed incomes?”

  22. otishertz says:

    Same news, every day, every channel. Kinda seems like there are only about four news organizations and they all sit in the sauna together, flap their towels, and plan larps to laugh about later.

    The only thing standing in the way of inflation spiraling higher is a collapse in demand…

    Plus it would only take the righteous and expected relative total barf out of AKA approved dog breed cryptocurrencies to erase $3 trillion of supposed “wealth.”

    So many for sale signs going up nearby. Three on my street in the last week.

    Things could get weird.

    • historicus says:

      ” they all sit in the sauna together”
      They all get their talking points together……and the tip off is the constant repeating by all of the same phrase on any particular day…

  23. Micheal Engel says:

    1) Backbones, on the left, build bubbles.
    2) The first fractal, on the right of a bubble, almost glued to it’s peak, indicate that price shouldn’t exceed that high.
    3) WTI weekly futures : Sept 22 2008 fractal zone (fz) was very important. There were several entries to the horizontal fz, but they failed.
    4) There were several predictions that WTI will reach $150 or $300, but they failed.
    5) Fail, rinse fail, that’s what traders do every day.
    6) Since Sept 22 2008 will not be reached in the near future, there will be no inflation, or hyperinflation.
    7) But, Nov 2021 is a warning sign : the diagonal channel coming from Sept 22 2008 was breached for the first time. Within few years this channel will be useless.
    8) In the 1930’s and 1940’s there were plenty of shortages, but no inflation.
    9) Then, there was SPX 1949 low, the last low, a higher low.
    10) Oct 1929 peak was breached in 1954. SPX 1956 fractal low indicated that price should never exceed that low. They didn’t.
    11) In 1957/58 SPX took off vertically like a rocket.
    12) Nicolas Darvas, a rootless refugee from Hungary, a nightclubs dancer travelling all over the world, made $2M, within two years, starting from $5K.

    • Nick Kelly says:

      8) In the 1930’s and 1940’s there were plenty of shortages, but no inflation.

      In the depth of the thirties wheat could not always pay for its storage and had to be thrown out. Before that stage if it wasn’t in an elevator it was used for animal feed. No shortage of wheat but no money, no inflation. Farmers sent cattle by rail and got back a bill: their sale hadn’t covered rail and auction costs. This was true of all ag products. The farm struggled to survive and was not just a price taker, it had to take any price.

      US Steel capacity utilization fell to 20%. No shortage of steel.
      If you had money there was no shortage of anything.
      This includes real estate as all cities acquired huge numbers of properties for taxes.

      What makes this period an appropriate parallel for today?

  24. SpencerG says:

    I doubt most Americans know (or care) what the Fed’s position this week is on the “transitory” nature of inflation. But as the saying goes… you cannot fool all of the people all of the time. What the American people are good at sniffing out is when things have changed for the worse and leaders are without a clue as to what to do about it.

    At this point… Americans have figured out that gas and food prices have skyrocketed. And they are not hearing a single thing out of Washington that gives them confidence that things will get better.

    • economicminor says:

      Because what will make it better is a significant drop in demand and that goes against their dogma of the Power of Positive Thinking and Borrowing More and More! Something like, If the model doesn’t work, change the narrative (Orwellian Newspeak).

      They are trapped. Without the illusion of achieving Nirvana thru the growth of borrowing their message is to what? Hunker Down and while the storm passes? That won’t get them campaign $ or re elected.

    • Old School says:

      Hussman always says something along the lines of the best predictor of inflation is inflation. It has arrived.

  25. Crush the Peasants! says:

    Inflation expectations are hopefully formed more from personal experience (and credible sites like Wolf’s) than from the MSM, unless one is to believe people believe the MSM again.

  26. Swamp Creature says:

    Randal Quarles, vice chairman of the Fed just announced his retirement. He made a killing trading securities in his private portfolio and now wants to spend more time with his dog. Lael Brainard was seen visiting the WH and is the leading candidate to replace J Powell. If you think Bidenflation is bad now get ready to buckle up. You ain’t seen nothin yet.

  27. Mark J Hujdic says:

    You are ALL WRONG! My CA supermarket/grocer gas price for regular is now $4.35 where just a few months ago at the height of summer was $3.85, but didn’t the WTI hit 80+. So looks like about 15% inflation in 3 months multiplied by 4 = 60% annual inflation for gas. That is about right. BUT this is purely supply and demand following the WTI. YES! Prices are rising but WHAT is driving the bus is simply and purely supply/demand. The next obvious turn is WHO is driving the bus. Can anyone offer an answer?

    • Micheal Engel says:

      Blame CA taxes.

    • Wolf Richter says:

      Mark J Hujdic,

      You got this wrong. It’s not one bus. It’s two separate buses.

      $4.2 trillion in money printing and $5.5 trillion in deficit spending, in total nearly $10 trillion in the biggest monetary and fiscal stimulus ever, are driving the demand bus.

      But the supply bus had a flat and then got stuck in the mud, and then ran out of gas trying to get out of the mud, and then someone came buy with a jerrycan to put some diesel into it, and then the axle broke. They’re still working on it.

      Meanwhile, the demand bus is going down the freeway at 100 mph, driven by monetary and fiscal stimulus.

      • BuySome says:

        “Flour Power!” The party run$ on fresh bread baked daily by people who have ta$ted the fruit$ of acid kool-aide. This bus stops for no railroad crossings, even if the red wigwag says derailed container movement block your progress. Kerplow!

      • polecat says:

        “Jerome .. the wealth-transfer axle is shot, you’re just grinding prescious metals … QEase down now, QEase down ..”

        “We’re in some pretty fine printed sh!t now .. Game over Fedman, GAME OVER!”

        “Those creatures from JeckleIsland are going to come in here, and they’re gonna do what they did to the others and they’re gonna kill U.S.!! …”

        “We need to nuke the entire Eccles site from orbit .. just to be sure ..”

        “F#ckin A!!!”

  28. Giorgio says:

    “TEMPORARY”? They don’t say HOW LONG! I mean…even the Life of the Universe is “Temporary” !!!
    It all depends on the units of measurement referred to!!

    • historicus says:

      The key question for Powell.

      “QUANTIFY the word “transitory”.
      Weeks, months, ? At what point will you concede you were wrong to call it transitory, and that it no longer fits the definition which you are about to share with us?”
      Mr. Powell……your turn

    • Nick Kelly says:

      Yes, and any statement that ‘X will happen in the future’ is meaningless, because it can neither be verified or falsified.

  29. Bruski says:

    Inflation begins with monetary expansion, monetization of debt and ends with psychological forces that drive prices to a level that “clears the market”.

    Round and round it goes; where it stops nobody knows.

    My guess is that we are headed into hyperinflation; and then?

    B

  30. Brant Lee says:

    What a great new tool for the retail monopolies: Supply Control. First, it sends industry and labor overseas, floods the market with cheap junk.

    Now, another light bulb goes off, seeing the port container backup: Americans are so glutinous, limit the supply of cheap made junk, jack up prices, they’ll pay anything to get it.

    Corporations and banks have so much control of the economy and are forever looking for ways to make a higher profit, it’s a science. Supply control is the new standard mark-up tool.

  31. ivanislav says:

    I have heard many times that the bond market is much larger than the equities market. However, what I find online does not support that – what gives? Various online sources show:

    * US Govt Bonds, 28T
    * US Municipal Bonds, 4T
    * US Corporate Bonds, 9.3T
    * This is for the subset rated by S&P as of 2019, unsure of % of total.
    * US Equity Market Cap, 48.5 T

    This context is necessary to interpret Fed actions and the impact of its balance sheet.

    • ivanislav says:

      “* This is for the subset rated by S&P as of 2019, unsure of % of total.”

      That was a sub-bullet; WolfStreet auto-formatted and eliminated the indent.

    • Augustus Frost says:

      The publicly traded market might be smaller now but notional principal is still noticeably larger.

      Also need to remember that US stock market is an outlier in deep outer space. The divergence between the US and global stock markets is unprecedented. Performance sure isn’t because of how brilliant US corporate management is versus their global peers or the fantastic US economic performance over the last 20 years either.

      The global bond market and notional value outstanding debt is still much larger than stocks. Start with China and EU where stocks have mostly flatlined since 1999 and 2007 while debt has soared.

    • Wolf Richter says:

      ivanislav,

      You forgot to add mortgage bonds (MBS and CMBS), and all the other secrutizations.

      What I got, from SIFMA:

      $9.8 T corp bonds
      $11.2 T MBS
      $1.5 T ABS
      $1.6 T federal agency securities
      $21 T publicly traded Treasury securities
      $4.0 T Munis

      $50 T total

      If you add the $8 T in non-marketable Treasuries (to get your $28 T figure), it’s $58 trillion in total

      And this still does not include publicly traded loans, such as leveraged loans. And I don’t think it includes CDO and CLOs, etc.

  32. Micheal Engel says:

    On Fri we got a $1.2T Infra plan. Did we get an increase in US gov debt.

  33. Bobber says:

    Retirees are being hung out to dry. They’ve seen zero return on savings for a long time, and now they are getting hit with 5-10% inflation, which looks to continue for three years or more.

    Worse yet, they cannot vote on the matter. Both parties support suppressed interest rates and money printing.

    • ivanislav says:

      Oldsters, it is time to experience what you left for posterity and hoped to avoid for yourselves. Reap as ye sow.

      • masked ghost says:

        Ivanislav. All savers are being hurt by low interest rates, not just the old farts.

        Low interest rates jack up the prices of assets. So young people who want to buy a home are being hurt as well.

        • ivanislav says:

          Of course all savers are being hurt, including me – my comment was in reply to OP’s “Retirees are being hung out to dry.” Boo hoo, cry me a river! The older generations in the USA sold the family silver for their own easy living and now maybe a few will have to contend with some of the difficulty for a few years that they created for future generations. That sentiment is directed at the older generations in aggregate, I freely admit that some sounded alarms along road to hell.

        • Old School says:

          Ivan,

          I am not sure that older American people really had much say in the matter. Fiscal and monetary policy were mostly determined by lobbyists and most of us peons had to play the game with the public policy we were handed.

        • ivanislav says:

          Old School,

          The older generation were just cattle and thus bear no responsibility? Is that your argument? All possible actions, including inaction and passivity in the face of parasites, are choices.

          The population at large should have organized itself and *forced* the political and economic structure to be virtuous and also prioritize further industrialization and technology development in the world of atoms, not just bits and bytes. Instead it allowed deindustralization and rentier activity.

    • historicus says:

      Right you are.
      The retirees expected the Fed to behave as they had behaved their entire lives. Fight inflation.
      But someone hijacked the Fed.
      Who “knows” that the Fed will not, would not, fight a 5% inflation with what normally would be a near 5% short interest rate?
      Who knew that???? For that is the key….who knows that and are beyond comfortable being long the oldest bull market with the highest evaluations….and some how know the Fed will not answer its all to duty, to honor its mandates?
      The departure from norms is the hijacking of the Fed.

      • historicus says:

        Talking heads on cable say
        “those who hold risk free assets like Treasuries don’t deserve a return.”
        SO, they are essentially…
        You should be punished for saving
        The government should be allowed to borrow at zero forever
        You must buy stocks

        So, don’t deserve a return after 100 years of getting a fair return? the edict, the mantra now is…….NO, now you must play OUR game
        Hijacked Fed.
        In a system designed to be one of “checks and balances”, the Fed is unchecked and unbalanced. Curious.

        • Bobber says:

          In the Fed’s policy book, people working and conservatively saving for a dignified retirement don’t deserve a decent return.

          On the other hand, if you speculate on Bitcoin, Tesla, Uber, etc., you deserve a handsome return. If you quit your job before normal retirement age, push a couple random buttons on your computer, you deserve a huge return. If you have a profitable business, with rising revenues, you can get free money such as a PPP loan with no strings attached.

          Got it?

        • Depth Charge says:

          FED: “If you work hard for your money and don’t gamble, you deserve to be financially destroyed.”

      • Red says:

        It sounds like the boomers they got rich due to being in the right place at the right time. Are now having their wealth stolen.

  34. Spencer Bradley Hall says:

    In an economic continuum, mass production requires concomitant mass consumption. Payrolls must be sufficient to buy the goods and services produced – at the asked prices.

    It is an incontrovertible fact. Nobel Laureate Dr. Milton Friedman famously said: “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

    #1 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”

    #2 Powell: “the correlation between different aggregates [like] M2 and inflation is just very, very low”.

    “The Humphrey-Hawkins Act of 1978 improved our procedures by requiring us to set money growth targets on a calendar-year basis.”

    Read: “Greenspan’s Fraud: How Two Decades of His Policies Have Undermined the Global Economy”

    “In July 1993, Chairman Greenspan informed Congress that the monetary aggregate, M2, had been “downgraded as a reliable indicator of financial conditions in the economy, ” reflecting the fact that “the historical relationships between money and income and between money and the price level [had] largely broken down.”

    Not so.

    Not only do economists not know a debit from a credit, but they can’t differentiate money from mud pie. Not even William Barnett can do it.

    There’s actually a perfect relationship between money flows and inflation. Inflation peaks in January 2022.

  35. Random guy 62 says:

    Can’t speak much for the big picture, but I can report on the prices of our products and those upstream in the supply chain.

    Input costs are still rising, but at a slower rate now.

    We make truck components.

    Our prices are up about 25% over one year ago, and show no signs of reversing unless we see meaningful reduction in raw material costs. Prices are up about 40% over five years ago.

    If this environment sticks, that’s a big loss in $ purchasing power in a short time.

    • Seneca’s Cliff says:

      I too am in manufacturing. The relentless increase in prices for all of our inputs from materials, to labor, to utilities to transportation is why I think we will never see prices on cars and trucks go back to where they were. Even if monetary inflation gets tamed ( fat chance) I think the days of the average joe being able to walk in to a dealer and afford to buy a new vehicle are fading as quickly as the average Joe’s ability to afford a house in Tarzana or Oakland. If you need a car, hold your nose and buy it now, plus a stash of all the most important parts. There may be a dip in used car prices at some point , but the longer the supply of new cars is restricted the smaller the fleet of used cars will get.

      • Random guy 62 says:

        I agree for the most part, but I used to think no one would ever just go deeper into debt and keep buying. The past year has made me rethink that.

        I now think we are heading toward ten year auto loans. It is the norm on campers and they lose value even faster in physical terms.

        Been saving $500/mo cash for several years to make my next vehicle upgrade debt free but the prices just keep outrunning my savings pile.

        • Augustus Frost says:

          This fake economy can last as long as borrowing costs and credit standards remain low but no longer.

  36. fred flintstone says:

    Inflation announced as highest in history on the wholesale level …….and the long bond yield drops.
    Inflation is a temp……that must be why inflationary expectations are raising……and workers are demanding more everywhere.
    Salmon that was 8.50 a round is now 12 around here. A bit more than 4%.
    Is this capitalism………its government run amok.

  37. Micheal Engel says:

    1) I visited two dealers looking for a van, any van. Non available.
    2) There are more idle salesmen, doing nothing, than brand new cars.
    3) The parking lot are less than half full. Chips shortages bs ==>
    4) Cash shortages.
    5) When u see a retail outfit with rusty old pcs, empty lots, stay away, they have money problems, cash flow problems.

  38. Micheal Engel says:

    1) Every order have a deadline. Orders for Chinese mfg have deadlines,
    too.
    2) We are two weeks from Black Fri. Retailers don’t need more
    inventory from China. It’s too late. Game over.
    3) Consumption is 70% of the GDP. Mfg is 15%.
    4) When those containers are rejected, either in warehouses or ships, mfg orders have shortages.

  39. Willy2 says:

    – “War chest for rate hikes ??”. Rising interest rates ? Didn’t you see what happened to the 30 year & the 10 year yield today & yesterday ?
    And that’s IN SPITE of (price) inflation being so high ………
    – Inflation expectations ? yeah sure, an d I was born yesterday, right ?

    • Wolf Richter says:

      The Fed is still buying lots of Treasuries, adding $80 billion a month to its pile and buying to replace maturing securities. The Fed has bought 60% of all the new debt that the government added since March 2020. There is no free bond market. It’s allowed to move within a narrow range, and that’s it. If you think that the bond market is giving any signals other than Fed buying, you’re hallucinating.

      • jon says:

        There is no free market of any kind. All markets are manipulated/controlled by FED.

  40. TheFalcon says:

    Consumer inflation expectations may provide an explanation for current consumer behavior, but perhaps may not be the best gauge to evaluate transitory versus permanent. Buyers of dot.com stocks made purchases with the expectation of continuing appreciation. Buyers of RE in the mid ’00’s made purchases based on expectations of continuing appreciation. We can go on all day with examples.

    Was it a great move to bid $250K over list to win the house auction? Was it a great move to cash out RE gains to buy that RV for 25% more than last year? Was it a great move to buy that new luxury SUV instead of getting a few more years out of the old one? Sorry but we don’t know the answers yet. However i think it would be a mistake to not be at least hedging with a bet against the Great American Consumer, who has a propensity to run recklessly through financial minefields.

  41. 2BFrank says:

    It is quite simple, with the current monetary regime the FED cannot raise interest rates significantly, it would bankrupt the Treasury, it cannot stop creating money/reserves, it would bankrupt the banks, it cannot control prices, the best it could achieve if it could raise rates significantly is to choke off demand to a limited extent, the FED does not set prices for oil, gas or anything else. The cure for high prices is high prices, simple.

  42. Gary says:

    Personlly speaking, I don’t think WTI will stay with $$$ for long time (if hit), cause higher oil price will restrain the demand and switch over other lower price alternatives; Next, Iran nuclear negotiation will launch at the end of this month (Nov.), USA will relieve some/all sanctions, Iran’s oil outputs will return the globla market, in this case, Saudi/Russia and other OPEC+ memebers will change current “cutting” plan and add more supplies in order to keep the market shares; Last but not least, higher oil price will stimulus more production of shale oil in US (Daily production 11.50 million barrels in last week’s EIA report).

  43. Swamp Creature says:

    One area where inflation is exploding is dental work. I’m talking about implants and bridges. I just shelled out over $7,800 for a bridge. Most dentists in this area have retired, and the good ones are hard to find. Expect to pay 20 to 30% more than the insurance reimbursement. So if they cover 50% of major items, you’re out the 50% plus the amount over the ins reimbursement. To add insult to injury, thanks to the Steve Mnucean/T 2017 tax reform which bailed out all the the fat cats on Wall Street most people like myself are forced on to the standard deduction which means all medical expenses are non-deductable and paid with after tax dollars.

  44. 2BFrank says:

    The FED buys more treasuries than is acknowledged in the list of the top ten foreign holders are the UK, Ireland, tiny Luxembourg, even smaller Cayman Island, Switzerland, Belgium, all replete with the FEDs third party agents acting on its unofficial deniable instructions.

  45. NotDeadYet says:

    At this point, many Americans are “addicted” to the “BREAKING NEWS” and the newest of the terrible catastrophes pushed at us by the media… while other Americans are becoming immune to such chatter.
    Is there inflation? Yes, it appears so. Will it continue? I would say yes… if only because talk of inflation breeds inflation. I know I am considering raising prices for no other reason than trying to get ahead of what is being reported. Real inflation is serious and will require our attention and new strategies, BUT… I lived thru it before and survived (when I was much younger and less smart). So I would quote FDR and say: “There is nothing to fear but fear itself”.

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