Dollar Purchasing Power Plunges. Inflation +6.2%. For Urban Wage Earners +6.9%, Highest in 40 years, Most Monstrously Overstimulated Economy Ever.

Fed still printing money and repressing “real” interest rates to negative 6%, new vehicle prices spike by most since 1975, housing CPI jumps, food & energy soar.

By Wolf Richter for WOLF STREET:

The broadest Consumer Price Index (CPI-U) spiked 0.9% in October from September, and by 6.2% from a year ago, the highest since November 1990 (6.3%) and since 1982, according to data released by the Bureau of Labor Statistics today.

The Consumer Price Index for All Urban Wage Earners and Clerical Workers (CPI-W) spiked by 6.9% in October year-over-year, the highest since June 1982, nearly 40 years ago:

This CPI-W is the index upon which the Social Security COLAs are based, which are determined by the average during the third quarter. The Q3 average of 5.9% set the COLA for 2022 at 5.9%, the highest COLA since 1982, and there was some jubilation among beneficiaries a month ago. But now inflation is blowing right past that COLA.

As Atlanta Fed President Raphael Bostic pointed out, “transitory has become a dirty word.” This massive inflation occurred while the Fed still had its foot fully on the accelerator – $120 billion a month in money printing and near-0% short-term interest rates, meaning “real” short-term rates are at negative 6.0%.

The Fed has been saying over and over again ad nauseam for seven months that inflation will slow down somehow on its own, even as the Fed had the foot fully on the accelerator, and every step along the way, the Fed has grossly underestimated the surge of inflation, and continues to do so. The Powell Fed has unleashed a monster.

Here is Fed Chair Jerome Powell’s reaction to this inflation monster blowout, as captured by cartoonist Marco Ricolli for WOLF STREET:

Despite the ongoing monetary stimulus, the negative 6% real short-term rates, and the repression of long-term yield via the Fed’s gargantuan balance sheet, Treasury Secretary Janet Yellen said yesterday on the radio that she still thinks that inflation will somehow on its own go back to about 2% in 2022.

And if it doesn’t? Well, she said, inflation would be “watched carefully,” and the Fed “wouldn’t permit” a return to the double-digit inflation of the 1970s. But 6% and 7% and 8% inflation is still OK?

San Francisco Federal Reserve President Mary Daly, a relentless dove on the FOMC, yesterday called the inflation data before today’s release “eye-popping,” but she too expected that inflation will subside on its own despite the gigantic monetary stimulus.

For  them, and for a few others, the enormous demand that $4.2 trillion in money-printing in 20 month has created has nothing to do with this inflation, and that it’s just the supply chains that are temporarily at fault, though they got overloaded by this Fed-generated demand, and the Fed still hasn’t backed off, still hasn’t raised short-term interest rates, and still hasn’t begun unloading its balance sheet to let long-term rates drift higher.

But consumers’ inflation expectations are blowing off the Fed’s propaganda about this inflation being temporary, and today’s truly “eye-popping” data is going to fire up those expectations further, and they’re getting built into the economy, with inflation further up the pipeline spiking at even more eye-popping rates.

Inflation is the loss of the purchasing power of the dollar. In October, the purchasing power of the dollar dropped another 0.8%. Since January 2000, the purchasing power of $1 has dropped to 61 cents. Note the steepening slope in recent months:

Rent is nearly one-third of CPI, and it’s now rising.

Two measures or rent account for 32% of CPI. Last year and early this year, these rent factors had plunged, and had kept CPI from spiking further over the spring and summer. But they made a U-turn in June and are now moving higher but are still holding down CPI, even as a market rents in the 100 largest cities started spiking months ago and in October were up 11% year-over-year. CPI is now following with a long lag.

“Rent of primary residence,” which accounts for 7.6% in the overall CPI, rose by 0.4% in October from September, and by 2.7% year-over-year. In the years before the pandemic, the rent CPI ran between 3.5% and 4% year-over-year. Note the U-turn as surging market rents are gradually filtering into the CPI (red line in the chart below).

“Owner’s equivalent rent of residences,” which accounts for 23.6% in the overall CPI and is a substitute to track the costs of homeownership, is based on surveys that ask what homeowners think their home might rent for. It rose 0.4% for the month, and was up 3.1% year-over-year.

Both measures are still holding down CPI (6.2%), but less than they did before. And market rents are surging, and eventually these two rent measures will do some serious catching up.

However, actual home prices have spiked by 20% year-over-year, according to the Case-Shiller Home Price Index, which tracks price changes of the same house over time and is therefore a measure of house price inflation (purple line below). The index for “Owner’s equivalent of rent” just started easing higher (red line). Both indexes are set to 100 for January 2000:

Food costs, accounting for 14% in the overall CPI, jumped 0.9% for the month and 5.3% year-over-year. The CPI for meats, poultry, and fish spiked by 11.9% year-over year, with beef spiking by 20%, which defies the actual price spikes at the grocery store.

Food away from home, which includes restaurants, jumped by 5.3% year-over-year, the most since 1983.

Energy costs, accounting for 7.3% in the overall CPI, spiked by 4.8% for the month and by a whopping 30% year-over-year:

  • Gasoline +6.1% for the month, +49.6% year-over-year
  • Utility natural gas to the home: +6.6% for the month, +28.1% year-over-year
  • Electricity service: +1.8% for the month, +6.5% year-over-year.

The CPI for used cars and trucks rose 2.5% for the month, after two months of declines, and jumped 26.4% year-over-year.

Wholesale prices re-spiked 5.3% month-over-month in September and 9.2% in October, and were up 38% year-over-year, and 59% from two years ago. There is a lag of about one to two months before wholesale price increases filter into retail prices, and the CPI is now just picking up the first tidbit of that re-spike of the past two months.

This chart of the index value (not year-over-year percent change) shows the three months of wobbling, the new record, and the set-up for the re-spike in the coming months:

The CPI for new cars and trucks spiked by 1.4% for the month and by 9.8% year-over-year, the biggest nastiest price spike since 1975. This chart shows the year-over-year change:

But it’s actually a lot worse: “hedonic quality adjustments.”

The CPI charts of the index value for used vehicles (above) and for new vehicles (below) show that the CPI for used vehicles actually fell over the 20 years between 2000 and 2020; and the CPI for new vehicles rose only a tad over those 20 years. It’s the recent spikes that blew all this apart.

Hedonic quality adjustments are why the CPIs for vehicles remained about flat for the two decades before the recent spikes, when, as everyone knows, actual prices on dealer lots surged.

CPI tracks the loss of the purchasing power of the dollar with regards to the same item over time. When the item is improved, the costs of the improvement is removed from the index. This practice was started in the 1990s. And this makes sense conceptually: Pay more for a better product.

For cars and trucks, these improvements have been enormous. They include consumer electronics, safety features, power trains (such as going from a four-speed automatic transmission over a 20-year period to a 10-speed electronically controlled automatic).

Understating actual inflation – understating the actual loss of purchasing power of labor – has been pursued in the US with bipartisan zeal. Even if the understatements are fairly small each year, they’re cumulative and compound over the decades. And the aggressive application of arcane hedonic quality adjustments is ideal for that.

My F-150 and Camry Price Index illustrates how prices have soared, even as the CPI for new cars and trucks (green line) remained nearly flat until the current spike. The chart will be updated with 2022 model year prices as soon as the two models in the index arrive at dealers:

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  251 comments for “Dollar Purchasing Power Plunges. Inflation +6.2%. For Urban Wage Earners +6.9%, Highest in 40 years, Most Monstrously Overstimulated Economy Ever.

  1. Minutes says:

    If Im Powell I’m pretty sure I’d be happy to exit. Let the maelstrom hit the person after.

    • Wolf Richter says:

      I already have a title in mind for the article I’m going to write.

      • Gabby Cat says:

        Look forward to that article!

        • Cobalt Programmer says:

          Well…Well…Well, What happens after Powell?

        • RH says:

          As he is leaving, Powell can use the words of Louis the XIV: Apres moi, le deluge! They would be singularly appropriate, since I am sure that like their other beloveds, such as the man whom Rolling Stone called Wall Street’s double agent in an article describing how he came in from the cold back to his law office which was held for him representing.Wall Streeters, financiers, the banksters, and the ultra-rich, Powell and his descendants have a golden future.

          Like other parasitic organizations, such as organized crime, the financiers in the US take good care of their puppets. If bribes are ever paid, or if they ever film their puppets sexually abusing little girls, they reward those who serve them with discreet silence and lots of money.

          The 2017 tax cuts, for example, which Powell and his cronies effectively passed, were as if passengers on a sinking ship that already is filling up with water started drilling more holes into the bottom of the sinking ship: the US faced, what was estimated already long before those tax cuts were passed unfunded liabilities of over $210 TRILLION, for which no plan has yet passed to pay them. See “Did the 2017 tax cut—the Tax Cuts and Jobs Act—pay for itself?” in brookings dot edu.

          The politicians passing those cuts and refusing to raise taxes on the ultra-rich, who have avoided paying billions in taxes for DECADES, as Gizmodo reported that Apple avoided paying over $40 billion in taxes, should also say to all : Apres moi, le deluge.
          The amusing thing is that it is the commies’ Evergrande and its sister, Ponzi schemes in China that appear to soon cause the financiers here to face the crash.

          For example, while the CCP government, or its cronies here, are probably buying up the bonds of the CCP, real estate developers, because it is cheaper to buy bonds at 35 cents (35% of the face amount) on the dollar in the market rather than pay them later at 100% of the face amount, there is no way that they can bail out the hundreds, of failing CCP developers. The exposure of the US financiers’ entities is concealed for now. That cannot continue forever. The time will come when their losses will have to be reported.

    • nvg says:

      Exit, why,….. so far he is getting very, very rich himself

      • Jackson Y says:

        No, Powell can get far richer by staying on as chair. The 2019 “insurance cuts” and repo “not QE” QE were architected by Powell to save the stock market after its 2018 crash and protect his own net worth. Judging from his financial disclosures, he likely made some $10-20 million that year alone as a direct result of the equity & bond rallies caused by his policy actions.

        It’s a lot harder to influence FOMC policy outside the institution or even as a rank & file governor. He’d have to do several hundreds of “speeches” to Wall Street banks to make that kind of money. Powell is the wealthiest Federal Reserve chairperson in history, so his motivations are different than someone like Bernanke who was worth <$1M before stepping down.

        • Minutes says:

          Tough to buy your reputation. Ask about long gone Arthur Burns who is a punch line.

        • Jackson Y says:

          @Minutes Don’t think Powell cares as he laughs all the way to the bank.

          The Federal Reserve’s credibility was already destroyed when they went from 4 planned rate increases in 2019 to 3 cuts, all because of a small drop in the stock market.

          Powell will be the next Arthur Burns, or worse, the next Rudolf Havenstein.

      • elysianfield says:

        nvg,
        Being “rich” is one thing…being able to enjoy being “rich” another issue entirely.

    • Jackson Y says:

      If Powell isn’t reappointed, it’ll be Brainard. Brainard is even loonier and wants to delay rate liftoff until 2024. These two are the only candidates who were confirmed by the media to have interviewed with Biden at the White House.

      So far, there have been no indications suggesting Biden is considering anyone who’s even remotely hawkish.

      • Augustus Frost says:

        He potentially foolishly believes loose monetary policy will help in the mid-term elections.

        When psychology turns against you, it doesn’t make any difference.

        • makruger says:

          Personally…as a liberal I think the Democrats will likely get slaughtered in the midterms, and in 2024 as well. Instead of moving farther left to attract the progressive vote, they keep moving farther to the right to attract conservative votes. Unfortunately that’s a losing strategy and when they do lose, they’ll be baffled to understand why.

          Previously someone here said the Republicans support the top 1% and the Democrats the top 10%. As for the remaining 90% unrepresented by lobbyists, we’re apparently on our own.

        • Jake W says:

          the progressives do not support the bottom 90%. they support the bottom 30%-40% or so. it’s the middle 50-60% that has no support.

        • Yossi says:

          I didn’t want to see Trump in power again.. but Biden is making sure that would happen.
          Economically Biden just continues Trump’s policy so far, instead of untangling his mess.

        • Winston says:

          “they support the bottom 30%-40%”

          They most certainly DO NOT! It’s properly called the “Democrat Plantation” maintained via the welfare trap. It’s a huge part of their voting block. Without it, they’d never win another election at any level of government:

          “The welfare trap (or unemployment trap or poverty trap in British English) theory asserts that taxation and welfare systems can jointly contribute to keep people on social insurance because the withdrawal of means-tested benefits that comes with entering low-paid work causes there to be no significant increase in total income. An individual sees that the opportunity cost of returning to work is too great for too little a financial return, and this can create a perverse incentive to not work.”

          Further, the allowed massive influx of illegal aliens (the official, fedgov term for them) does the lower 30-40% no service either.

          And on the Rep/Dem ping-pong between what partisans see as the lesser of two evils, I’ll paraphrase George Carlin’s famous bit: “They don’t care about YOU. At all. AT ALL!”

      • Dazed And Confused says:

        Biden should nominate Larry Summers for Fed Chair.

        He’s a Democrat and former Clinton Treasury Secretary who has been consistently warning about inflation arising from excessive stimulus for a year, long before it started to show up in the inflation figures.

        He would be much more hawkish than Powell or Brainard.

    • Up north says:

      Just a theory of mine (don’t shoot the messenger please).
      Notwithstanding all the political crap and rip offs linked to this ongoing zoo, I wonder if at least part of their goal is to try to help (as ludicrously as it sounds) with the trade imbalance. Essentially they’re like ok, we got no good option here, but it will at least make USD and USA more attractive to investments and trade deficit could go lower with it.
      I’M NOT ARGUING THIS WHOLE SHABANG won’t be without consequences, as Wolf and others have aptly pointed out.
      Again, don’t shoot the messenger: but I wonder if one of the known purposes or intentions of this lowering of purchasing power is to fight trade imbalance either as a direct or an indirect effect .
      So what I’m saying is they’re aware that it’s negative on some metrics, but that they can’t be that dumb to not know that it will help on some other metrics.
      When this is established, from where I am as a non American (it helps bring an outsider), I wouldn’t be surprised this is worked out in coordination at and with higher levels of the government, even involving CIA and all. One can argue all he wants that the US and or Powell and or intelligentsia is are dumb and so on, but I wouldn’t argue it’s ALL just dumb (which is a non argument, it’s more venting at that point). USA is still number one power and so on and will play all cards left in their hands. Still a few cards left to play imo and of many others. And no cards are not stupid nor just 2s of spade etc.

      • Finster says:

        Excess dollars in the US overflow out to import more foreign goods. Fed monetary stimulus stimulates consumption more than production, exacerbating the trade deficit.

      • Augustus Frost says:

        Good thing you aren’t making a case because it can’t be made. The USD FX rate has weakened considerably since Nixon closed the “gold window” in 1971.

        The trade deficit has simultaneously soared.

        Once so much manufacturing and offshoring has occurred, it doesn’t make much difference how far it falls when a country no longer produces what it did.

        What exactly does the US produce now that foreigners want to buy so much more of to make any real difference?

      • Old school says:

        Professor Hanke had another interview up on Kitco. He predicted about 6 months ago that inflation wasn’t transitory and we would end the year with inflation above 6%.

        Says we got at least two more years of inflation baked into the cake already and Fed is still doing the wrong thing.

        His gold sentiment indicator has went from slightly bearish to extremely bullish starting last Thursday. This number is determined by scraping internet every hour for gold sentiment.

        MMT theory says print til you have to kill inflation by raising taxes. Theory didn’t take into account it’s hard for politicians to vote for taxes.

        It was only 6 weeks ago I was buying shares of a gold miner with $17 handle, now $20 handle. Transitory inflation didn’t age well and people are starting to figure out Fed is totally incompetent or situation is so bad they are running extreme policy and lying about it.

        • California Bob says:

          Gold bugs have been saying ‘Any day now!’ for years. Crypto has supplanted gold as an (alleged) ‘inflation hedge.’

      • Degobah Smith says:

        Just a minor clarification meant in the purest sense of brotherhood with our northern neighbors… If it’s your theory, you’re not the messenger. At least not in the context of the idiom. Cheers, ay.

    • bob says:

      Well the one bright spot in all this, is that at least the Biden voters are getting what they voted for. I hope they get every penny of their vote.

  2. Jackson Y says:

    There is a culture of corruption at the Federal Reserve and the trading scandal only scratches the surface.

    Ever since Alan Greenspan took office in 1987 and started the “Federal Reserve Put,” the FOMC has made pleasing Wall Street its singular focus, instead of managing unemployment & inflation as mandated by law.

    Powell took it to new levels by lowering interest rates in 2019 in the absence of any economic deterioration in the data, then restarting “not QE” QE later in the year. He did it only because stocks crashed in 2018 and his own $50+ million net worth, heavily invested in S&P and equity ETFs per his financial disclosures, was at stake.

    Almost every FOMC governor, including lifelong academics Bernanke & Yellen, spins through the revolving door to work for Wall Street, delivering $100,000+/hr “speeches, “consulting” for hedge funds, etc., after retiring from public service.

    Yet Congress and the American people have turned a blind eye to this. When will something be done?

    • historicus says:

      The Fed has been hijacked…..they no longer answer to their mandates/directives that allow them to exist.
      Senate Banking Committee? Is that who oversees the Fed? how about a phone call?
      Who does the Fed answer to? I have a guess.
      The greatest thing to “know for sure” in the past decade has been..
      ……..The Fed will not address inflation…….

      Knowing this allowed you bullet proof bravery to be locked down long.
      5% inflation….and they dont lift a finger?
      In years past, fed funds would move to meet the inflation rate….
      now…..zip.
      hmmmmmmmmmmmmm?

    • TimTN says:

      I was thinking the same thing. This is the problem. These guys have tunnel vision now, not looking out for anything but Wall Street at this point.

    • Augustus Frost says:

      I can hardly wait to see potential replies, but the real problem is that monetary policy exists in the first place.

      What evidence is there that any central bank has any clue as to the “proper” interest rate which is simply the price of money?

      The correct answer is none. Conceptually, it’s no different than the price of anything else; there is no “correct” price.

      Distorting the price of money just creates a massive transfer of wealth with winners and losers.

      Most of the time, it’s a wealth transfer from the prudent savers and producers to spendthrifts, deadbeats, and speculators. Collectively, it’s pulled years of future demand forwards as the country effectively eats its seed corn.

      It’s one of the primary reasons most Americans are worse off than they should be and are destined to become (a lot) poorer in the future.

      • Pelican says:

        This comment is pretty deep! Had to read a couple of times to really grasp all that is being conveyed here. A classic example of why the comments section here on WolfStreet is just in a class of its own!

        Now that I digest all of it, couldn’t agree more!

        And I worry about the future generations. When they look back at who/what decimated their lives, it would be unmistakable that the “adults” (the policymakers – monetary/fiscal) of these last few decades wanted to live high on the horse on the backs of the future generations. There couldn’t be worse bunch of wussies unwilling to muster up any semblance of fiscal prudence, any amount of honesty. Extend and pretend forever, until it all collapses on its own weight, and then declare “no one could’ve seen it coming”.

  3. MiTurn says:

    “The broadest Consumer Price Index (CPI-U) spiked 0.9% in October from September, and by 6.2% from a year ago…”

    I’m feeling it too, now that I live on a fixed income. It’s called experiential learning.

    • Minutes says:

      Just work more. Oh wait you are retired. Well you can just gamble those dollars in crypto or NFT. Our economy reminds me of the Seinfeld episode where Elaine says ‘Fake…fake…fake’

    • Swamp Creature says:

      I’m taking Wolf’s advise. The only hedge against this inflation is to stay in the workforce even after you’re retired. Work until you no longer can. Its working so far. My generation will have no real retirement. That’s something for the history books.

      • MiTurn says:

        SW,

        I’d work if I could, but not an option. Hey, maybe I’ll buy and flip houses…I’ve heard it’s like instant money.

        • Swamp Creature says:

          MiTurn

          Too Late! All the big money has already been made. You’ll be riding this roller coaster downhill.

      • Augustus Frost says:

        It’s not actually for the history books.

        For over 5000 years of recorded history, most people worked until they dropped dead. It was only in the 20th century that mass retirements first existed.

        There is nothing in history to give anyone any reason to believe that mass retirement should be a future expectation. We don’t know if it’s a temporary aberration but this should be anticipated as a legitimate (and likely) outcome.

        • Wolf Richter says:

          Correct, but the timing is a tad longer — going back to the 19th century, barely…

          In 1889, German Chancellor Otto von Bismarck turned Germany into the first nation in the world with an old-age social insurance program. Originally, the retirement age was 70. But since not many people lived that long at the time, it was reduced to 65 in the early 1916s so the lucky ones could enjoy a few years of retirement. Many didn’t make it that far.

          My understanding is that many companies used this as a ceiling and instituted forced retirement on your 65th birthday.

        • Depth Charge says:

          Yep. “Retirement” is a new concept and a pipe dream which will go the way of the buggy whip. More than half of Boomers don’t even have $50,000 saved.

      • Old School says:

        That’s definitely a choice, but not the only one.

        It really helps to master good personal finance and try to master portfolio management if you are geared toward that. A person that doesn’t master those two life skills will have a tough time ever getting off the hamster wheel. You are on Wolf Street so that’s probably not your situation.

        The average person does a really poor job managing their retirement accounts because we are amateurs that are being outgunned by professionals.

        The amateur has some advantages in that he can have a longer term perspective and can be nimble, but in nearly all other aspects we are outgunned.

  4. Wisdom Seeker says:

    I think if you smooth the CPI-U data a bit and then graph it against the “inflation expectations” data, you’ll learn that people’s general inflation expectations are basically that inflation will keep doing what it’s just been doing.

    Basically no one can forecast inflation, but when inflation is surging we all start talking about why (awareness increases), and then we resort to the heuristic of assuming that the future will most likely be similar to the recent past.

    Cognitive psychologists and/or Econ-oriented psychologists could probably could have a field day with this dataset!

    P.S. Same applies to the stock market – we tend to assume that recent past performance is indicative of future returns – which is often wrong and why funds all have huge disclaimers about this in the prospectuses…

    • Wisdom Seeker says:

      Update: did this with FRED using CPI-U, the Michigan Inflation Expectations monthly survey series back to 1978, and the TIPS/Treasuries 5-year inflation breakeven (“bond market”) data.

      Michigan Inflation Expectations track preceding inflation quite well! But people skeptical of temporary dips in inflation (expectations don’t fall), and expectations tend to lag in magnitude when inflation surges.

      The “bond market” (in quotes since it’s not a true market when the Fed is actively trading for policy reasons) also fails to surge until actual inflation surges, but tends also to be very skeptical of inflation surges (as well as dips) and is therefore a terrible predictor when you need it most. But it’s more accurate than the Expectations survey at “predicting” the current level of inflation (which isn’t really a prediction is it!).

      To see for yourself, go to (http…) fred.stlouisfed.org/graph/?g=IL7B

      • Squeemey says:

        Thanks for the link. In perusing around FRED, I came across this quote from St. Louis Fed President James Bullard on Nov 8,2021: “Depending on how the data come in, if inflation’s more persistent than we’re saying right now, then I think we may have to take a little sooner action in order to keep inflation under control,” (Sooner than the end of the first quarter, 2022).

        So, we can expect inflation to keep running rampant for at least 5 more months. Plenty of time to flip a house or two. At least one before February ;-)

        So, refi the house, buy another, get a new car (Anything), buy stuff to resell in 3 months, and live large. Cash out in February (Maybe later) and sit back and applaud the FED for enabling you to have a good time before the big meltdown.

    • historicus says:

      “inflation will keep doing what it’s just been doing.”

      Yes….and we havent even seen the Union strikes which will be EVERYWHERE….raising the price of EVERYTHING….
      spiral…

      • RH says:

        Amen. Unions AND other employees will be demanding raises. I already want to charge more for my work. This will be a vicious circle unless something big changes: think Zimbabwe or else, Venezuela now.

      • monday1929 says:

        Yeah, it’s the Unions fault :-)

    • RP says:

      This is why it’s so important not to follow the crowd when investing

  5. The Real Tony says:

    A good time to go on a long diet.

  6. DR DOOM says:

    Daly and other chairs in the Fed did their PH.D.’s by bowing to the Keynesian Religious Order and kissing its ring and turning their back on Milton the Unwashed and his belief in the Exchange Equation which has accurately predicted what would happen when +4 trillion stimulus was un-leashed 20 months ago. Daly proabaly had to self flaggilate with leather straps while denouncing Milton Friedman and his words of heresy over and over again. I denounce Inflation is everywhere and always a monetary phenomenon.

    • Franz Beckenbauer says:

      At university, one of my fellow students borrowed the “General theory on money and credit” from the debile british nobleman from the library.

      He made it through the first ten pages. Then he returned it. It was just too unbearable to read that utterly confused nonsense.

    • Tom S. says:

      They didn’t denounce Friedman at all the entire time they’ve been spewing Phillips curve and suggesting trickle down benefits. Well we’re getting trickle down inflation and massive wealth effect.

    • historicus says:

      Dr Doom..

      Even Keynes advanced the notion that stimulus be removed when the need abated.
      These central bankers forgot that chapter.
      All they are doing is stealing from the future to pay for the present.
      The notion that each generation is responsible for their own debt is …out the window.
      $9 Trillion national debt in2012…..forthe first 215 years of the nations…..now they tack on $21 Trillion in the past 12 years.

      • Augustus Frost says:

        Keynes contracyclical policy prescription is contrary to human nature. It was and is guaranteed to fail.

        Today’s culture doesn’t only believe you never have to pay the debt back, but that it’s possible and a birthright to have higher living standards forever by perpetually borrowing more.

        • fajensen says:

          So far “todays culture” has been totally vindicated, and they will never pay the debt back too.

      • Depth Charge says:

        “$9 Trillion national debt in2012…..forthe first 215 years of the nations…..now they tack on $21 Trillion in the past 12 years.z”

        Yep, and they just can’t help themselves. Now they’re trotting out the triple Bs. BrokebackBidenBuilds or some nonsense. These people are deranged lunatics.

  7. Djreef says:

    I’m watching CNBC and they’re talking about this right now – probably for the first time.

    Thanx for being way ahead of the curve Wolf.

  8. Bruce Kebbekus says:

    Might you comute the rolling average 3 month rate? I think the first 6 monthly numbers of the prior year bias this downward.It is much higher since about June.

    • Wolf Richter says:

      This is the rolling three month moving average, year-over-year rate. It doesn’t change much. It rounds some of the corners, and it lags 1.5 months behind current data (by definition), but otherwise looks very similar:

  9. Franz Beckenbauer says:

    It’s an empirical fact, lastly proven by the “Arab spring” movements, that revolutions start when expenses for food surpass one third of peoples’ income, with a rising tendency.

    Just a fun fact with no further agenda.

    • RP says:

      Sounds like what happened to Germany and Japan…both countries had hyperinflation before they started the second world war… doesn’t usually turn out very well when prices outrun earnings for most people

      • jm says:

        I’m pretty sure Japan never had hyperinflation before WWII.
        After the war the currency was massively debased to 360 yen to the dollar, and kept there until circa 1971, when I began my 50+ year relationship with that nation. The purpose was to inflate away the war debt. That was also the purpose of the German Weimar inflation; the German government had expected to win the war and pay for it by extracting reparations from the nations they had attacked (they billed the war as defensive against the other powers unfairly limiting their expansion). When they ended up the losers, they had no way to.pay the debt. BTW, the oft heard claim they were crushed by the reparations demanded of them is untrue; they paid almost no reparations, and much of what they did pay they borrowed from the U.S.. They suffered almost no physical destruction, and the cost of dealing with the horrific destruction in France and Belgium fell almost entirely on those nations.

        • Nick Kelly says:

          A lot of what you say is true. However, whether or not they ‘deserved’ it the suffering in Germany after WWI was very real and in the most basic want, food, was much worse than France.
          Germany was never self- sufficient in food, the sandy soil needs fertilizers, imported back then. In all German thinking pre-war the Brit Navy was dismissed as a factor, but after four years of blockade Berlin was starving. Pig slaughtered was down to a few hundred from a hundred thousand a week. Bread was made of all sorts of stuff. The troops were underfed but better fed. The end of the war did not help.
          And Germany did pay reps but space does not permit. A lot of it was in kind: coal from occupied Rhineland and timber etc. They also lost their few colonies.

          But the worst thing to happen to Germany as the Depression loomed was the Smoot Hawley tariffs. How could Germany a manufacturing workshop, pay reps and feed itself if cut off from markets? UK also did a kind of barrier: The Empire Trade
          Agreements.

          The impoverishment of Germany led to an era of sex tourism from the prudish UK as ordinary young women had to feed themselves. One young English student in Germany offered to pay his old tutor in advance when the latter had to cancel for a week due to illness. Next week he thanked the student for saving his life. He had been starving to death.

    • Augustus Frost says:

      You are confusing everyone with facts and logic. Can’t do that.

      Your example is one of many supposed “black swans” contradicting the ridiculous notion that today’s manic environment can last in perpetuity. A supposed “new normal”.

      • Jake W says:

        you know the famous proverb, “when the student is ready, the teacher will appear?” there’s a sad historical corollary that has repeated itself many times in history. “when things get bad enough, a dictator is destined to appear.”

        • NBay says:

          I fear there is just too damned much truth in that post, Jake.

          But well said, anyway, as we already got a taste of it’s truth.

  10. Crypto Jim says:

    Glad my crypto holdings are offsetting the losses from my limited U$D that I hold.

    • Wolf Richter says:

      So bitcoin plunged 50% and then recovered, all in six months, and it now lost 6% of its purchasing power in 12 hours, while the USD lost 3% of its purchasing power over six months?

      • Crypto Jim says:

        Easy to pick and chose a small period that supports your viewpoint. Lets look at a chart for ANY four year period since bitcoin’s existence and compare it with the USD to see that bitcoin is the clear winner. It’s not for everyone but it’s for me, my wife and young daughter who has owned it for several years.

        • Wolf Richter says:

          I pointed out “volatility” = “risk.” You’re taking massive risks and hope for massive gains. That’s fair.

          You’re not engaged in a risk-free activity with massive gains. That doesn’t exist. But you compared cryptos to a near-risk-free activity, such as holding Treasuries. And that’s apples and oranges. That’s what I pointed out.

        • Dave says:

          The banksters and deep state sure knew what they were doing when they created Bitcoin to suppress the price of gold and allow further debasement of the dollar.

        • andy says:

          Upvote for ‘limited U$D’.

          Good idea to diversify all your criptos into three different baskets. Got to be careful these days.

        • Depth Charge says:

          E-tulips just took a nearly 10% haircut in a matter of hours. Have fun, playa.

        • c1ue says:

          Read up on the Bezzle in Galbraith’s seminal book about 1929.
          We are in the best of times for anything remotely pretending to be an asset; when this changes (not if), multiples will fall across the board.
          I can see no reason whatsoever why bitcoin would not suffer multiple contraction as well.
          But most importantly, it is impossible to tell when the avalanche down starts. Tightening credit is the prerequisite – now we need an Enron/Worldcom/AIG/Bear Stearns to kick it all off.

        • COWG says:

          Your future may also be the clear winner in sign holding at WalMart…

      • Eugene says:

        BTC is not for trading,long term hold only,4 years at least.Trading crypto is like penny stocks trading.99% of traders lose.Especially boomers,their brain is not flexible and they don,t have balls to trade.

    • Franz Beckenbauer says:

      And how are your Tulip bulbs doing ?

    • Nick Kelly says:

      When the history of this period is written, the cryptos will amaze.
      At least with tulips you get a tulip. Long term it turned out for Holland: it makes about 300 million a year from flowers, largely tulips.

      When the kid asks the history teacher: but what did they GET when they bought it? Just zeros and ones?

      It is the perfect proof that a bubble can’t be observed from inside the bubble. Why do the zeros and ones that constitute a BC have value? Because people believe they do. BC lasts as long as they believe, and unlike a bar of gold or a barrel of oil, it will disappear if they stop believing.
      It has more connection to religion than economics.

  11. Frank says:

    Hedonic improvements count when they provide functional / efficiency improvements. A TV for example gets bigger and the image quality improved, real tangible improvements. For vehicles, increased fuel efficiency and safety are tangible improvements. But much of the rest is has arguable benefit for the basic function of he vehicle, i.e. the 6 way adjustable, powered, side mirror, as well as alot of the electronics. The marginal improvements are one reason why folks keep their cars so much longer. Is today’s model you your vehicle a vast improvement over the 10 year older version??? Another reason folks keep their vehicles for so much loner
    Also, much of the cost for trucks is pure price gouging because they can get away with it. The auto companies have told us a much. How does this factor into the suppressed CPI for vehicles? I doubt they made the equivalent of $20-30K per vehicle back in the 70s.
    I read an article years ago that noted that to make a sub-compact vs. a large truck took about the same effort/cost. Yes, material costs are a bit more, but both required 2/4 doors, an engine, seats, etc. Hence the manufacturer’s love of lux vehicles and trucks.
    One solution for truck inflation would be to drop the tariffs (25% “chicken tax”) on truck and allow for more competition.

    • ivanislav says:

      Apparently the administration is planning to add regulations that require all cars to have infra-red cameras starting 2026, supposedly just to prevent drunk driving. So either the car will stream video of you to the cloud where it is processed or it will have an on-board processor. Either way, that should be a negative hedonic quality adjustment as far as I’m concerned, but no doubt it will be booked as an improvement.

    • Paddy says:

      I just put a $4,000 engine in my ‘06 Expedition King Ranch. Then struts, CVs, steering rack, upper and lower ball joints, control arms, alternator, starter, water pump, radiator, and a battery. About $6k for a nearly new vehicle. When the trans goes, I’ll rebuild it.

      A new Expo will run you about $80k today. No way in bleep I’m paying that. Ever. The old girl will do me fine for another 15 years, or until IC engines are outlawed.

      I also have a ‘95 F250 diesel that I’ll be keeping forever.

      Btw, I’m buying now the parts I expect to need in the next few years. Including oil and filters.

      • historicus says:

        Paddy..
        “When the trans goes, I’ll rebuild it.”
        Hats off to you if you can rebuild one of those things.

        Get the parts now…yes. Our reliance on an unfriendly supplier will come home in spades. Lesson to be learned.

  12. Jezabeel says:

    Bitcoin may be a scam, but it has absolutely saved my savings and then some.

    • Crypto Jim says:

      Same here. Exponential growth.

      • Wolf Richter says:

        Bitcoin is back where it was 6 months ago, with a 50% sag in the middle. Doesn’t sound exponential.

        • Depth Charge says:

          Sounds like it just ran across Dolly Parton’s chest, and is about to fall off her body. I’m calling sub $10,000 in the next year.

        • Jezabeel says:

          Well people can pontificate and be disparaging all they want, but I could either have put it in the bank and lost 5-10% a year. I’m locked out of housing (f*** the banks anyway) With few options, and being VERY leery of crypto I did what desperate people do, took a risk, and thankfully it’s going ok.

    • ivanislav says:

      You haven’t made money until you sell. Don’t be the last one out.

    • ru82 says:

      I know several people who have made some good money in crytpos this year. Like 3x their normal salary.

      I heard an analyst say there are a lot people who instead of going back to work just to trade crytpos.

      Similar to the late 90s when a lot of people started day trading the dotcom bubble.

    • historicus says:

      are you out yet? lots of folk in your exact position.

    • andy says:

      “Bitcoin saved my savings”

      This should go on onto the Wolf’s next beer mug.

      • Wolf Richter says:

        And when it goes down 90%, as it has done before, I’d need another mug: “Bitcoin ate my savings.”

        • VintageVNvet says:

          To be clear Wolf,,, we the total Wolf fans, ( which I hope all here understand ”fan” is short for fanatic )
          DEFINITELY need a NEW Wolfstreet MUG!!!
          Please make it at least 24 oz,,, as that is what my preferred brewski requires when I pour it out the way I prefer…
          16 oz is fine for wine or tequila,,, both of which I would be happy to testify at the inn quests,,, in guests, how some ever,,,
          AT LEAST 24 OZ, please please please and thank you…

        • Wolf Richter says:

          I cannot even get a 15 oz mug. The glass shortage!

        • Brant Lee says:

          The mug needs to be about 36″ high to chart the inflation. And of course Tesla stock.

        • Swamp Creature says:

          Wolf,

          Stick with the 16oz mug. Don’t pay any attention to these alcoholics

        • NBay says:

          Along with the other website related requests, I get why the yacht picture is there, but how about one swimming in the Bay? A few of us here find that more impressive.

          And maybe a coffee mug for those of us that quit drinking simply because they have recently proved to themselves (over many fun filled years} that they just don’t like it anymore?

        • Wolf Richter says:

          “…but how about one swimming in the Bay?”

          Hahahaha.. Who wants to look at a white but tanned middle-aged male fossil in a Speedo?

          In terms of coffee mugs, I’m thinking about it. The design has to be different. Coffee mugs are a lot smaller than the big glass mugs.

    • Jon says:

      I have cryptos and it did well for me
      Although I have no faith in it
      It’s like a tulip bubble

      • Xavier Caveat says:

        I was about to throw out a ragged recliner and when I tipped it over a Bitcoin fell like manna from the sky, so I decided to retire.

      • Sams says:

        And the reason for the Tulip buble and the crypto bubles are the same. Inflation, there is a lot of cash that have nowhere to go.The cash cant be spent on consumer goods put into sane invstments.

  13. Micheal Engel says:

    1) The CPI – U trading range : 1987 low to 1990 high.
    2) We are still < 1990 peak, after sipping stimulus for almost two years.
    3) 1998 is resistance.
    4) In real terms, what followed the 1990 peak, was five yeas decline to 1995, the lowest point for RE, the nadir.

  14. Gian says:

    Interesting chart, “Purchasing Power of $1…”, shows a glitch upward in 2008/2009, when real estate crashed. I bought and held 6 houses in Southern CA during this time, 3 and 4 bedroom, 2 bath SFR’s for $70K to $82K , which had previously sold for the mid to high $300K’s. I also flipped 14 houses during this time and made a handsome return on my money. It would seem that the purchasing power of my dollars was much greater than the small blip noted? I was able to purchase 4 houses for less than the previous price of one house. How does this not equate to a stronger “rebound” in the dollars purchasing power?

    • Wisdom Seeker says:

      Gian, purchasing power depends both on the dollar and on the item being purchased. The “purchasing power” in Wolf’s graphing is compared against general consumer prices. And in 2006-2010 consumer items (food, clothing, gas) didn’t get cheaper nearly as fast as houses did.

      You made a great choice and benefited because housing prices had crashed much farther than most everything else. And then came back with a vengeance!

    • Wolf Richter says:

      CPI doesn’t include the purchase price of housing. See the charts further down. It only includes rental factors.

  15. Red says:

    Wolfs last car article, the Manheim Index data. It showed Vans appreciating the most. I was stumped but I have concluded that the new evictions coming online are forcing people to conclude that the van life is for them.

    • Nemo 300 BLK says:

      Vans are used frequently in construction, the service industry, and delivery, all of which are experiencing rapid growth. If you can’t get or afford new ones, you buy used ones. I live in a booming rural area that can’t build custom homes fast enough, and vans are the number one vehicle for the illegal subs probably because you can put several people and their tools inside and not see inside.

      • Brant Lee says:

        I don’t carry any illegal subs in my work van but it holds a lot of tools I can lock up. I can also haul almost 20′ long lumber on the top racks.

        Now, I could go out and splurge on an $80k pick em up truck and have to double my rates then also have to buy a trailer to pull because today’s truck beds won’t even fit 8 ft lumber. But you know, we all use illegal subs.

        • NBay says:

          Yeah, but the new trucks now have tailgates can perform cool dance moves, for some idiot’s hedonistic driveway delight.

          And it still pisses me off that warlords and people smugglers WORLD WIDE can get that perfect 1 1/2 ton (or more) no frills tough Toyota work truck and we can’t.

  16. ru82 says:

    The answer is just to buy cryptos. Then you never have to worry about inflation? LOL

    Michael Salyor said Bitcoin will go up forever.

    I wonder if more people will start asking to be paid in cryptos.

  17. What was BOE doing last week? If they had delivered on the (hinted) rate hikes then the road would have been clear. Now you are alone, so don’t do it Jerome. Don’t hike rates here. Be firm my man, a quarter point means nothing to the economy, and everything to Wall St.

    • historicus says:

      Do the right thing Jerome.
      Your parents were allowed to save and prosper and not be punished by a cabal called the Federal Reserve.
      Why should this generation come under the wrath you have plugged into the system…
      6% inflation……05% savings return (fed funds)

      NEVER EVER HAPPENED BEFORE….why? Because it is WRONG!

  18. Petunia says:

    I hate to rain on the landlord’s parade, but if rents are going up double digits and they require 3X rent as income, and incomes are not rising double digits too, the math just doesn’t work. The pool of qualified renters is shrinking with every increase. It’s not my opinion, it’s the math.

    • Gattopardo says:

      Sounds like what we’ve (I’ve) been saying about housing for a long, long time, as it outran incomes.

      *Eventually* the math doesn’t work. But if there’s any slack (excess income) now, then tenants can absorb increases for awhile.

      Plus, it’s possible that tenants merely shift down to lesser rentals. Everyone takes one step down the ladder, and landlords still win. Except maybe the the owners of the higher end places, but it’s also likely that their higher end tenants will always have slack and can simply pay up if they want to.

    • DawnsEarlyLight says:

      “Earth provides enough to satisfy every man’s needs, but not every man’s greed.”
      ― Mahatma Gandhi

    • DougP says:

      Lots of people make way more than 3x rent.

      • Joee says:

        That depends on where you live and where you work….most blue collar Americans (excepting maybe union members and business owners) cannot pay current rents with only a single income. Either 2 jobs or 2 wage earners are necessary. Certainly in coastal cities the math is even harder to manage.

    • Augustus Frost says:

      It’s another substantially created government problem in search of a “solution”.

      Porous border enforcement increases demand predominantly at the lower end inflating the cost of renting for those who can least afford it.

      Concurrently, government policy financializes the housing market creating rent seeking on steroids.

      The next solution will be expanding tax credits for homebuyers and more rent subsidies which will make housing even less affordable.

  19. Reynold Blight says:

    Here is a crazy outside the box suggestion:
    Because the FED has bought trillions of dollars of Treasury securities to keep interest rates artificially low (and now well below the rate of inflation) which they can’t sell (now or in the foreseeable future);
    and the federal government requires that working people have a chunk of their income withheld to be “invested” in Treasury securities (Social Security);
    why doesn’t the Fed simple donate a trillion or two to the Social Security Administration? It’ll keep the seniors, at least, off the streets during the coming melt up.

    • Wolf Richter says:

      SS has been a lender to the government. It lent nearly $3 trillion to the government — those are Treasuries in the SS Trust Fund, earning interest for the Trust Fund, albeit too little interest. For now, the SS Trust Fund doesn’t need money from the Fed — it’s got nearly $3 trillion.

      • NBay says:

        Since I spent the last 17 years of my long work life (since 14) at the Post Office, they also hit the FERS “G” (treasury bonds) “401K” fund when needed, and ALWAYS at debt ceiling fight time.
        Our corporate and Wall Street masters REALLY hate Unmarketable Treasury Bonds with a passion. They will eventually end it, but I burnt through all mine building an off grid home, so I won’t be one of the millions it hurts.

    • Augustus Frost says:

      The trust fund is an accounting shell game.

      Social security benefits are ultimately paid out of tax receipts. First payroll taxes and if necessary, the general fund.

      There is no “money” in the “trust fund” Congress spent it as soon as it was received, replacing it with an IOU. Conceptually, it’s no different than borrowing from yourself.

      • Wolfbay says:

        Al Gore assured us it’s a “ lock box”

        • MarkinSF says:

          No. What he said is that it should be in a lockbox. So that Congress cannot spend it on anything but SS benefits.

      • jm says:

        By buying those Treasury bonds and thereby keeping them off the market, the SS trust fund reduced interest rates in the private sector. Indirectly, the money was invested in the private sector, implicitly increasing investment that should generate the earning power to pay them off with interest.
        It was always implicit that at some point the private sector would have to be pay them off from general revenues. Workers paying into the system paid about 30% more than would have been needed to run the program on a pay as you go basis.

  20. R2D2 says:

    It is worth remembering that you can still make your “personal” inflation go down.

    For example, we have knocked -50% from our car costs, -40% from food, and -30% from vacations in the past 5 years.

    It takes a bit more effort, research, and forward thinking, but it is definitely still possible to reverse inflation, without a significant loss of lifestyle.

    For example, shop around for vehicle insurance, holiday in quieter times or places, and so on.

  21. Brent says:

    I predict that Great Bear Market of 2021 ( which lasted 2 days,Nov 9-Nov 10 ) will be over by tomorrow morning and stocks will resume their ruthless soaring.

    Well,since “LET’S GO…” nowadays is worse than 4 – letter word:

    VAYA CON DIOS SEÑOR POWELL,AS FAR AS YOU POSSIBLY CAN !!!

    • Old School says:

      Trouble with the current situation is we are above 99% percentile on stocks and probably bonds too. It means returning to normal is a catastrophe.

      • Brent says:

        “Normal” is not what it used to be…

        “The Venezuelan Stock Market’s on Fire as Inflation Heads to 1,000,000%”
        BARRON’S

      • Brent says:

        “We expect the government to continue to run wide fiscal deficits financed entirely by an expansion in base money, which will continue to fuel an acceleration of inflation as money demand continues to collapse”
        “A shrewd minority are using the stock market as a sort of inflation-linked bank, buying shares to deposit cash and selling them to withdraw it. A favored stock is Banco Mercantil, which has businesses outside Venezuela”

        Why do I need BofA and its pathetic 0.08% savings yield when stocks will skyrocket 1% daily (dipping intermittently-just to create a simulacrum of working market) ???

  22. Finster says:

    “ Well, she said, inflation would be “watched carefully,” and the Fed “wouldn’t permit” a return to the double-digit inflation of the 1970s. ”

    Too late. If you calculate the CPI the same way we did in the 1970s, we’re already there. It’s only lower now because of fudges like “homeowner’s equivalent rent” and “hedonics”.

    • Depth Charge says:

      At least she could lie a little better, but these people know how stupid Americans are so the lies don’t even have to be good. As long as they can fill their bloated gullets with some high fructose corn syrup while glued to an iPhone, s’all good.

  23. SocalJim says:

    ” Most Monstrously Overstimulated Economy Ever”

    Talk about sticking your head in the sand because there is a lot more wrong than just that.

    • Wolf Richter says:

      Yes, this whole mess started under Trump (March 2020), and Trump’s man Powell has been doing this shit-show for 20 months now.

      • SocalJim says:

        The main problem is globalization … 3 presidents and VPs before 2016 are the perps.

      • Tony says:

        Started under Trump?

        This mess started many administrations ago.
        You have a very informative web site with many conservative followers, don’t blow it.

        • Depth Charge says:

          I think he’s talking about this latest clown show act by the FED, and he’s right. Trump ran his campaign on sound monetary policy, calling Yellen’s largesse a “big, fat, ugly bubble.” Yet once he got in, he did a complete 180 and was publicly flogging Powell, bullying him to lower rates, and celebrating the most massive stock bubble in history as some sort of grand accomplishment. I recoiled in horror. SOB.

          I would NEVER vote for Trump again after that, and I didn’t vote for him last election. And it cost him. I surmise there are many more like me who didn’t appreciate the lies. I did not, however, vote for the current Cadaver In Chief, either.

        • ru82 says:

          Yes Tony. I cannot find the the graph but I think there was $32 Trillion in Bailouts under Obama like TARP, QE1, QE2, QE3,…. from 2009 to pre-covid. Covid added another $5 to $8 trillion I think.

          No wonder stocks, housing , etc are all up big.

        • MarkinSF says:

          So stating the truth will destroy his base? Sounds about right.

        • COWG says:

          And many liberals…

          And many older folks…

          And many younger folks…

          And some wealthy folks…

          And some not so wealthy folks…

          And some international folks…

          And some people who say many smart things…

          And some people who say some not so smart things… hint hint…

          Many details of a painting become apparent when using less than a broad brush…

        • drifterprof says:

          LOL – so Trump represents “conservatives”?

        • Swamp Creature says:

          The real mess started in year 2000. Not that it wasn’t bad before that year. After that year we passed the point of no return. IRAQ War, Bernanke Fed, massive federal deficits and money printing, corrupt media, etc. Need I say more. Its all over folks, get over it.

      • Squanky says:

        Wolf, you disappoint yourself with “this whole mess started under Trump”. No, the whole mess started long ago. Unfortunately, Trump, Democrats, Republicans and the whole of our Government failed to support a rise in interest rates and let this monster continue to thrive.

        • Chris says:

          This chart shows clearly when and how much debt was added. note steep slope starting 2017

        • Wolf Richter says:

          Chris,

          You description is wrong. The date is wrong. This is the second time you said this.

          The slope didn’t steepen in 2017. Look at your chart again.

          The debt-in-trillions-chart steepened in 2020 and 2021, not 2017. And my chart which is daily shows this a lot better, and that’s why I inserted it, instead of your link, in your prior copy-and-paste comment.

          And the Debt-to-GDP version of the chart you linked shows FLAT debt-to-GDP from 2016 through 2019, with a spike in 2020 and 2021.

          It seems you’re trying to fake the data to make a fake political point. You’re talking to the debt-maestros here, we go through this very frequently here, and you cannot pull a quick on us.

  24. Micheal Engel says:

    1) In 2008 the CPI- W went straight down, without any change of direction, without stopping to fill the tank, from 6% to minus 2%.
    2) The 2015 low was a higher low, a trigger to move higher. The 2020 low was a trigger to move higher.
    3) From Mar 2020 low the CPI – W jumped straight from 0% to 7%.
    4) Today CPI reading might be a trigger to move lower.
    5) The CPI will retrace the whole move between zero and 7%, in stepping stones, or exceed it, going to negative rates.
    6) After few dots at the top to start the engine, the CPI will move lower.
    7) Negative rates are the climate change.
    9) In Apr 2020 a speculator in the electronic market paid $40/b to get rid of his physical oil.
    10) Gold miners short to deliver nuggets.
    11) Gov rob people at the pump, suppressing prices with inflated taxes. The producers can sell below cost, at any price, if the gov pay them enough.

  25. Dan Romig says:

    At negative 6% when compounded daily, it takes 11 years and 202 days to turn a one dollar bill into fifty cents.

    Applied mathematics, you know ….

    • Brent says:

      It is an old joke of 1919 vintage:

      “Nowadays a man without a dollar is 50 cents better off than he once was”
      (Frederick Lewis Allen “Only Yesterday”)

      50% of college grads still dont get it and react with puzzled “Huh ?”

      • COWG says:

        The other 50% pull out their phone and ask Google…

        • Brent says:

          Not surprisingly many did.Google search “A Man without a Dollar” came up with an obscure song about silver dollar.No dice.Back of the envelope & pencil to the rescue !

          4-square table with net worth of a Man without a Dollar in constant dollars and current dollars explained everything.

          Inflation increases the net worth of indebted individuals 😁

      • NBay says:

        Fractional banking often fractures….(as all of the many creative financial variations on the same theme do).

        • NBay says:

          After the First Great Awakening, Ricardo-think was trashed by evangelicals who preferred the notion of human desires followed by divine atonement for them, calling it the “business cycle”.

          Calvinism is VERY DEEP in the American psyche….sadly.

          As Seneca said c 50 AD, “Religion is obvious to the ignorant, foolish to the wise, and very useful to the rulers.”

    • historicus says:

      While we are at it…

      2% inflation rips 22% off the dollar in ten years
      2.5% inflation rips 28% off the dollar in ten years.

      A billion seconds is 32 years
      A Trillion seconds is 320 CENTURIES!!!!!!!!!!!!

      Now …what does 5% inflation do over ten years?
      takes off 62% off the dollar.

      Yellen and Powell are keeping a close eye on it….
      “It” being the destruction of the dollar….and an advancing of globalistic currency reshuffle…….digital global “money”.

    • Old School says:

      Yep. This what stacking precious metals is all about and will pick up until situation improves. Costs nothing to store in your house for 12 years. If you never need to cash out, leave it to your kids.

  26. SocalJim says:

    If the FED cuts back QE, you will get negative GDP with inflation. That is the issue.

    • The Fed is still buying bonds and they aren’t raising interest rates. They aren’t doing anything. If you apply the CPI readings to nominal GDP your overheated economy looks more normal. This confirms CB policy inaction (BOE). Meanwhile the dollar and the shadow dollar (bitcoin) are rising, with different outcomes for the users.

    • historicus says:

      Maybe we need a few quarters of reality….

      Central bankers interrupt free market forces when they attempt to deny corrections and cycles…things that flush excesses….that’s why they are called corrections….THEY CORRECT.
      In so doing, they allow excesses to be pent up. They protect the poorly financed. Excessed build, the eventual flush becomes worse.
      But central bankers know better than the free market…..just ask them.

    • RP says:

      The real issue is if they let rates rise there will be many who cannot repay their debts, and there will be big falls in asset prices.

      Borrowing has skyrocketed – worldwide – under low rates and qe. Governments, companies, families etc cannot repay the higher interest bills.

      I think they’ll keep letting inflation run hot to deflate the value of all those debts, before they raise interest rates and kill off inflation.

      • Old school says:

        All these PhD geniuses could read an hour of history and understand that once you start taking the first hit with the printer, you are an addict.

    • Nacho Bigly Libre says:

      There was a very nice thread here on why measuring economic success using GDP as we do today is extremely misleading. Under the blog entry “The Mess of China’s Over-Leveraged Property Developers Spills into California”. Worth re-reading.

      Oh and btw we want the Fed out of the picture, now. Fed has proven once again it can only cause bubbles, distortions and misery.

  27. joe2 says:

    Owners equivalent rent appears to me to do a tricky thing. It turns a private cash based purchase into a commercial investment. I buy a house to live in and it costs me mortgage, taxes, insurance, utilities, maintenance. When I owned and rented out houses depreciation was a big consideration and utilities, insurance and maintenance were tax deductible. A home owner who just lives in his house, gets none of that and may even have his mortgage interest and tax payment deductions capped.

    Seems to be just another way to shave the inflation rate.

    • Paulo says:

      Plus, every time you buy something at a building supply store and such you can apply it against the rental income.

    • historicus says:

      Owners equivalent rent…

      is a survey.
      Now why would a survey, compiled by whom and only known to some, be the metric when there is hard core Case Schiller data to rely upon?

  28. Swamp Creature says:

    ON the day the data on accelerating inflation was released Janet Yellen gave a speech on Federal Reserve’s additional mandate to promote diversity.

    • Depth Charge says:

      Virtue signaling. It’s what all CEOs, corporations, political talking heads, celebrities, etc. are doing. None of it is authentic. In cancel culture, nobody wants to take the financial hit of finding themselves at the receiving end of a wrath of hatred and punishment from holier than thou psychos with closets full of skeletons.

  29. Joe says:

    What does it means for those non USD countries? BTW, DXY is not the upside.

  30. A says:

    Didn’t the FED think that inflation was “transitory” in the early 1970s and would just work it’s way through the system? Didn’t they think stagflation was impossible according to their models? Didn’t they think it was a temporary response to a small 4-month oil crisis and it would work it’s way through the supply chain and be back to normal in no time?

    Seems the policy of “hope inflation solves itself” was attempted for a decade and the results were a clear and obvious failure.

    • historicus says:

      In the 70s we had a Fed that FOUGHT inflation.
      Now we have a Fed that PROMOTES inflation and lets it run hot.

      That ends the comparison discussion between the 70s and now.

  31. Micheal Engel says:

    1) Savanna & Long Beach containers ships, clogged outside the ports,
    are loaded with washing machines, cell phones T-shirts…ordered
    by the big box or online giants for Xmas.
    2) Game over : we are few days from Black Fri.
    3) Those rejects, those unwanted goods will be sold at deflated prices.
    4) Chinese mfg don’t want them back. The giant retailers can’t use them,
    so there must be a solution, because those giant container ships have to move on, empty.T hat’s is why todatybinflation spike

    • fajensen says:

      Regarding “3” – I think they will be sold at the regular, brand-name, prices. Those empty shelves will be re-stocked with what “we” have to stock with, not what “we” planned to stock with.

      These “special deals” are manufactured extra cheaply precisely for Black Friday, but, most people cannot tell the difference. Vendors will get away with more profits and this will just boost the existing trend in brand-name degradation.

      • COWG says:

        Actually f, this has been going on for years…

        It used to be called the WalMart effect…

        WalMart would sell the exact model of let’s say a tv… the selling price price would be less than anywhere else… except the WalMart model would have only two HDMI ports instead of 4… things like that…

        I think Petunia ( our resident fashionista) could chime in on how the manufacturers over the last years also made cheaper version of clothing specifically for sale at their “outlets”….

        • Petunia says:

          I don’t mind when the outlets sell different merchandise at lower price points, if you know the premium line, you know the difference. What I don’t like, which is prevalent now, is when the “premium brands” raise the prices as the quality is tanking, and the products have hit saturation points.

          Also there is a level of price gouging going on with designer brands which feels like a huge ripoff. I have purchased many designer items, and always knew I was spending a lot for what I purchased, but always felt it was warranted. Now I see top of the line items which don’t deserve the rank or price. Most of what passes as high end are mass produced items, which should be selling for a fraction of the price.

    • Sams says:

      There may be no solution needed. Due to capacity constraints the ships are offloaded and the goods transported at pace no faster than the store can stock them. Sales may be slow, but not to the degree that storage place at the shop is a problem.

      Price reduction? Well due to the troubles getting the goods to the store and other considerations, less is ordered in to avoid oversupply. The main consideration, prices are to stay.

      • COWG says:

        I don’t know, Sams…

        I can see a scenario of supply exceeding demand, especially on larger ticket items…

        Do you think its a possibility that x item is marked at retail, but then sold at cost to flush excess, then afterwards higher retail price becomes the norm…

        It would be interesting to know exactly what inventory is in the floating warehouses…

        • Sams says:

          The answer to the last question probably gives the answer to the previous. If supply in the chain can be sold at the pace it arrive the shop without building much inventory my take is that there will be no sale.

          At least not at cost. Maybe a “sale” with a slight price reduction as often done in marketing, but no more.

    • John says:

      ME: Gareth Bale is on the cusp of his 100th cap

    • joe2 says:

      History is full of repurposed holidays when one ruler or religion takes over the culture of a conquered people. Social transitions are smoothed by renaming existing holidays and traditions to minimize psychological trauma and political unrest. Many of our current holidays go back to the Sumerians.

      So Black Friday Thanksgiving will just transition to Black Friday Easter and the Easter bunny will bring many diverse colored washing machines and iPhones for the peasant worshipers of Mammon.

      • Nick Kelly says:

        The word ‘Easter’ has the same Latin root as ‘estrus.’
        Essentially a festival of Spring and fertility.
        So rabbit is a good symbol.

    • Shiloh1 says:

      My washer and dryer came from Ripon, Wisconsin.

    • LK says:

      Let’s kick things down the road just like the eviction moratorium and other tactics.

      We’ll just reschedule Thanksgiving and Christmas until everything is back to normal. Truly, we will have Christmas in July.

  32. Rowen says:

    Massive monetary stimulus meets supply constraints from both supply chain disruptions + concentrated capitalism.

    What could go wrong?

  33. NJB says:

    It’s disingenuous for Yellen to say the Fed stands read to act if needed given the Fed is still buying bonds and is committed to not raising rates until mid next year. Also, we all know that whenever there is a high inflation print it is dismissed as transitory and hence any comparisons with inflation in the 1970s is immediately dismissed.

    • Bead says:

      Hellen doesn’t mean a word she says. COVID is their Magic Money Tree opportunity. It has become obvious.

    • Old School says:

      The narrative is more truthful than reality now. Didn’t you know?

      • historicus says:

        The comparison between the 70s and now stops with this FACT.

        In the 70s we had a Fed that FOUGHT and FEARED inflation.
        And reacted accordingly.
        NOW, we have a Fed that Promotes inflation, and doesnt lift a finger to halt it.

        A nefarious and manipulative breed of Federal Reserve People now populate the Fed. And the compliant committees in Congress that just might identify such seem partner to the program.

        • Depth Charge says:

          It’s a bunch of wealthy, corrupt insiders looting the US Treasury and destroying the country. We found that out with the insider trading from the FED officials who promptly “retired.” They’re printing their own bank accounts higher. And nothing but CRICKETS from this unbelievably corrupt administration.

  34. Roger Pedactor says:

    30 year Treasury blows the roof off. The DXY still super strong. 5 year rocketed too.

    WTF?

    • NJB says:

      Higher bond yields = stronger USD

    • Rowen says:

      The dollar index is kinda of like the G7, less relevant in 2021 then 1951: Euro, Swiss Franc, Japanese Yen, Canadian dollar, British pound, and Swedish Krona

      Try the currency pairs for the new multipolar world.

      USDRUB or USDCNH (or CNY)

    • Escierto says:

      I saw that too. The DXY hit a yearly high rocketing upward. It seems like everybody wants Uncle Sam’s toilet paper!

      • historicus says:

        Tallest midget in the room.

      • The Real Tony says:

        The exact opposite will happen. When the suckers who bought U.S. dollars figure it out it will already be too late. The U.S. dollar or DXY index will crater in a freefall down to the 74 level. This isn’t the 1970’s and Powell won’t raise interest rates to anything near the real inflation rate making U.S. dollars worthless. At the 74 level on the DXY index a stock market crash is very possible as the stock market is most likely to crash when the value of the U.S. dollar is low not high.

    • Bobber says:

      People smell a stock market crash, especially Elon Musk.

      • ivanislav says:

        I read his options were expiring, ie. he had to sell existing shares to raise cash to exercise the options or they would expire worthless. Also to pay back his asset-backed loans.

        • Bobber says:

          Better check into that. If you believe that explanation, that would make Musk a net buyer of shares, not a net seller, and Tesla bulls would be spouting that fact from the mountain top, but they are not.

      • VintageVNvet says:

        Might an ”alleged” $12BB TAX have something or more to do with his selling??
        Just asking, eh
        IMHO, he master of the clearly out of control of anyone internet scofflaws and SO much similar these days, when the GUV MINT is SO clearly WAAAYYY behind,,, and, so far, also IMO, is not likely to catch up to this guy or SO many others in spite of the very clear efforts of various and sundry nations,,, maybe ALL nations from what I read daily…
        NOT a fan of total global GUV MINT,,, but beginning to think that would be better for WE the PEONs of each and every area of the world than the very clearly screwed up situation currently prevailing…
        Hope to hear some wisdom with regards clear challenges of each and every local municipality challenges with the current situation…
        Thank you.

  35. NJB says:

    Great caricature of Powell. He’s definitely under pressure. He painted himself into a corner earlier this year by saying the Fed wasn’t even thinking about thinking about tightening monetary policy.

    • historicus says:

      Painted himself into a corner?
      OR
      Painted an accurate portrait of a locked down and determined functionary dedicated to some nefarious plot to destroy the dollar, inflate the currency, and facilitate reckless government debt creation?
      Never have fed funds been so below the promoted inflation……..both contrived by the Fed. Why?
      They dont lift a finger.
      They STILL are buying near $120 Billion a month of federal paper…
      foot on the gas…..with 6% inflation!

  36. Micheal Engel says:

    1) Thanksgiving Turkey use inflation to reduce labor cost.
    2) Turkey is the newest European and the ME mfg hub. They produce Toyota Corollas, transit vans, sophisticated military hardware & drones, selling Iranian oil for Euros, dollars and gold.
    3) Ford use to produce transit vans in Turkey, but now they are assembled in Kansas City. Turkey’s Ford Otosan had a change of name.
    4) Pete Buttigieg, Harvard graduate, will find a “racist” solution to those clogged containers, coming from China, South Korea and Vietnam, loaded with goodies for Xmas ==> selling them for “free” to the underprivileged, after Xmas.

    • Sams says:

      #3, Theys stil make Ford Transit vans in Turkey. They manufactured the Transit Connect, now they manufacture the Transit Courier.

  37. Micheal Engel says:

    DXY weekly entered Mar 9 2020 fractal zone.
    It will be down soon. SPX & NDX built a new backbone.

  38. phleep says:

    There are ants and there are grasshoppers. Ants build for a rainy day (deflationary or inflationary). What I hear now (across the media and here) are grasshoppers panicking and screaming. This is hardly the moment to start figuring out strategies and answers, as the moment (thanks Mandelbrot) is, in a sense, compressed, time is bunched up and the movements can steepen, even go blatantly fractal. Ranting and blaming is perhaps by now a waste of precious time too. But many folks are, as always , just waking up and blinking and saying “gee whiz, maybe I should adjust my behavior ….” Too late, Tinkerbell. Catch you on the next cycle, if you are still here (and if I am). My money’s on me (and yours on you).

  39. historicus says:

    “panicking and screaming”
    Where?
    Stocks essentially all time highs.

    What is going here is questioning. What is the Fed for if not to quell inflation……yet they do nothing when it is at 3 decade highs. Whom do they serve, is another question.
    This inflation hasnt even begun in my opinion. Every union in the country is about to go on strike….which will spiral the inflationary effects. Then you might see some “panicking and screaming”….and justified.

    • phleep says:

      > “panicking and screaming”
      > Where?

      Everywhere across the media-sphere, dominated by this buzz. The word inflation is replicating literally millions of times today. Try looking at any news source, the first few words that flash. It sure sounds like hysteria to me, like an ant-hill that has been excited, or rather, to stay with my metaphor, a herd of grasshoppers whose frolics have been disturbed.

      Yes, kudos to this site for being ahead of the curve.

      The cure for high prices is high prices, coming to an economy near you. A buyers’ strike MUST ensue, with the state of personal finances, right? OK then.

      What the Fed needs to do is find its backbone and hold to a reasonable line in the middle, while things rebalance. (But I can imagine a replay of Nixon’s auditioning Arthur Burns, with Biden and Powell now.) As in ’08, some folks are very poorly positioned, and will have shrill cries.

      As in ’08, we have a lot of good things in this economy, and I think an endless runaway process unlikely. But many folks will (with standard cognitive error) anticipate it will just keep going the same way, as they did in recession. That’s what Mr. Market does, which is to transfer wealth to those who know better.

    • phleep says:

      Stocks at all time highs:
      Every heard of panic buying?
      As in, dumping dollars for something perceived to hold value better(especially when housing is out of reach)? That would explain all sorts of asset spikes now.

      I am holding a good dollar cushion, like a good recession-baby (it paid off several times in my life to date, especially after crazy asset run-ups).

  40. Swamp Creature says:

    We’re heading for another Argentina. 50% inflation there with no end in sight. Add in corruption at every level of government and business.

    • Swamp Creature says:

      Look at NYC in the mid 70s as a model to where the whole country is headed. Massive stagflation hung over from Carter, municipal bankruptcies, strikes of transit workers, teachers etc, Look for the current administration to rev up the anti-inflation gimmicks like the WIN “Whip Inflation Now Buttons”. WIN buttons didn’t work then and they won’t work now.

  41. Dazed And Confused says:

    Makes one wonder what inflation reading would cause Powell et al to change course and immediately halt QE, raise interest rates and start QT?

    Clearly 6% is not enough?

    How about 7%? 10%? 15%? 25%?

    • historicus says:

      thats where we are headed…
      Every union in the country is going on strike….and the spiral will be unending…..until the Fed does something.
      Forcing a great RESET? Digital currency and even more central banking control? Create the emergency?

  42. YuShan says:

    The problem is that none of the policy makers have skin in the game. In fact, they have negative skin in the game: they all benefit greatly from inflation.

    They should be forced to put all their wealth into cash to be able to make an unbiased assessment.

    Most people in power really have no honor. It is all about gaining advantages for themselves and their friends. Nobody seems to take into consideration whether the choices they make are moral. But for leaders, that should always be the first consideration.

    In the mean time, all we can do to resist this is to create our own parallel structures, the same way that dissidents in the former communist block resisted their suppressors.

    In this case, we should adopt an honest, parallel monetary system BY OURSELVES, bypassing the banks. We should adopt gold as money again. Compared to only ten years ago, there are few barriers to do this now, with several non-bank options available and growing into a complete ecosystem.

    • historicus says:

      Yushan
      And of note, all those who promote inflation on us, who say dont worry about it….
      have inflation protected pensions awaiting them for the rest of their lives, and likely the finest medical care as well.
      Yellen has at least three pensions (U of C, Fed, Treasury) not to mention the payback “speaking fees”. Add in Bernanke and Powell.

    • historicus says:

      “we should adopt an honest, parallel monetary system”
      Isnt that what CRYPTOs are?

      How many Fed Governors are long Cryptos? Fair to ask.

  43. Xavier Caveat says:

    Now I’ve one thing to say, and that
    Down the road 2022 2% inflation play!
    Dammit Janet, I love you
    Dammit, Janet

  44. AdamMu says:

    Mr. Richter, curious if you think a stagflation scenario is far more plausible now. If you square what is clearly becoming out-of-control inflation with logner-term structual changes to the economy such as Baby-Boomers exiting the workforce while also reducing their spending as they downsize their homes, etc, it all equates to a slowing economcy coupled with the need to increase rates to combat inflation in the short-term.

    I wouldnt be surprised to see another U-Turn in rates over the next 3-4 years as a result.

    • Wolf Richter says:

      AdamMu,

      Yes, boomers have started to leave the labor force. But the millennials, an even bigger generation is now entering peak earnings and consumption years. So that balances out. When the millennials are starting to retire, that’s when you have to worry because there is no equally big generation behind them. But that won’t happen for a couple more decades. So until then, you can take the boomers-disappearing-issue off your worry list.

  45. Dazed And Confused says:

    So the last time inflation was this high in 1990,

    the Fed funds rate was approx. 7.5% and 30 year mortgage rate was 10%.

    Currently they are around 0% and 3% respectively.

    WTF?

    • historicus says:

      That’s right.
      The FED HAS BEEN HIJACKED to the benefit of a few.

      Who issued the inside scoop that the Fed would shirk their duties and not address inflation, that they would punish anyone who didnt buy stocks, real estate (things the elites own) and now BTC.

      You dont even have to go back that far. 1999 and 2006, with less inflation than now, 30yr mortgage was 6%.

      How is it that there are those so brave, so certain that the Fed would not, will not answer their call to duty? Where would the markets be if the Fed has stood to their post?

      Powell solves the problem of Fed’s divergence from their mandates/instructions/agreements for their existence….

      With a New Mission Statement…

      “It is the Federal Reserve’s actions, as a central bank, to achieve these goals specified by Congress: promote unemployment by providing cheap money to the federal government to dole out and encourage idleness, promote inflation, punish savers and holders of dollars, and promote record low long term interest rates so as to facilitate the pulling of wealth forward from the future generations of the United States, and we will partner up and take advice from outside entities that have big bets on in the markets.””

  46. head scatcher says:

    All my life gold and diamonds were the ultimate sign of wealth. I don’t know how diamonds are faring, but gold is the only thing in the world not going up in price. How you figure that? Inflation hits everything but gold.

  47. Mendocino Coast says:

    Now is the Real Estate Market going to turn I am thinking humm
    I bet listings are going to Rise

  48. Bobber says:

    The truly odd part of our inflation problem is that legislators are silent. Aside from some truthful accurate statements from ‘Senator Manchin, I don’t see any Congress persons going on record with criticism, even though runaway inflation negatively impacts 90% of the population.

    • historicus says:

      Bobber…
      Yep, Congress is silent because they love the federal govt borrowing at RECORD LOW interest rates with the highest inflation in 30yrs.
      This is the great flaw in our system. IMO.

      Be sure to nominate a loose money guy the head the Fed if you are President.

      Senate Banking Committee, run by a Dem Sherrod Brown. He knows that the big spending bills have a better chance when borrowing costs are unrealistically low.
      All the Congressmen, Pelosi, Feinstein and the like, must all be fully invested so as not to talk about fighting inflation.

      • historicus says:

        “The final bill, the Infrastructure Investment and Jobs Act, passed with several key provisions Brown secured for Ohio communities. As the Chairman of a key committee on infrastructure legislation, Brown delivered big investments for Ohio.”

        Do we expect this politician to tell Powell to fight inflation and raise rates, when he has the government borrowing at these low rates and spending the money in his home state….in HIS NAME?

        • Depth Charge says:

          “Brown delivered big investments for Ohio.”

          You mean like massive inflation and poverty?

  49. doug says:

    Inflation was a BIG news item on several local TV news broadcasts. They devoted a lot of time, and footage to it. They keep mentioning 1990, OMG!
    Since most of the ‘local’ news is the same all over the USofA, I think this reporting will help feed more inflation.

    We readers of this blog were ahead of most on this issue. Much thanks to our host.

  50. frred flintstone says:

    Don’t any of you worry………The admin is about to replace our hard nosed fed chair with……..get ready for it……….a dove. LOL……this is better than any circus. Too bad the citizens of our used to be great country are getting screwed.
    and it would not matter who you voted for in the election…….they are both intent on keeping the dolts (who are their children) in charge…..by handing the middle-class their debts.

    • Depth Charge says:

      Lael Brainard has a screw loose. She’s going to actually destroy the country, with Granny Yellen and Co. assisting. This isn’t funny. These people are extremely dangerous and diabolical.

    • historicus says:

      Neal Kashkari is dying to be Fed Chair….and he is a MMTer

    • Swamp Creature says:

      Larry Fink is also in the running for Fed chief. Him and Joe B are joined at the hip. They are both Chinese agents.

  51. Anthony says:

    Inflation is one of the top factors in the collapse of all the empires of the past.

  52. DawnsEarlyLight says:

    I lost DNS to your site, but it just now reappeared. Maybe the new Windows update fixed it?

  53. DawnsEarlyLight says:

    BTW, what’s the dollar per treasury basis point cost, in holding down the bond rates?

  54. Marc D. says:

    Gold should be doing better than it is, with real interest rates of -6%. Maybe crypto’s hurting gold a little, draining some potential investment dollars that might’ve gone into it. It’s $1860/oz, but probably should be $2500 by now.

  55. drifterprof says:

    Some here, on previous threads, have described an important concept that enables the Fed and government people to speak with forked tongues.

    Stating that inflation is “temporary” is misleading, because it avoids discussing a permanent loss in buying power. Inflation, when not subsequently compensated for by deflation, is a permanent loss in buying power, even if inflation goes to nearly zero. And deflation is a rare occurrence.

    An analogy: If I lose 50% on my stock market investments, I could say my loss is “temporary” (I do not expect to continue losing). But if my stocks did not subsequently regain their value, the loss is not “temporary.”

    • historicus says:

      drifter…
      Yep.
      Central bankers speak with forked tongue

      If inflation goes back to the illegal target of 2-2.5%, the Fed will declare …”See, we were right.” But the buying power of the dollar just went down 7.5% (5+2.5)
      Intellectual dishonesty I think they call such misdirection nonsense…..from those who allegedly serve the People. The Fed has been HIJACKED, IMO.

  56. Spencer Bradley Hall says:

    Lending by the Reserve and commercial banks is inflationary, increases both the volume and turnover of new money. Lending by the nonbanks is noninflationary, activates the turnover of existing money.

    In the circular flow of income, unless the upper income quintiles savings (highest shares of income), are put back to work, a dampening economic outcome, secular stagnation, is generated (a fall in velocity).

    The Keynesian economists have achieved their objective, that there’s no difference between money and liquid assets.

  57. Swamp Creature says:

    I went for routine eye exam, from the same eye doctor I went to before the pandemic. Price went up from $85 to $133. That’s some serious inflation in my book.

  58. Ace says:

    I came upon wolfstreet.com just today after doing a search for “exponential decay of the dollar’s buying power.”
    It’s nice to read the truth after watching and listening to all of the talking heads on the financial news channels, and their relentless ignorant blabbering. Well if the top 7 stocks have a combined market cap of over $10 trillion dollars isn’t proof that the government has printed too much money, then I don’t know what is. Remember when you could put money in the bank and keep up with inflation? Interest rates should be 5% right NOW. This is irrefutably the third major asset bubble in twenty years, and it just keeps getting bigger.

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