WOOSH, Shock-and-Awe Loss of Dollar Purchasing Power Hits Americans. Worst Inflation in 40 Years. Getting it Under Control Will Be a Bitch

Inflation for Urban Wage Earners & Clerical Workers (CPI-W) = 7.6%. Fed is still pouring fuel on the raging fire.  Most reckless Fed ever.

Fed Chair Jerome Powell’s reaction to today’s WOOSH inflation blowout, as captured by cartoonist Marco Ricolli for WOLF STREET.

The broadest Consumer Price Index (CPI-U) spiked by 0.8% in November from October, and by 6.8% from a year ago, the highest since June 1982, according to data released by the Bureau of Labor Statistics today.

But it gets better. The Consumer Price Index for All Urban Wage Earners and Clerical Workers (CPI-W), the index upon which the Social Security COLAs are based, spiked by 7.6% in November year-over-year — exceeding even Mexico’s soaring inflation rate — and the worst since January 1982.

But in January 1982, inflation was coming down; now inflation is surging. At the time, the Fed’s short-term interest rates were over 13%; now they’re still near 0%, and the Fed is still printing $105 billion in the current period from mid-November through mid-December, though it will reduce the money printing further.

Nearly all interest rates and yields, including on risky junk bonds, are now negative in real terms. This – the Powell Fed that unleashed this monster and has been feeding it month after month – has got to be the most reckless Fed ever.

Inflation without food and energy – OK, Americans, go ahead and try to live without food and energy – spiked by 4.9%, the most since June 1991. This shows how embedded inflation is now in the economy beyond energy, and it has started to hit services, which is hard to explain away by jabbering uselessly about “bottlenecks and shortages.”

Inflation in consumer prices is another term for the loss of the purchasing power of the consumer’s dollar. In November, the purchasing power of what was $1 in January 2000 dropped to 60.81 cents:

Rent Factors, nearly one-third of CPI, still lag far behind reality but started to rise.

Two measures of rent make up 32% in the Consumer Price Index. In 2020 and early in 2021, these two rent factors dropped sharply and pushed down CPI, even as other prices were surging, thereby keeping CPI from spiking even more. They turned around in June and have been rising every month since then, but they’re still holding down CPI, even as market rents in the 100 largest cities have been spiking for months.

“Rent of primary residence” (makes up 7.6% of overall CPI), rose by 0.4% in November from October, and by 3.0% year-over-year but is still far below where it had been before the pandemic and far, far below the surge in market rents, which are only gradually filtering into CPI (red in the chart below).

“Owner’s equivalent rent of residences” (makes up 23.5% of overall CPI) is used as a substitute for the costs of homeownership. It is based on surveys that ask what homeowners think their home might rent for. It rose 0.4% for the month, and 3.5% year-over-year.

These rent measures are still holding down CPI (6.8% in November), but as they’re catching up little by little with reality in the market, those rent measures will continue to rise, and given their 32% weight in the index will push CPI higher, and it has nothing to do with supply chains and bottlenecks; these are services:

Actual home prices have spiked by historic amounts. According to the Case-Shiller Home Price Index – it tracks price changes of the same house over time and is therefore a measure of house price inflation – has soared by 20% year-over-year (purple line below), while “Owner’s equivalent of rent,” which is supposed to track the costs of homeownership, is just starting to ease higher (red line). Both indexes are set to 100 for January 2000:

Food costs (makes up 14% of overall CPI), jumped 0.7% for the month and 6.1% year-over-year, with the CPI for meats jumping by 16% year-over year.

Energy costs (7.5% of overall CPI) spiked by 3.5% for the month and by 33% year-over-year:

  • Gasoline +58.1% year-over-year
  • Utility natural gas to the home: +25.1% year-over-year
  • Electricity service: +6.5% year-over-year.

The CPI for used cars and trucks (makes up 3.4% in overall CPI) jumped by 2.5% for the month, and by 31.4% year-over-year.

This is going to get worse over the next couple of months because used-vehicle wholesale prices, which lead the CPI by about two months, started spiking again, after a pause, and for November were up 44% from a year ago!

The jump in used-vehicle retail prices picked up by the CPI for November reflects wholesale price gains in roughly September. But in the two months since September, wholesale prices have spiked by another 13.5%, which will hit used vehicle CPI in December and January – something to look forward to (chart shows index value, not year-over-year percent change):

The CPI for new cars and trucks (makes up 3.9% in overall CPI) spiked by 1.1% for the month and by 11.1% year-over-year.

In the history of this CPI, there were only a couple of months in 1975 when new vehicle prices rose even faster topping out at 12.7% in March 1975. We may be looking at what in a few months from now will be the worst-ever inflation in new vehicles as consumers no longer care about price and pay whatever, even thousands of dollars over sticker (chart shows the year-over-year % change):

It’s going to be a bitch to get this under control.

This inflation is spiraling out of control because consumers and businesses are now willing to pay the higher prices. The dam has broken. The inflationary mindset has changed for the first time in decades. And this is happening as nearly unlimited amounts of newly created money washing around the globe has destroyed all sense of price resistance. And the Fed is still making it worse by pouring more fuel on the raging fire.

Trying to get this under control will be tough and will take a long time. Inflation doesn’t even react to monetary tightening for a year or more, and then only gradually. And tightening hasn’t even started yet. The Fed is still repressing interest rates and it’s still printing money – which positions it as likely the most reckless Fed ever. And this inflation isn’t going away under these circumstances.

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  508 comments for “WOOSH, Shock-and-Awe Loss of Dollar Purchasing Power Hits Americans. Worst Inflation in 40 Years. Getting it Under Control Will Be a Bitch

  1. DawnsEarlyLight says:

    A VERY common observation seen on the web, “As long as you don’t need cars, housing, food or energy inflation is only 6.8%”. Who really is in control?

    • Eastern Bunny says:

      They will take care of inflation.
      Expect the definition of inflation to be changed.

      • silverdog says:

        Very Interesting and insightful. If you have read 1984 by Orwell, they do the same there with changing the definitions/meanings of certain words. It’s hard to believe we are actually getting to see that aspect of the book it in real life.

        I get the impression that the corruption within the political/government class is off the charts. I was recently reading that the NIH removed the only section from their website on “Gain Of Function” or something along those lines and there is no documentation on who ordered/why it was removed.

        I don’t want to get into the whole Covid mess but it’s just an example of the ruling class changing definitions/reality as it pleases them.

        • Winston says:

          “I get the impression that the corruption within the political/government class is off the charts.”

          Welcome to reality. I got that CORRECT impression way back in the mid-1990s from a number of books which exposed that in great detail. As such things go if not widely exposed and punished, it has only gotten worse with time.

        • VintageVNvet says:

          Ditto for me as far as the very very obvious corruption, but starting in the 1970s, especially regarding ronny ray gun who had done his ”thing” to impress the oligarchs with his crazy corrupt ”conservatism” — actually the very worst kind of ”reactionary behaviours” while guv of CA by doing the very worst things he could for WE the Peons at every turn of the screw.
          Consider tear gassing thousands of innocent non-participants because of proximity to what turned out to be ”planted” trouble makers in otherwise peaceful marches, etc., as just one example…
          Closing many of the CA mental health facilities and kicking residents there in onto the streets as another…
          RR was a paid political puppet before any others, and WE the Peons are still suffering from his and his owner’s EXCESSES,,, for which he was paid very well of course…

        • NBay says:

          Silverdog, I don’t know what sort of trash you “read” (more likely HEAR) but I get about 173K results from NIH website on “gain of function”.

          Some people are really IGNORANT, and like you, it seems, trying extra hard to be more so.

          https://pubmed.ncbi.nlm.nih.gov/?term=gain+of+function

          Sorry for link, but blatant lies are worse than the political/agenda-driven ones

        • ChangeMachine says:

          Yes, they did scrub the page. Reality sends its apologies.

        • Tommy says:

          Go to Archive.org, it’s all there

          “gain of function virus” leads to pubmed.ncbi.nlm.nih.gov site and several papers describing the process and dangers of it.

      • historicus says:

        Already in the works.
        Check Zerohedge web site

        • Pish Posh
          Business is great all around.
          People can get jobs easily.
          Raises compensating for inflation.
          Robust demand causing more supply to be built out.
          I see the glass 95 percent full.
          This is brilliant policy.

        • Jake W says:

          avraam, are you out of your mind? raises are not compensating for inflation. rent is up 20%. salaries are up 4-5%. seriously, what are you smoking?

        • rich says:

          ZH has morphed into a clickbait site filled w/white trash racists and GQP’rs.

      • andy says:

        Updated definition: Inflation is good.

        • Thomas Roberts says:

          Inflation has been good for awhile, but, we have discovered recently, that inflation is good depending on the situation and who is in charge. Powell is clearly the one who understands it and the right guy for the job. That other guy from that other administration will just muck things up. Sure it’s the same guy put in power, from that other administration, but, the current administration gives him the tools he needs to do the job properly.

          /s

    • leanFIRE_Queen says:

      I’m still deep into deflation territory – which I LOVE – thanks to remote work allowing me to leave NIMBY areas.

      Some of us didn’t feel inflation at all thanks to remote work becoming mainstream.

      • Anthony A. says:

        You just cut your expenses by not going to the office. That’s not feeling inflation, that’s cutting back. Wait until you go buy a car or go to the grocery store. Then you will “feel” inflation.

        • LeanFIREQueen says:

          > You just cut your expenses by not going to the office.

          Not quite. What I got rid of is the housing inflation caused by NIMBYs which ends up inflating every single cost that’s defined locally. Bought a cheap REO, fixed it, have no rent, no mortgage, property taxes under $1k and homestead exemption that protects the entire property forever.

          I also shifted the tax burden to those NIMBYs and my healthcare costs. So killing the 3 biggest fixed costs.

          Remote work is here to stay thanks to this dynamic.

          My advice to the young: Make the NIMBYs work relentlessly for YOU, not the other way around.

    • Old school says:

      The current situation is a strange one for young retirees. I have decent social security check and around 3/4 million in IRA and savings. No home, no debt.

      At 5% negative real rate on savings, your savings really isn’t worth much compared to social security which is indexed to inflation. If you knew negative real rates would persist you would buy durable goods today and not in 10 years.

      • NBay says:

        Thanks for the disclosure….more people should do it…..gives a good idea of how much “lifestyle pain” makes people whine here….providing they are being honest.
        IMHO you are doing just fine now…..I hope you enjoyed your youth back when it used to be “NOW”.

  2. Kunal says:

    Is not it criminal for Fed to do what its doing? I thought FED’s mandate is to achieve full employment and keep inflation under 2%. We are at more than full employment now so FED should now do everything needed to bring Inflation back to 2% target. Why is FED blatantly committing this crime again majority of Americans and enriching themselves and the rich.

    • RH says:

      Of course, however, the “Federal” Reserve (meaning its trillionaire-family, bankster owners) is now going up against the wall, because more and more Americans have become aware of its shenanigans.

      Dear CCP groupies and banksters,

      Did you hear how Evergrande reportedly defaulted formally today. What is going to happen to your “investments” with your CCP buddies? Conquering the world and enslaving humanity is looking harder and harder? It must suck to be you.

      • RH says:

        I forgot to add: “after the dear CCP groupies and banksters,” Most CCP-real estate developers are going to go under as more property prices in China tank. CCP controlled local governments are many dozens of TRILLIONS in debt, which debts cannot be serviced for much longer, because their prime source of revenue (from land sales which are no longer occurring) is gone.

        The economic dominoes from these CCP disasters are falling. Their fall is only accelerating day by day, which explains why the CCP is suddenly eager to “wag the dog” and attack a certain independent nation off of their shores to distract the innocent Chinese public from how the CCP’s members defrauded them from most of their savings.

        • Sams says:

          Some observations.
          The laws and regulations governing the Chinese banking system is different than the US system.

          China have seen fiat currencies come and during their history.

          Evergrande defaulted on some of their debt in foreign currency, mostly US dollars.

          Expect Chinese law and regulations to protect Chinese entities in China.

          Do not expect the same framework apply to handling a financial crisis in China that you expect in the USA.

          No not expect China to do very much for foreign investors.

          Be not surprised if China have engineered a “swan” black, grey or white that make financial dominos fall, outside China.

        • Jon says:

          There is no property price crash happening in China.
          There won’t be any widespread contagion because of evergrande going down.

          Real inflation is 25 percent plus on the ground.
          People complain about fed because people mistakenly believe that fed works for the common people.

          Fed is doing what they ate supposed to do.

        • Thomas Roberts says:

          The CCP intentionally destroyed as much Chinese history, historical buildings/artifacts, and culture as they possibly could.

          The CCP isn’t a continuation of China, nearly everything they know and believe is from outside China; mixed in with the self serving greed of CCP members.

          It’s every CCP member (plus their specific family) for themselves. It’s important to remember that the bulk of top ranking CCP members have parts of their family permanently living outside China (sometimes their spouse and all children). I don’t know of any other country with such a large percentage of the nation’s rulers having a backup plan for leaving the country.

          If things get really bad in China, there isn’t some master plan to deal with it; many/most (top ranking CCP members) will simply abandon China. At the very least most will send all their children away.

          If China simply decides to not pay back foreigners, that means very few foreigners will invest in China again, this also means a lot of the more valuable manufacturing will also leave. China doesn’t have much resources, there are other sources for rare earth metals, their only real way to bring in money in through manufacturing. There are alot of other countries now where manufacturing is alot cheaper.

          This whole, China holds all the cards thing, is just a bluff. Right now, in November 2022, the every 5 year meeting, where the “election” of the chairman of the CCP happens, Xi will do anything to win, it’s not about China for him.

        • Miatadon says:

          China protected its people from Covid, with 4,600 fatalities, whereas the US has lost over 800,000 lives to the pandemic. I would expect China to protect its economy and currency as efficiently as it dealt with the virus. Their system isn’t set up to reward the richest people at the expense of all the rest. We are told by our corporate masters that China is an evil place and that we must crush the commies before they take over the world, but the truth is China is just a convenient enemy for a nation that is failing on numerous fronts.

        • The Nominalist says:

          The way I read oec.world/en/profile/country/chn/ does not entail claims China’s economy is slowing down:

          “Growth
          In August 2021, the increase in China’s year-by-year exports was explained primarily by an increase in exports to United States ($57.5B or 153%), South Korea ($7.74B or 142%), and Australia ($6.99B or 180%), and product exports increase in Integrated Circuits ($9.26B or 182%), Computers ($7.39B or 79.8%), and Telephones ($4.92B or 40.1%). In August 2021, the increase in China’s year-by-year imports was explained primarily by an increase in imports from Australia ($10.2B or 129%), United States ($7.45B or 113%), and Taiwan ($6.21B or 37.3%), and product imports increase in Iron Ore ($11.2B or 123%), Integrated Circuits ($10.9B or 40.2%), and Crude Petroleum ($9.96B or 71.8%).”

        • Thomas Roberts says:

          Far more than that died in Wuhan alone, during the first lockdown. We know, because they are videos showing massive stockpiles of urns, being handed out after the first lockdown ended.

          The real figures are unknown, because under the CCP system, everyone is supposed to cover things up. There are have been many lockdowns in China throughout the pandemic, with many people, having their doors welded shut; There is of course many videos of this as well. Hospitals don’t want to accept blame, so they will intentionally turn alot of positive results negative. This is also proven by the impossibly low, positive test rate, false positives alone, would be far higher.

          As far as “protecting” the people goes, remember that Australia and a certain country off china’s coast, far exceeded them. The issue for China is that their vaccines suck and many people have been hesitant to take them. This means if truly very few people ever got infected, there is no end in sight for the pandemic for them, because far too many people are still susceptible. We know their vaccines suck, because other countries who bought them, have said so.

          As far as handling any financial crisis goes, CCP officials are just having other people say that the CCP will just magically fix them, there are no experts explaining the mechanisms for how it would work. There is no secret plan. They are crossing their fingers and hoping it won’t be devasting, as they fight each other.

        • phoenix says:

          Congrats on swallowing all of the corporatist propaganda like a good little boy. You’ve really got it all figured out, genius

        • NBay says:

          Yeah phoenix, the good old solid science Null Hypothesis.*

          *(that’s when you periodically examine your beliefs and consider the possibility you may be full of shit, or your sources were….

          ..for the ignorant here)

          has REALLY fallen out of favor judging from many of these, (gag, choke) “comments”.

      • Marcus Aurelius says:

        Unless, they are making their final moves.

        “They” are running out of time. While the Internet is their second greatest asset, (after the control over currency), the public is slowly learning about the FED and who controls it. They must control the Internet and stop this education of the masses.

        The game is soon to be up, for all of us. The Day of Reckoning is about to present itself, and thus, “they” have to collapse the World’s Economy ASAP.

        I personally believe this “EverGrande” event, the chip shortage, the out-lawing of 50% of all Trucks in California, Covid, Supply shortages, etc. etc., are part of the move to destroy the World’s economy. Free Enterprise is so powerful that “they” must go to extraordinary efforts to bring it down. And, so they are.

        Only then, can “they” consolidate their power and take final control, declare World martial law (travel controls anyone?), issue a World currency, and establish the control “they” have been working on for decades.

        They have had the power for decades. They are now consolidating it. I feel very, very, very sorry for anybody in the Stock Market and has not mentally, emotionally, financially physically prepared for what must come.

        There is a phrase used by Religious people about the smartest thing the Devil did was to convince people “he” doesn’t exists. Well, the smartest thing the Conspiracy has done is to convince the people it doesn’t exist.

        • drifterprof says:

          If the Devil convinced people he doesn’t exist. Then in their mind he would no longer be around to convince them, and soon they would start believing he exists again. Because lesser intelligences need concrete objects or anthropomorphic representations to understand abstract evil or transcendent nirvana.

        • georgist says:

          There is no secret plan.
          The USA has inflation and falling living standards because the ideology of each person pursuing their self interest does not produce the best outcome at the national level.

        • NoPrep says:

          I have a little different take.

          I think there’ has long been a general notion of world order among most of the troubled billionaires and corrupt old family wealth elites of our time (these people are sort of faceless pseudo-masters holding immense family fortunes). There is a Kissinger book about this, with high praise from Ms. Hillary. But it seems to me that there really isn’t a coherent grand plan other than: “when there is chaos and dysfunction, control it and order it and keep the global markets and commerce moving, when at all possible. And keep talking up the ideas and words of democracy”.

          Based on the last sentence, and knowing the importance of keeping things humming, I actually think most of them really did +not+ want to stop the machine when Covid hit. Certainly if it was Musk and Trump in actual top charge of the world, we would not have had the great shutdown, based on their thinking. But the virus and it’s unknown put the fear into most of the heavy world power people and their advisors, and certainly into Bill Gates. The fear overrode. And so they did what they did.

        • Nick Kelly says:

          ‘Certainly if it was Musk and Trump in actual top charge of the world, we would not have had the great shutdown,’

          I’ve been trying to ignore the usual paranoid crap but this is too much. The NY magazine devoted half an issue to Trump et al overriding experts and turning a likely 250K fatality into a million. That was epidemic specialist Birk’s estimate when it hit the fan: If we get serious now we can hold this to 250K.

          The Diamond Princess cruise boat is tied up in Yokohama, with a case. No one is allowed off. Passengers confined to cabins. Should prevent spread, right? No, soon 500 cases. Hmm…maybe airborne? Yup. So halt cruises? Mnuchin has a fit: ‘you can’t you’ll devastate the industry!

          WH staff opinion of Birk: ‘they hate her’ Pence senior guy wonders ‘how long will she terrorize America’

          All they cared about was the stock market and the polls. The virus could be repelled with bleach and happy thought: ‘One day you’ll wake up and it will be gone’: The Donald.

          Then Trump gets it and knowing he’s tested positive he attends meetings anyway and infects others including his family and members of the Secret Service. This sounds like a crime, btw.
          Of course he gets the very best care like monoclonal antibodies
          which at this point are rare and expensive and not available to the other 300 K cases. Even at that it is now emerging that his O2 levels were dangerously low. He was very fortunate that none of his suggested therapies were employed.

          But now this a new Pres who does listen to experts so why are cases still climbing? You only have a brief window to contain a highly contagious agent. The opportunity was blown.

        • VintageVNvet says:

          Good comment No Prep,,, please keep sharing with us who love Wolf’s wonderful analyses and the equally wonderful commentariat, of which I am mostly a ”learner”,,, just trying to figure out if I can make some ”rational” investment(s) to help my spouse keep on keeping on after my demise…
          OTOH, I will admit to commenting about some of the ”old times” in my life, especially those times in the late ’50s and ’60s, when I was mentored and femtored by many folks of several ”ethnic groups” who were clearly trying to help me understand SO MUCH of what I had, ( clearly to them ) no clue about,,,

        • Billybob says:

          What unmitigated horse pucks

        • Nick Kelly says:

          Was this the same They that made the Dutch invest so much in tulip bulbs in almost wrecked their economy? Was it the same They who drove the Great Florida Land Boom and Bust?
          The same they that made people pay too much for stocks, again and again and again? The same They who made Chinese invest in too much real estate? The same They who make people pay over 50 K for a single group of 0s and 1s stored in computers?

          Along with the never ending human desire to get rich quick there is a tendency to blame the resulting problems on a malevolent They or It.

        • Augustus Frost says:

          Collectivism guarantees everyone will be poorer. No one is entitled to minimum living standards at anyone else’s expense.

        • Pelican says:

          “…. the ideology of each person pursuing their self interest does not produce the best outcome at the national level”

          +1

          The unchecked greed is the biggest outcome we have to show for it

    • Tom S. says:

      Every move will be telegraphed 3-6 months in advance because the Fed’s secret mandate is plunge protection and they will never “spook” markets,

    • joe2 says:

      I thought …. ”

      There is no rule of law. Get that through you thick skull.

      You are small, they are big.

    • Djreef says:

      That’s why there will be a quick reversal starting Wednesday next week. The music only has 2 more trading days before it stops.

      • sunny129 says:

        Djreef

        Don’t count on it!
        This Fed is captive to vested interests who want this everything ‘bubble’ keep floating as long as they could.Even 7% inflation hasn’t been taken seriously by the mkt action today, so far! Weaning the addiction to easy-peasy money is that easy. Fed is consistently reluctant to administer the bitter medicine. It will be too little and too late!

        • Djreef says:

          The smart money is already rotating out and pushing the buy buy buy narrative to the unsuspecting mom and pop and junior in mom’s basement stockbro rubes.

          I guess we’ll see next week.

        • Jake W says:

          the markets aren’t taking it seriously because they don’t believe the fed will ever stop printing. i guess we’ll see next week.

      • Cvillian says:

        I really hope you are right. The few have benefited at the cost of many.
        It seems as though the market is delirious

    • perpetual perp says:

      We are not at full employment. That said the economy is booming and pressuring prices upwards as a result of that and the supply bottlenecks. Wolf has his hair on fire and projects there will continue to be a linear extension of the price hike trajectory. Not likely, IMO. The trends will ‘roll over’ once the bottlenecks are repaired. That said it would be nice if wages continue to improve.

      • Wolf Richter says:

        perpetual perp

        “Wolf has his hair on fire and projects there will continue to be a linear extension of the price hike trajectory.”

        Not sure about the hair. But in terms of the “linear extension of the price hike trajectory”: On the contrary. I have said many times that the price spikes in vehicles cannot go on. And so far, I’ve been wrong every time I said it :-]

        But each individual price spike cannot continue. Someday I’m going to be correct with that assertion.

        What will happen that will continue to power CPI higher: housing costs (1/3 of CPI will gradually push up CPI, though they’re still pushing down CPI. Check out above what I wrote about it.

        And then there will be other prices that suddenly spike. Prices will take turns in spiking. It will be a game of whack-a-mole. Energy might go down, and suddenly food prices and healthcare prices spike, etc. This will cause CPI to speed up and to slow down only to speed up again.

        That’s how it was last time (1970s & 1980s). It caused a lot of false hopes that inflation would go away — and back then interest rates were much higher already. Right now the Fed is still fueling inflation.

        • Eastwind says:

          I am not here to claim ‘this time is different’. But there are some things that aren’t the same as the 70’s. Our economy is so much less based on manufacturing. So much manufactured stuff comes form China.

          In the 70’s a far greater amount of what we consumed was domestically produced, compared to now, and that was directly impacted by domestic inflation. This time, foreign producers are not necessarily going to be on the same inflation trajectory as we are. Just because our economy has inflation, it doesn’t mean theirs will, or at the same level. (However if another currency has less inflation than ours then over time theirs should appreciate vs ours, making those imports more expensive). Anyway, vs domestic production, inflation in imports will be more indirect, and maybe easier to quash.

          Unions were stronger in the 70’s, with strikes more effective at locking in wage increases that were demanded because of inflation and fed back into creating more inflation. I’m watching Kellogg to see what happens there, if they can get away with destroying their union and maintain their production then I’ll be surprised, but that will mean strikes are going to be much less effective than in the 70’s.

          So while I’m certainly not certain, I think it might be a little easier to break the feedback between wages and prices this time. Once they actually start trying, that is.

        • Wes says:

          Yes, Mr. Richter, automobile supply will eventually catch up when normal production resumes (maybe in two years?). Think about those who have automobile leases ending. They will probably be better off purchasing their lease vehicle than trying to find a new one. As for residential housing it is probably more economical to by an existing home than to build a new one. As for petroleum & NG, who knows!

      • Lawefa says:

        @Perpetual

        The economy is far from booming….unless your definition of that includes speculation, rising costs, greed, leveraging, and instability…..which could result in this going on for some time. At some point, folks are gonna have to get honest with themselves that this economy is screwed up at best.

      • historicus says:

        Eastwind
        Here is what is different between now and the 70s

        In the 70’s you had a Fed that FOUGHT inflation
        Now, we have a Fed that PROMOTES inflation

        It’s that simple

    • max says:

      The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. — 12 U.S. Code § 225a
      There are three mandates.

      moderate long-term interest rates — what ever they like is moderate.

    • historicus says:

      Dont forget the most important mandate, which is the most important demonstrated by their editing out, their omission.

      The Fed has edited OUT the THIRD MANDATE of the Federal Reserve Act…..they have removed from their web site any mention of this directive from the Act !!!

      The language that is in the Federal Reserve Act making clear that the Fed is bound to “Moderate long term interest rates” can be found here

      The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

      [12 USC 225a. As added by act of November 16, 1977 (91 Stat. 1387) and amended by acts of October 27, 1978 (92 Stat. 1897); Aug. 23, 1988 (102 Stat. 1375); and Dec. 27, 2000 (114 Stat. 3028).]

      Federal Reserve Board – Section 2A. Monetary policy objectives

      HOWEVER, in the most recent REWRITE of “The Fed Explained”, a document prepared by the Fed in Aug of this 2021

      THERE IS NO MENTION OF THE FED BEING MANDATED TO “Moderate Long Term Interest Rates”!!!!!

      They have edited it out!!! They have disregarded a key portion of the Federal Reserve Act.

      That third mandate is unmentioned, and completely disregarded by this Fed, and their omission is proof as is their pegging long term interest rates at record IMMODERATELY low levels.

      You cant find any reference to their directive to promote “moderate long term interest rates” anywhere on their web site. The game of “dual mandate” (employment and stable prices) is their trimmed down version. The Fed is writing their own powers and obligations.

      Moderate long rates would prevent the flattening of the yield curve, keep a balance between lender and borrower, prevent crippling creation of long term debt that burdens future generations to fluff the present.

    • CingRed says:

      The Frds mandate is full employment and price stability NOT 2% inflation. 2% inflation destroys 50% of a dollars purchasing power every 35 years. They’ve been touting the 2% number so long that everyone has forgotten that price stability is really ZERO percent inflation.

    • Winston says:

      “I thought FED’s mandate is to achieve full employment and keep inflation under 2%.”

      Which is simply not possible when using using simplistic garbage economic theory to centrally plan (that always works well, huh) the nation’s (and, effectively, the world’s) economy with key input data (like actual inflation) manipulated for political reasons plugged into the garbage models created from that simplistic garbage economic theory.

      • VintageVNvet says:

        CORRECTO MUNDO W:::
        IMHO, very good summary of the deep fundamentals of which NO ONE in the paid political puppet class will ever utter a single word!!
        SO, again IMHO, sooner and later, the political puppets will sooner and later be replaced by those willing and able to put up with the abuse,,,
        and keep/focus as/on #1, their actual voters of WE the PEONS,,, first in mind,,,
        After that,,, we can have still have some hopium that their other more extensive obligations for our USA Senators,,, and, even possibly our POTUS will become more to their liking than the obvious millions and billions from the oligarchy…
        WE can hope, eh???

    • JeffD says:

      The Fed could halt inflation quickly by telling banks to tighten credit, by raising margin requirements, by cutting off QE cold turkey, and by raising Fed fund interest rates a mere 0.25%. Instead, the FHFA just raised annual conforming loan limits by 18%. Government is not trying to stop inflation. They are pedal to the metal trying to keep it alive.

      • Janna says:

        “Government is not trying to stop inflation. They are pedal to the metal trying to keep it alive.”

        Why? What is the end goal? Inflation really is a political B. So why not address this sooner rather than later?

      • Augustus Frost says:

        The Federal Reserve does not have the authority to tell banks to tighten credit requirements. Banks set their own credit standards. Banking supervision can criticize lending practices after the fact but won’t get the result you infer.

        • Wisdom Seeker says:

          The Fed ABSOLUTELY has a set of “macroprudential” regulation tools / capabilities, and does set standards for the banks in any number of areas, including reserve requirements, interest on “excess” reserves, and much more.

          The Fed doesn’t have to tell the banks to “tighten credit requirements”, it just has to tell the banks that they cannot add to their balance sheets and the tightening is the immediate side effect.

          BTW, the Fed was deeply complicit in the 2006-2009 credit crash precisely because it failed to use any of those tools in a “prudential” fashion.

          Don’t expect it to do any better here. The incentives are all wrong. But it COULD do something if it wanted to.

  3. Tom S. says:

    I think it can be said with certainty that people are buying now to avoid further price increases later.

    • Trevor L. says:

      I thought the exact thing when buying a new battery for my car. It cost nearly $250 and was difficult to find due to supply problems. My instinct was to buy now while it was available, and before the price goes up. Humans seem to be hardwired to react his way, must be our hunter/gather instincts for when food and supplies are hard to find.

      • Ron says:

        Sam,s club half price

      • joe2 says:

        True, but you can train yourself out of the lemming reaction.

        It all reverts to the norm. Unless there is foul play to manipulate it off balance for benefit to a few. Then you have to follow the money, Figure out who and why. and then develop a counter strategy to shadow and profit, wait it out, or ignore it and become part of the friction.

        • sunny129 says:

          joe2

          ‘Unless there is foul play to manipulate it off balance for benefit to a few’

          LOL!

          What do you think happening since fall of 2018? Mkt remain disconnected from the economy on the ground.

          When the mkts tanked almost 35%, Mr Powell sprikled 4 Trillions right away and now over the pre endemic record. Price discovery is NOT allowed! If this not foul play or manipulation, then what is?

          Inflation number under counted to someone’s advantage, NOT to the man on the street! Just the CPI portion renter’s equivalent inflation is almost 26% ( per Mish Shedlock)

        • Wisdom Seeker says:

          What do you think happening since fall of 2018 2008.

          FIFY.

          The lawless “Calvinball” make-it-up-as-we-go make-sure-we-win policies began in 2008.

          Historically, financial crooks went to jail and failed companies went bankrupt. The S&L crooks went to jail. The dot-com bubble stocks went BK. The Enron crooks and Bernie Madoff went to jail. Lehman Brothers went BK.

          But since Lehman went BK in 2008, though, no one has been punished, moral hazard reigns supreme, and behavior that used to be considered criminal is now considered normal.

        • drifterprof says:

          @Wisdon Seeker: “Historically, financial crooks went to jail and failed companies went bankrupt.”

          Nope. Read:
          “The Gods of Money” (Engdhal)
          or
          “Super Imperialism. The Economic Strategy of American Empire. (Hudson)

        • 91B20 1stCav (AUS) says:

          Wisdom-still not convinced that Kenny-boy isn’t lounging on a beach somewhere sporting a carefully-reconstructed physical countenance and paper history…

          may we all find a better day.

      • BeenThere says:

        $250?! I just bought an Interstate Mega-Tron II for $130.

    • perpetual perp says:

      Tom suspects “I think it can be said with certainty that people are buying now to avoid further price increases later.” They are more likely to regret not waiting for a more normal economy.

    • Truckman says:

      I certainly have. I have all the materials I need for my renovations already purchased and stored. I got them all before prices rose. Furthermore, my property is unlikely to need any serious work for the next 30 years. And I’ve cut my energy bills by 20%, with another 20% saving when reno’s are complete. I see quite a lot of people around me doing the same thing.
      And another thing, from relatives who are experts in interior decor, is that nobody even knows what “this year’s style” or “this year’s colors” are. What this means is that when demand starts to drop, it could seriously crash.

      • leanFIRE_Queen says:

        > nobody even knows what “this year’s style” or “this year’s colors” are. What this means is that when demand starts to drop, it could seriously crash.

        Isn’t that a sign of Americans finally developing a sense of good taste? You don’t see Italians changing design colors of their homes every year. They have a classic taste instead.

        • El Katz says:

          Pantone just released their 2022 “color of the year”. If you care, it’s “Very Peri” (a Periwinkle Blue). The press release announcing its selection is a word salad of magnificent proportion.

        • Truckman says:

          I do agree that style is better than fashion (says the man with a 20 year old YSL raincoat), and it could be a sign of same, but I think it’s more likely due to people having bigger priorities, nevermind the lack of supply.

    • historicus says:

      Tom
      And that is where the bottlenecks originate, IMO.
      Every purchasing agent sensed the inflation coming, and called their suppliers and said, “Get me all you can at that price.” For to have inventory in an inflationary period is everything.
      THIS caused the bottlenecks.
      The Fed and the administration would suggest otherwise……they don’t want the blame….but THEY are to blame.

  4. Red says:

    Kellogg has the solution.

    • sam says:

      Kellogg’s reaction mirroring Reagan’s response with striking ATC (’81)

      Rarely noted today (even in case study’s) – theintercept.com/2021/08/06/middle-class-reagan-patco-strike/

      • Nacho Bigly Libre says:

        That action very well might have nipped in bud the possibility of special interest groups taking hostage critical services. It removed a big Alinsky weapon from hurting general public.

        If Kellogg shuts down, there are alternatives. Not for ATC.

        Seems hostage-liberator-in-chief liberated more than just hostages in Iran.

        • drifterprof says:

          From the article sam cites:

          “Reagan fired 11,345 striking air traffic controllers and barred them from ever working again for the federal government. … The careers of most of the individual strikers were similarly dead. … PATCO was dominated by Vietnam War-era veterans who’d learned air traffic control in the military and were one of a vanishingly small number of unions to endorse Reagan in 1980 … It’s easy to imagine strikers expressing the same sentiments as a Trump voter who famously lamented, “I thought he was going to do good things. He’s not hurting the people he needs to be hurting.”

          Yes, big unions in relatively high paid critical services trades tend to be extremely selfish. They can’t be given blackmail control. However, ATC work is extremely stressful and should be compensated as such.

          Looks like Reagan didn’t have good negotiating skills at that point. Barring the workers from ever working again seems vindictive, some kind of revenge mentality. It’s very possible that Reagan had onset Alzheirmer’s at that point (he was diagnosed 5 years after he left the presidency).

        • Nacho Bigly Libre says:

          What you quoted is the narrative; one side of the story written in a tearjerker manner.

          If you are curious about the larger picture, you can watch the press conference on YouTube titled “President Reagan’s Remarks on the Air Traffic Controllers Strike in Rose Garden, August 3, 1981”.

        • drifterprof says:

          @Nacho Bigly Libre

          What I quoted was facts, not narrative.

          I have no need to watch Reagan practicing his second rate acting skills. I lived through that era and paid attention to what was going on in the “big picture.”

        • Nacho Bigly Libre says:

          You seem to be adamant on being a drifter and not seek the truth.

          Let me list down the facts for you and those who get triggered by him:

          – ATC union had agreed to the terms and then reneged.
          – ATC union wanted a far higher package, which they themselves didn’t believe was possible or practical.
          – ATC members had signed and taken oath not to strike, else get fired.
          – President clarified all that and gave a 48 hour notice. Only then fired the violaters.

          And the big picture? You mean the spectacular reversal of American dull fortunes and start of decades long prosperity?

        • drifterprof says:

          @Nacho Bigly Libre
          “decade of long prosperity” for who?

          I’m not triggered by Reagan. Reaganomics destroyed the middle class. This is a fact. Check out how the middle class has done since Reagan. Trickle down is a joke. If you look at a chart of the income growth since Reagan, poor and middle class income grown has tanked, while the top 1% has skyrocketed.

          Also: “Wealth Gap in US Between Blacks and Whites Tripled Since Reagan”

          If you want to become educated on FACTS related America’s history of violently crushing unions, watch the documentary “Plutocracy” (Metanoia Films). Otherwise, enjoy your echo chamber.

          I have no empathy for ATC, Teamsters, etc. But it’s obvious that breaking the backs of unions, an American oligarch tradition promoted in the Reagan era, has not benefitted anyone but the filthy rich.

        • Nacho Bigly Libre says:

          You mentioned you have no desire to watch that short video – so I assumed that you get triggered by him. I know some who do.

          “Trickle down” was not his theory or any theory – that’s a lie; a politically charged term, not an economic term. But still gets repeated to-date in the echo chamber. Feel free to live there, just don’t claim that’s the truth.

          Can you explain what you mean by middle class was destroyed? What metric are you using here? What objective data are you citing? Does your ‘since Reagan’ include 2021? Middle class was destroyed by NAFTA and a nonstop outsourcing of manufacturing capability in the 21st century.

          “Income inequality” exists everywhere – it’s far worse it Communist and socialist nations, but hardly gets highlighted. 

          People or households who are in the 1% (or 10%) keeps changing with age and income mobility, that’s a whole big tangential topic.

        • drifterprof says:

          Nacho: “Can you explain what you mean by middle class was destroyed? What metric are you using here?”

          Obviously, I referred to a graph showing a metric comparing tanking increases of poor/middle class income compared with skyrocketing 99.9 percentile income. It’s not hard to do a web search on that (“middle class since Reagan”) Too lazy to find it?

          Reagan’s policies: economic growth would occur when marginal tax rates were low enough to cause investment, which would then lead to higher employment and wages. Critics labeled this “trickle-down economics” (tax policies that benefit the wealthy will supposedly “trickle-down” to the poor).

          Reagan’s trickle-down economic policies included
          * freezing the minimum wage at $3.35 an hour
          * slashing federal assistance to local governments by 60%
          * cutting public housing and Section 8 rent subsidies in half
          * axing antipoverty Community Devel Block Grant program
          * Reagan’s 1981 cut in the top tax rate on unearned income, reducing max capital gains rate to 20 percent; later set tax rates on capital gains at the same level as the rates on ordinary income like salaries and wages (both topping out at 28 percent)
          * raising taxes eleven times throughout his presidency, all in the name of fiscal responsibility.

          But most of all, the filthy rich kept their money, stashing it overseas. And the industrial oligarchs moved their companies overseas. You can easily find metrics on that too.

        • Brant Lee says:

          “Reagan fired 11,345 striking air traffic controllers….”

          To me, that was the moment everything changed in labor. Our small union was crushed systematically afterward. Every company in the states seized the moment and we can see the results to this day the downward projectory of labor compensation and benefits through the years.

        • Nacho Bigly Libre says:

          Why did you delete my response?

        • Wolf Richter says:

          Because you got into an endless tit-for-tat argument, and this argument is OVER. I let it drag on far too long.

    • Cobalt Programmer says:

      As a senior commenter, I have to update the kellogg situation. As the company decided to hire scabs, their recruitment website is down. Reddit apes (not the wallstreet bet guys) wrote a bot that brought the job application site down. Even NPR wrote an article on the situation.

      Ford workers versus police situation comes to my mind.

      • historicus says:

        Every Union in the country is considering striking…and come 2022, it will be a common news item.

      • NBay says:

        Bits vs Bullets……nice……thanks for the info.
        They should call this malware “Woody”.
        I’ve had enough of our 40 year New Gilded Age.

    • Cvillian says:

      Boycott Kellogg’s.

  5. David says:

    A hallmark of banana republics is rampant inflation.
    But that probably wouldn’t properly obfuscate the issue of who’s to blame.

  6. Petunia says:

    If you are on social security or getting close to being on it, look up Rep. Larson’s proposal to revamp it. It includes a change in the index to cpi-e and other adjustments.

    • Wolf Richter says:

      Petunia,

      CPI-E rose only 6.2% in November, compared to CPI-W 7.6% (CPI-W is used for COLAs). Read my article about CPI-E. I wrote it in response to Larson’s proposal. I compare CPI-E to CPI-W. It’s not a cure-all. People need to know what’s going on:

      https://wolfstreet.com/2021/12/06/social-security-reform-what-if-cola-calculations-shift-from-cpi-w-to-cpi-e/

      • Petunia says:

        I don’t expect the index change to be great for beneficiaries, but I brought it up because it pertains to your article. There are other provisions in the bill I am more interested in, liking rising the minimum benefit and survivor benefits.

        Plus I want to point out the potential changes to anybody retired or on the brink of it. People can decide to support it or not. I’m supporting it so far.

        • Wolf Richter says:

          Yes. Thanks. And every little thing helps, and switching COLAs to CPI-E might help over the decades by a tiny bit. But there are times when it’s really bad for retirees. I’m not opposed to CPI-E COLAs. But it’s not as clear-cut an improvement as it’s being pitched.

        • Winston says:

          “I don’t expect the index change to be great for beneficiaries”

          Boskin Commission (1995)

          “Its final report, titled “Toward A More Accurate Measure Of The Cost Of Living” and issued on December 4, 1996, concluded that the CPI overstated inflation by about 1.1 percentage points per year in 1996 and about 1.3 percentage points prior to 1996.

          The report was important because inflation, as calculated by the Bureau of Labor Statistics, is used to index the annual payment increases in Social Security and other retirement and compensation programs. This implied that the federal budget had increased by more than it should have, and that projections of future budget deficits were too large. The original report calculated that the overstatement of inflation would add $148 billion to the deficit and $691 billion to the national debt by 2006.”

          It was a 50/50 chance that they’d find that the CPI figure was too low. But, MIRACULOUSLY, they “found” exactly what they wanted, that it was too high.

          In “accurately” measuring what is impossible to measure accurately, and which has a strong political incentive to NOT measure accurately because of the need to slowly inflate away promised benefits which cannot be economically maintained, one can come up with anything.

          It’s ALL a big farce and always has been.

  7. Anthony A. says:

    I was waiting for this report and sent it off to my friends and family. Thanks Wolf!

  8. restingbetchface says:

    WE REQUEST YOU COVER THE ADMINISTRATION IN A MORE POSITIVE LIGHT.

    we have the strongest economy, perhaps I have ever seen

    The fact that we only have one kind of inflation, though, is tremendous news

    I trust in science, the science of our great ph//arma companies, and they haven’t let us down at all. They won’t in the future, not in their DNA

    lmao

    • Depth Charge says:

      I laugh out loud every time I read your name.

    • joe2 says:

      Ha Ha! Good one. Black humor will save the human race. Or not.

      • restingbetchface says:

        FYI I failed to attribute the italicized quotes to Jim C from MSDNC (I read his words, didn’t watch), in case anyone didn’t catch that.

        It sounds very Orwellian…!

        • joe2 says:

          I would be afraid to be caught quoting Jimmy the Con also.

          Unbelievable how he is still on – “Bear Stearns is [still[ fine.”

          I did once have a friend who watched him. He liked the horn honking and bells and whistles and sirens. But I think he just missed the circus clown from when he was a kid.

  9. Jason says:

    Inflation has been happening for several years….
    We new it would spike as factories/companies started coming back to the US, and honestly, we were willing to except it for the greater good…. My job materials would see spikes every time a Tariff was put in place (last administration)… we anticipated it and absorbed the cost. IMHO, it was somewhat controlled and manageable…
    This is different…..
    Glad too say I’m hanging it up, but the next generation of contractors/businesses owners are gonna have a hard time staying ahead of this madness…

  10. doug says:

    ‘Hottest U.S. inflation rate in almost 40 years brings sigh of relief in some corners of financial markets’
    quote from popular finance site.
    That is some tortured, beaten, quartered and drawn logic behind that headline.

    • Wolf Richter says:

      I saw that headline too and went Hmmm

    • Ron says:

      Manufacturing has to come back to our shores but we can’t compete on a global economy when third world countries pay poverty wages and no benefits seems simple break system start over ,peons will work at same rate or starve happened before history repeats

      • Sierra7 says:

        ron:
        Just not going to happen. A big explosive arrow was shot into America’s economy when NAFTA and “globalization” were embraced (thru so much propaganda).
        “American labor must be crushed to a world level playing field for American businesses can again compete in world (labor) markets”.
        That was objective of the Reagan incoming admin. and we are living with the results.
        I saw all this coming way back in the 1970’s and 80’s. What we were (and are still doing) doing to smaller vulnerable countries economically, politically and militarily thru so many “off the books” endeavors would someday have to come back and bite America in the A##. And it has.
        We are in a totally new world for the “commons” which includes the declining middle class here which was fought and bled for by organized labor.
        Adam Smith appropriately stated (which is never quoted) that, (Paraphrasing) “Can’t allow free market capitalism to be dominant or it will crush all of society”.
        It’s happening whether anyone sees it or not.

        • NBay says:

          Well said….there are many other negative things about that senile B actor’s puppet masters and their agendas you left out, but he was picked to begin a really really nasty program for this country, and it was DONE.

        • 91B20 1stCav (AUS) says:

          Sierra/NBay +1. (Reaganistas the resurgent reactionaries aiming for a return to the Gilded Age by reversing and extirpating economic/labor changes beginning with the Trust-Busters and extending through the New Deal/post-WW2 eras).

          Perfection is never achievable, but improvement always is…

          may we all find a better day.

    • sunny129 says:

      doug
      They try to see ‘silver’ linning in every negative or bearish news on the mkts. Guess that’s their defined job by their masters! Reality matters little.

    • Brant Lee says:

      But hey, when the U.S. can out-do Mexico’s inflation rate, it’s a sigh of relief that it’s ok to go buy another $90k pick-up.

  11. Jake W says:

    the good thing about all of this is it basically lays waste to the argument that we can print with impunity because we’re the reserve currency. now, it’s very clear that we’re not immune to the forces that have been with us since the beginning of time. if there is a new crisis, it won’t be as easy, politically to just do more qe, as people are saying will happen, as its effects are plain for everyone to see.

  12. Michael Gorback says:

    As a fake woke person and confirmed moron I must object to the use of the word “bitch”.

    /s Alexandria Ocasio-Cortez

    • Petunia says:

      AOC is not a fake woke person, she is the real thing.

    • JakSiemasz says:

      Yeah. It’s all her fault. lol

      • NBay says:

        Ok, Ok…..so I get how “woke” is used.

        So my question is what is a “phony rugged individual” called?

        And don’t say their aren’t any.

        • VintageVNvet says:

          Usually called ”victim” of something similar nby.
          They are the ones the coasties rescue regularly, even in the bay(s),,, and the forest service folks rescue regularly,,, and the ones that end up in hospital regularly, etc., etc.
          In the field doing the actual hands on manual labor, skilled and otherwise, they are usually called, ”quitter(s)” after a day or less on the job when they realize construction field work is just not the same ”work” as sitting in the AC at a computer terminal.
          Will always remember 60 folks showing up at a job site by 0800 in ’81, after one ad in the SF Chron; 12 were left by noon!

        • El Katz says:

          “So my question is what is a “phony rugged individual” called?”

          Poseur

    • cb says:

      She is neither fake woke nor a moron, and she may become a big nightmare. At least she didn’t work for the FED —– that’s one positive thing.

    • NBay says:

      You once mentioned Proteomics as the “future”. I assume you meant for investors……so here’s another -omics for you and sunny and any other investor-docs here at this website….I say it’s more all inclusive, IMHO, kinda like a pre-ETF for “drug discovery” pipelines.

      I think this cranking out of “magic bullets” stuff is way out of hand, even physically damaging to many. But it is easy to get richer on, if that’s your bag.

      file:///Users/network/Desktop/Clear%20stuff%20%20quotes,for%20writing/GRANTONOMICS%20Website%20copy%202.webarchive

  13. David Hall says:

    In 1981 U.S. inflation was 10%, the unemployment rate was 8.5%. In 1982 the unemployment rate was 10%. People searched dumpsters for food.

    After Evergrande, China printed money. Chinese fresh vegetable prices surged 30% over the past 12 months.

    • Ron says:

      China will not bail out many property developers ,in default bond holders take a bath worldwide problem there go our pensions there lying it’s systemic

      • Djreef says:

        Exactly. I’ve been pounding the table on this for months. Nobody wants to hear it until it’s too late.

    • Marcus Aurelius says:

      The World’s Climate is changing. It is getting Colder and the Chinese State has 3,000 years of history of this cycle.

      Prices for food are going to go up dramatically, as more and more countries ban export of food. Inflation is just an additional factor, but you can’t inflate food when Meridional Jet Stream Artic blasts extend down to the growing regions.

      Pay attention to this Climate Change.

  14. SpencerG says:

    Why whatever are you talking about Wolf? I just saw a report on CNN detailing for almost four minutes how hunky-dory everything is with the economy. The CNN newsreader even prefaced the report by saying how much she loves bringing out these “good news stories on the economy.”

    The title (which I cannot make up): “From gas prices to supply chains: Signs of improvement for the US economy”

    • DR DOOM says:

      Looks like the Security Complex /Mic MSM is following marching orders given to them from the White House. The orders were simple just like in the old dead USSR. Do not speak bad comrade about our heroic leaders. All is well. All that is missing now is for the Powell speech about his Tool Kit then it’s nappy time. Inflation does not matter to Mrs Magoo or Jerome or the Connected. Inflation is the problem of the scurrying little piss ants.

    • Jake W says:

      that’s propaganda even goebbels would be proud of

    • Djreef says:

      Was that reporter’s name Stupid Morone? I’ve read her articles before and I just love them for their humor.

  15. Ron says:

    As we deplete world resources ,scarcity creates greater demand,plus China gamed the system buying up copper iron ore and many other commodities while we argue over nonsense politicians looks like a failed republic

  16. KGC says:

    It is the job of Congress to provide the US Gov’t financial guidance, and they won’t do anything more than try to pass a higher debt ceiling. Forcing the Gov’t (and consumers) to live within a balanced budget is something nobody has even suggested in over 20 years. Trying to force the Gov’t do so would cause the greatest social unrest ever, even worse than the 1860’s.

    They have to keep printing money. This country depends on entitlements and subsidies to keep running. Bread and circuses…

    • LK says:

      20 years you say? Would that perhaps have been because of a certain president launching certain wars without any certain way to pay for it, just a mandate that the domestic population shouldn’t have to feel any negative impact from these conflicts?

      That war that saw the U.S. government load up on debt to pay out to a bevy of private contractors could reap the benefits, contractors whom were COMPLETELY unrelated parties and had no connections to policy makers?

      Didn’t a certain Presidential candidate as an owner and investor of a certain Private Equity firm do the same thing? Got rich by buying up public companies, loading them with debt, and reaping the gains?

      • KGC says:

        So basically you’re saying that when the Congress doesn’t do it’s job it’s okay for them to continue not doing their job? And we should point the finger at the President? Because, for the large majority of the time this countries been in existence the President has not been of the same party as the Congressional majority.

        OK. Let’s go with that. This is all Joe Biden’s fault.

        Let’s also note that WWI, WWII, The Korean War, and Vietnam were wars the USA got involved in where a single party (the Democrats) had the Presidency and majorities in the Congress and Senate. In fact you have to go all the way back to the Civil War to find a Republican supermajority at the start of a conflict, and in that case it’s because the Dems all committed treason and went South. And every war has loaded the country up (all the countries) with debt, and made contractors got rich.

        • COWG says:

          A war about every 10 years keeps things ginning… no matter who is the majority….

          At least since the late 1800s….

        • VintageVNvet says:

          A war every 10 years or so keeps a ”blooded cadre” operating military forces; this was very clear policy after USA was caught almost completely unprepared for WW1 and WW2.
          Explained to me in early ’70s by former WW2 US Army Medical Officer who was still friends with folks who had stayed in and become top generals, etc.
          Don’t think that policy has changed at all since.

      • Knowdung Flunghi says:

        “,,,the domestic population shouldn’t have to feel any negative impact from these conflicts?” — The elephant in the room!

        GWB “Go shopping or the trrist win.” OBL must be laughing his butt off – David to the US Goliath…

        To quote Bender Bending Rodriguez – “well, we’re boned!”

  17. Tbv3 says:

    What’s truly astounding is how bonds reacted to today’s CPI release: prices up, yields down.

    Could it be the bond market is looking beyond current inflation and is already pricing in a deflationary asset price collapse on the horizon?

    Why should one own junk bonds with a current negative after-inflation yield of 3 to 4 percent and the potential of much much bigger negative returns in a meltdown when purchasing T-bills gives you an assured negative after-inflation return of 5 to 7 percent?

    Bond mutual fund performance is relative. For years the junk- and high-grade bond owners have outperformed the T-bill owners, but with stock indices (by some metrics) higher than they were in 1999 and 1929 for how much longer?

    There are no problems I can see . . . as long as the USD doesn’t collapse (more than it already has vs cryptos).

    • Wolf Richter says:

      For the bond market to react to inflation, the Fed would have to not only stop buying bonds (it’s still adding $105 billion a month), but also allow maturing bonds to roll off its balance sheet without replacement. That would free up the bond market to react over time.

      • Ron says:

        Our money is bailing out china

      • Eastern Bunny says:

        The Fed isn’t buying junk and corporate bonds.
        Why are people holding corporate bonds yielding 1% when inflation is 7% ?

        • Jake W says:

          because every other bond is judged against treasury bills, a “safe” investment. the spread is considered a premium over treasury. if the fed suppresses treasury bills by buying them, the spread can remain the same while the overall rates drop.

      • BigAl says:

        Wolf,

        The inflation number was hot – but given the rapid drop in yields in the minutes after the report – it was clear that while the number was higher than expected….it did not beat expectations as much as some had expected.

        Also note that the news today concerning Omicron is not as uniformly good as it was earlier in the week. That would tend to keep yields in check, also.

      • Jackson Y says:

        There’s also the fact that other central banks around the world are also printing like crazy, driving their yields down. All the European & Japanese investors getting 0% on their government bonds move their money to US treasuries.

      • cb says:

        minor edit Wolf –

        ….. the FED would have to stop creating money to buy bonds

    • Djreef says:

      That’s exactly what’s happening. The bond guys expect the Fed to trash the markets and send us into recession – just like they always do.

      • Wolf Richter says:

        A recession is about the only thing that will cure this type of massive inflation.

        • georgist says:

          The wealth “created” is not backed by real wealth creation. It needs to recede. Asset prices falling will hurt the mega rich and help the bottom 25%.

        • cb says:

          Stopping the money creation is about the only thing that will cure this type of inflation ,,,,,,,,,,,,,,,,,,,,,,,,,, eventually. It will take a long time, with recession along the way.

        • Sierra7 says:

          Mr. Richter:
          +1000

        • Jacques says:

          Help defeat inflation, hold a massive garage sale, or just give away stuff you’ll never use, to reduce retail sales.

      • Old school says:

        Watched a Jim Rogers interview. He said when he was on Wall Street you got out of the markets on the third Fed interest rate hike. Will be interesting if that works this time.

  18. Jay says:

    Can we all agree that the reason why the FED continues to keep rates near zero is to keep the treasury’s borrowing costs low? With the annual deficits we’re expecting over the next 10 years, does anyone expect the FED to let rates move more than 1-2% higher? They can’t. We don’t payoff debt. We just roll it over. And if we start rolling over trillions of dollars in debt at 4-5% borrowing costs, we’re sunk.

    • Depth Charge says:

      So what you’re saying is that they are going to let inflation destroy the country. Got it.

      • The Real Tony says:

        Hyperinflation will destroy the country and the rest of the world since the U.S. dollar is the world’s reserve currency. Until something supplants the U.S. dollar as the world’s reserve currency hyperinflation will run rampant everywhere worldwide.

        • BigAl says:

          @The Real Tony

          It won’t run wild in China. Aside from dollar denominated bonds – which it’s own financial institutions largely don’t touch – they have no exposure to the dollar. Ditto Russia. Ditto Iran. You get the picture.

          China can still produce stuff. Even if savings are wiped out by a currency event – they can recover. Enviable.

          And the vacuum created by the dollars collapse will be nicely filled by the Yuan.

        • Old school says:

          Real long term economic growth in US is about 2%. You can’t live under the illusion of assets growing a lot faster than real economy for only so long.

    • Djreef says:

      We’re sunk already.

    • Auldyin says:

      @J
      “Can we all agree that the reason why the FED continues to keep rates near zero is to keep the treasury’s borrowing costs low?”
      Partially, yes, but another, maybe bigger, factor is the value of balance sheet collateral for banks and corporates. If interest rates go up paper values go down, that means liabilities might exceed assets which is the ‘polite’ definition of stuffed.
      The EU would glow white hot with all the melting ‘collateral ???’ if that happened.

      • Dan Romig says:

        Good point Auldyin.

        Higher interest rates are a double edged sword in regards to the USA national debt, European Union debt, and Fortune 500 Corporate debt.

        I keep my eye on the 3 Year Treasury Yield for the above reasons. Today’s close on 3 Year = 0.98%.

    • historicus says:

      Jay
      ” They can’t.”
      They must.
      The fake low rates allow the rampant creation of debt, even promote and subsidize the creation of debt.
      To allow it to continue will…….follow me here……..perpetuate more of same.
      The CAUSE can not be the SOLUTION.
      The solution must be higher rates to put a REAL cost to debt creation.

      • Sierra7 says:

        Historicus:
        Either we return to some good economic basics that return to “market to market” values, or resort to the “means” of historical economic behaviour we are finished as a nation.
        The whole American economy is now based on false premises that anti historical. The FED and the political economic system here has painted itself into a corner since the 2008 crash and what they used as tools to support the failures.
        This will continue until it can’t.

        • rankinfile says:

          Why do you think that both sides sink so much money into the military?
          China and Russia are testing fractured America’s resolve.A weak President and a dis functional split Congress make moves ripe for opportunity.How is it they say?
          Don’t let a disaster go to waste.

  19. random guy 62 says:

    Plenty more inflation coming.

    I am prepping our annual price change for 2022. It’s going to be a whopper. Our company has not fully kept pace with all the cost increases in 2021, and we have no choice but to raise prices again for 2022 after five increases in 2021. From chats with others in the industry, it won’t jus be us.

  20. joe2 says:

    So if the social security COLA goes up by 10%, does that mean it is retroactively bankrupt?

    Asking for an old friend who may have to retroactively die.

  21. Depth Charge says:

    So what is Weimar Boy Powell doing about it? He’s PRINTING “OUT THE WAZOO” (thanks, Wolf). This out-of-control megalomaniac is destroying the country in real time. Has anybody thought to publicly ask this destroyer of human beings wtf he is doing?

    “Chairman Powell – we have the highest inflation reading in 40 years, and yet you’re still printing. Why are you doing that?”

    CRICKETS.

    • J-Pow!!! says:

      Because I love America!! I am ushering in a great era of prosperity!!!! Every year gdp will be higher than the year before!!!! You will have more dollars in your pockets!!!! There will be more and more zeros at the end of your account balance!!!! We are all getting richer!!!!

    • Swamp Creature says:

      Peter Schiff was on the local radio here and said some things I agree with 100%. J Powell will not be able to tighten to the degree that he wants to in order to tame the inflation monster. The current Biden administration, who didn’t really want to re-appoint Powell is getting ready to appoint “Woke” Federal reserve governors to the vacant posts on the Fed. Their priority will not be price stability nor control of the money supply. Their priority will be to mitigate climate change, and promote social justice and diversity. They will continue to monetize the gigantic federal deficits that are backed into the cake already and the new bigger ones that will result if the BBB bill passes. Inflation which is now 15% to 20% right now if you used the same way to calculate the CPI as was done in 1981 will accelerate to 20 to 25% in the next year.

      • historicus says:

        Fed to announce 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””

        • Swamp Creature says:

          Fed’s mission statement contd

          Add ” keep the low interest rates on 10year bonds at 13% below the real rate of inflation” to promote cash out refinances and using the house as an ATM machine just like Greenspan did in 2003/2004. If the housing becomes unaffordable then we will loosen lending requirements and encourage people with bad credit to enter the housing market as “everyone should own a home” as George Bush once said just before the housing crash. If the banks lose money on these mortgages then the Fed is standing ready to bail out all the lenders who made these loans, and assure that their CEOS’ can retire with a golden parachute. The hell with the now homeowners who get wiped out. They were just lemmings who made a bad investment.

        • cb says:

          “everyone should own a home” as George Bush once said
          ————————————–

          what he meant was that everyone should take out a large loan …
          to buy a home ….. push up demand for and prices of the homes ….. and become debt slaves ………. with funny money created under the auspices of the FED to the benefit of funny money lenders who create dollars to loan ……….

        • rankinfile says:

          and climate stuff and that

      • cb says:

        That scumbag J Powell never cared about taming inflation. His priority was never price stability nor controlling money supply in any way other to massively increase it. The proof is in the pudding. Don’t ignore the obvious.

  22. Jackson Y says:

    Democrats spent the past year screaming that inflation was transitory, caused by supply chain disruptions that would soon resolve, and most importantly, fearmongering over inflation was a Republican talking point to derail their spending agenda.

    Many Democrats continue to parrot these talking points today. It’s why the party is now stuck between a rock & a hard place: they either do a U-turn on inflation being a serious problem, lowering their credibility, or they double down on their talking points while sounding increasingly out of touch to ordinary Americans.

    • Djreef says:

      Um, Powell was the first to say that inflation was transitory and he’s a Republican.

      Nice try, though.

      • restingbetchface says:

        Except Jen P, with majors in English and Sociology, mouthpiece and press secretary for the administration, ran with bozo claims.

        Read her Orwellian double-speak claims on inflation.

        Also:

        ‘False’: Jen Psaki Gets Fact Checked Over Inflation Claim

        • Jake W says:

          so did yellen. powell isn’t a republican. he’s not a politician at all. he’s just an idiot.

        • OutWest says:

          JW – Powell wasn’t appointed because of his political affiliation and willingness to abide? Got it…

        • Anthony A. says:

          JP is set up as the fall guy if anything blows up. Plain and simple.

        • Swamp Creature says:

          I heard Steve Mnucian hand picked J Powell for Fed chief, Mnucian use to work for George Soros. Why the hell didn’t Trump check out this connection before he appointed him?? This has to be the worst appointment ever made by any President in the history of the United States.

    • Bobber says:

      Republicans are the same as Democrats. Only the sales pitch is different. Wake up.

    • Jon says:

      Things would have been same of we have a Republican President !

  23. dishonest says:

    Wolf, do you not think the FED knows exactly what is going on and proceeding with their own agenda?

    It’s incomprehensible that people would reach the pinnacle of power in this cutthroat field and not be completely cognicent of the actual ramifications of their actions.

    • Wolf Richter says:

      dishonest,

      This massive bout of inflation caught even me by surprise. But in early 2021, I already knew something big was coming because I was seeing the action in new and used vehicles — remember, the ultimate discretionary purchase. People and dealers were paying crazy prices. That was new.

      But the Fed doesn’t pay attention to what is happening at auto auctions and dealer lots. They didn’t see the shift in the inflationary mindsets.

      And also, they had deluded themselves into thinking that QE and 0% would never create inflation because over the past 13 years in the US and the EU and over the past 20+ years in Japan, they hadn’t created inflation. This gave them a false sense of security that is now getting rattled. This is a paradigm shift.

      The Fed is staffed with group-think economists. If you’re not a group-think economist, you don’t get a job at the Fed. There were plenty of economists that warned about this, but they’re not working at the Fed.

      • Swamp Creature says:

        dishonest

        They were too busy getting rich by trading in their own investment accounts, using the inside information that they were aware of to pay any attention to what was going on with inflation and the ramifications of their flawed policies. History will not look kindly on this group of misfits that have wrecked the financial integrity of this country for many years to come.

        • Old school says:

          Two Economists on opposite sides of the aisle told anyone who would listen that the Fed was doing too much. Larry Summer’s said it was basic arithmetic and Steve Hanke predicted the year end inflation rate.

          My guess is the Fed knows what they are doing. It’s not an accident.

        • historicus says:

          Who hijacked the Fed?
          I have an idea…….

      • Shells says:

        Finding a new reality or new development emerging from sets of data is often surprising because it consists of something you couldnt have predicted when you started looking at the data.

        As they say, the truth is stranger than fiction.

      • Rowen says:

        “over the past 13 years in the US and the EU and over the past 20+ years in Japan, they hadn’t created inflation.”

        The two big reasons, as explained by Greenspan himself, were worker insecurity and China acting as the great disinflator. As we’re seeing now, both of these disinflationary forces are being unwound globally.

        The only way inflation would be manageable in this environment would be massive state investment into increasing supply. For some reason, FedGov is happy to drop hundreds of billions into semiconductor development, but not affordable housing or increasing food stock.

      • cb says:

        Wolf said: “And also, they had deluded themselves into thinking that QE and 0% would never create inflation because over the past 13 years in the US and the EU and over the past 20+ years in Japan, they hadn’t created inflation.”
        ——————————————
        There has been an expanding money supply (inflation 1) and rising prices (inflation 2) for many, many years.

        The only delusion is the one we buy into via buying into and expanding propaganda. The FED’s scumbag moves have been obvious.

        • Jon says:

          I don’t believe that there has been no inflation in the last 13 years for the last 13 years.
          The cost of almost all necessities have gone up quite a lot for last 13 years but not properly registered in manipulated government inflation metrics.

      • Wes says:

        It reminds me of the monkey trying to put the cork back in the elephant’s behind. Forgot to mention that the elephant had diarrhea…. The circus must go on.

  24. Jackson Y says:

    The Federal Reserve is STILL printing $105 billion per month to buy treasuries and MBS.

    They need to stop NOW. Even an “expedited” taper from $15 to $30B/month would drag this out through next April. Just end it.

    • Djreef says:

      Exactly. This stupidity has gone on long enough.

    • Depth Charge says:

      They needed to stop a year ago. These clowns have been wrong from the very start, and they just keep digging. Is it that they’re trying to “save face” or something? Like, in their own twisted minds they think if they just speed up the taper a skosh, then it’s like they weren’t completely wrong vs. just ending it abruptly where they’d look the fool? I really don’t know what these clowns are doing at this point. It’s scary.

      • historicus says:

        “They needed to stop a year ago. These clowns have been wrong”

        And we complain on Wolf’s website…to each other.

        In a system of checks and balances, WHO CHECKS THE FED?
        Who makes them adhere to their mandates? Senate banking committee? NO. The politicians enjoy the free money…for their pet vote buying projects.

        • otishertz says:

          Yeah, all the bellyaching and kvetching in comments and xocial media only neutralizes any potential resistance, either through giving the false sense that a comment matters, or through outright censorship by tech tyrants, all while serving double duty as a quasi governmental honeypot to identify problem people.

          The revolution will not be tweeted. Tweets are mental turds that people need to flush in front of their “frens”

      • Old school says:

        I think it will end with a Breton Woods type meeting with major powers. System is so out of balance with US trade imbalance nearly a trillion dollars. Fed is playing the game as long as rickety old machine stays running.

        Congress can allow Fed to do a lot of stuff like Japan Central bank has done if they need to buy time.

      • Gilbert says:

        Don’t delude yourself. The Fed will not taper, nor will they raise rates appreciably. To do either would kill the markets. Better to just keep treading water and hope things work out.

  25. 2BFrank says:

    Emigrate and renounce your US citizenship, find a well run “third world” country and go, after all almost any country is better run then the USA.
    I have yet to see organised gang raids on retailers anywhere else in the world, so far, (louis Vitton), no one defecates in the streets in Madrid, you all live in a third world shithole and none of you can see it, almost any free at the point of use health service is superior to your overpriced crap, the only countries I can think of that are worse are Venezuela or Australia or maybe a few central south American ones, but even Belize is better than the USA, the worlds exceptional country is only exceptional in the levels of shit its citizenry puts up with.

    • COWG says:

      Hater gotta hate… no clue… betch he gets his worldview from Google news…

      • restingbetchface says:

        I actually uninstalled that yesterday from my mother’s phone. I never use G, so, sorry, you’re wrong here.

      • COWG says:

        Not you, fool :)

        The guy selling timeshares in Spain…

      • Dan Romig says:

        I love seeing the helicopter shots of La Vuelta a Espania.

        As 16 cm of snow is falling on my home tonight, I’m thinking Carboneras would be a nice place to get a few kilometers in on the bike this time of year.

      • restingbetchface says:

        Oh, I see… you forgot a comma then…

        I have a Spanish relative living in CA. This person is disgusted with the ever-increasing comm unism / social ism in USA. They left their homeland because of comm unism / social ism!

    • Alku says:

      “…you all live in a third world shithole and none of you can see it”

      why are you so mean? I’ve been here for 10 years – coming from the world’s happiest country – but even I can’t agree with you. (and I am not an American)

    • restingbetchface says:

      Please provide the top 5 Repub li can controlled cities where “organized gang raids on retailers” occurs. Or just 1. Please.

      How ’bout this:

      America’s deadly year: Philadelphia now has more mur ders than NYC and LA and a DOZEN major US cities smash annual hom icide records (and they are ALL Demo crat) Daily Mail – 2 days ago

    • Auldyin says:

      @2B
      Take plenty dollars when you move!

    • LK says:

      Your first problem is thinking all sh/tholes are alike in why they are sh/tholes.

      We can both be right for different reasons, you know.

    • restingbetchface says:

      I knew you weren’t following, LK, so I reiterated the reason why the poster called US a 3rd-world place (sh/thole). Their reason was “gang raids”. Again, no Rep ub lican places would tolerate these behaviors. That is why they only happen in Dem o crat sh/tholes. If you have a different opinion of what a 3rd-world place (sh/thole) entails, you should provide your reasoning. Let me guess, “They mow their lawns, leave their doors unlocked, have very pasty skin tones.”

  26. The Real Tony says:

    If they included rent in the CPI in Canada the CPI would be in double digits. Meanwhile wage increases in Canada are almost non-existent.

  27. Breamrod says:

    it will be interesting to see what Powell says next week and how he tries to spin it. They might taper a little faster to see if they can save a little of their credibility. I think Wolf’s readers won’t buy it.

    • Jackson Y says:

      WSJ has already reported what they plan to do, because these days, every policy action has to be announced in advance so Wall Street investors can prepare for it.

      The current proposal is to speed up the taper to $30B/month. This would end QE in April instead of June/July. Then potential rate increases after that if the economy “evolves as expected” (code for “markets don’t crash”) – the current dot plot forecast is for two 0.25% increases next year.

    • historicus says:

      Reducing the cause of the problem….so the cause of the problem is still there….just not as big.
      As Wolf said, the Fed must not only trim QE…(why any QE?) but also let maturing assets on their balance sheet “roll off”.
      Damage or carnage seem the only choices…
      and the Fed STILL hasnt learned the basic of nearly everything..

      FOR EVERY ACTION THERE IS AN EQUAL AND OPPOSITE REACTION

    • Old school says:

      Taylor rule would already have short term rates in mid single digits depending on the many variations of it. Fed is not being rules based, but totally winging it. That leaves investors up in the air on making rational decisions.

  28. JakSiemasz says:

    Wow! Amazed at the senseless hate and cluelessness expressed here in the comments.

    • Jason says:

      Agreed….It didn’t used to be like this so much..
      Seems like Wolf used to call out the political BS..
      Price you pay for fame I suppose…lol
      Been reading and occasionally commenting for several years..
      Still a good site, just gotta ignore the bitterness that pops up every now and again…

      • Masked Ghost says:

        Jason. There really is no way to separate the economic issues from politics. The two are linked, arm in arm, and always have been.

        • Jason says:

          Of course….
          Healthy debate is great…
          The bitterness these days towards one another is off the hook though…
          No worries..

    • John Vermeer says:

      it’s not HATE and SENSELESS, it’s mostly FEAR.

      • A says:

        A dog that snarling and attacking because it’s scared can kill you just as much as one that’s snarling and attacking because it’s angry. I don’t really care why the dog acts like it acts if it’s chewing on me. Sympathy is lost.

        • otishertz says:

          Civility and tolerance went out the window about 7 years ago. Anonymous internet hate empowers small minds and powerless people. Now we have witch hunts, blacklisting, and mob rule. Pretty sad.

          Used to be that one didn’t discuss politics or religion out of politeness and self preservation. Now people can spew hate and fear without being seen. I blame the infantilizing smart phones. The iPhone was the most destructive invention in history as far as interpersonal relations go.

      • NoPrep says:

        I don’t quite agree John Vermeer. Worry hate and fear are a troubled trio that are strongly correlated with lack of sense, when these things show up in human beings and start to control their lives and behaviors. That’s what I see a lot of, anyway.

        I think this WolfStreet comment board is all in all quite intelligent, astute, perceptive, and reasonably non-toxic and non hateful. At least when compared to many others. But back to hate…my thinking is that when hate does show up, that we have to hate the things that deserve it – corrupt things and people, corrupt institutions and systems, lies, so as to make some sense out of our hate and possibly have something positive come out of it. When someone hates good things and on uncomfortable truths because this person is only projecting our own darkness, and trouble, this person is very asleep and lost at that point. “The sleeper must awaken” – Frank Herbert

        Cheers.

    • Trucker guy says:

      We must also remember that cyberwarfare is an alive and well aspect of our lives now. Russia/china have entire warehouses with automated bots showering the internet with anti-american divisive attitudes and propaganda. Places like comments are easy because translated text never caries an accent and is good enough to not be gibberish like Google translate circa 2009.

      Take a look at a place like Reddit. Especially the stuff that gets posted to the front page. It is supposed Americans who have a vitriolic hate of their own country. Yet most people I meet day to day may be politically divided but they aren’t wanting to take up arms against their fellow Americans. If you also read between the lines a little, you can see how much bullshit it is.

      I saw a post about how someone was paying 8k a month for insurance and medical bills and only making 25k a year. Anyone with any level of familiarity with the US healthcare system knows that is complete and utter horseshit. Iirc Obamacare is subsidized below 34k/yr. Medical debt can be paid at a miniscule amount monthly and also negotiated for poor people since it’s mostly just nonsense like charging 200 dollars for an aspirin.

      Of course there are 10k comments all parroting the same line of how awful America is and how our healthcare is just the absolute worst except for the fact that while our insurance companies and healthcare companies are overpriced, we have the absolute best coverage in the world. Do some research. When important rich people in other countries get really sick and need state of the art healthcare, they come to our specialists and research centers.

      The bots from other rival countries also always focus on a handful of topics they know about. It’s always the same few things:

      Insurance/healthcare
      Police brutality
      Racism
      Gun r bad
      Killing for oil
      Political corruptness

      Etc etc. Our supposed “crises” are often still better than other countries. Most of our issues are substantially overblown and if you research things, we’re still a million times better off than 90+% of the world.

      • Jos Oskam says:

        @Trucker Guy

        I usually like and appreciate your comments but I am quite surprised by this one. It’s almost like somebody else has hijacked your pseudo.

        Stupid and vitriolic comments on websites do not prove or even support any Russian or Chinese cyberwarfare boogeyman. Think Hanlon’s razor: “never attribute to malice that which can be adequately explained by stupidity”. There are more than enough intellectually challenged individuals with internet connectivity around to account for an avalanche of BS posts. No need for bots to accomplish that.

        I was born in the Netherlands, are currently living in France, and have spent significant time in the US but also in Norway, Sweden, Germany, Austria, Belgium, Spain, Italy, Portugal and Singapore. You speak of “rival countries”, yet I have never met anybody in any of these countries who considered the US a “rival”. This attitude seems a typical US thingy.

        Also, I have also never met anybody from there who wanted to trade their local healthcare with that of the US. Maybe that has something to do with the fact that the average life expectancy in the US is lower than all of the countries mentioned above. Despite the “absolute best coverage in the world” as you call it.

        Most of what you get through the Internet nowadays is biased, coloured, unreliable, and subject to outright censoring by big tech and cancelling of unwelcome opinions. Critical and contrarian thinking is verboten and open fact-based discussion is stifled. You may find that “Our supposed “crises” are often still better than other countries” but if that is because of what you read on the internet, that reasoning is based on quicksand.

        I hope you’ll get the opportunity some day to exit the US exceptionalism bubble, travel around the world a bit, and spend enough time in various countries to get a hang of the way of life there.

        If you ever do, you might want to eat that “million times better off” remark.

        • VintageVNvet says:

          not to get too deep into a reply to JO,,,
          but have Canadian friends who come to USA for ”major” medical services, while quite content with ”minor” issues, FKA problems…
          and, similar for many other kinds of services, for many folks,,,
          and, then, especially ”creative”,,, STILL,,, and in spite of the propaganda on all sides, etc., etc.
          That we live in ”interesting times” is evident for many of us who at least try to pay attention to what is happening globally and locally, in spite of the very old adage,, or maybe because of it,,, EH?

        • Jon says:

          I have experienced health care systems of few countries and based on my limited experience and knowledge I can say UsA has the worst.
          Have few anecdotal evidences but leave it for another day.

          Big problem in USA is Healthcare have been hostage to big money and all politicians in the pocket of big corporations.

        • Trucker guy says:

          Nonsense. You’re comparing western white people society “exceptionality bubble to the US instead of the whole globe. There are what? 200 countries or so? The US has been in the top 10 for the greater part of a century.

          There’s a reason the most powerful and influential people are here. The elite can chose any place they want to operate from. It isn’t like they opt for India or Guyana. It’s because of the prosperity. Same as why they would chose Switzerland or Canada etc.

          And save your nonsense about the US not having rivals. Russia has a specific agency dedicated to internet cyber warfare. A lot of people just eat up stupid shit they push and go along with it because it’s what they want to believe in. Such as that Alex Jones con artist and the like.

          If the cult leader says we should have a mass suicide and a bunch of idiots follow his orders, who’s the real bad guy? Wilful idiots or the cult leader?

          Also, stop liking and appreciating my comments. I live to be hated. Praise from others make me sick.

      • phoenix says:

        coverage doesn’t mean shit if you have to go into debt/declare bankruptcy after a routine medical procedure. our healthcare system is garbage wtf are you on about

        • Trucker guy says:

          What would you rather have as your options?

          1. Live in a third world country like 90% of the population. Get cancer and die because you have no options at all other than rub some tree bark on your balls and ask the village shaman to bless you.

          2. Be lucky and live in the US where if you are poor your state of the art healthcare is subsidized and you get cancer and have most all of it paid and you live.

          (In your example) Theoretically get treatment that “bankrupts” you which is then expunged in bankruptcy court. Or you know, talk to billing with the medical debtors and have 90% of the cost negotiated away and make miniscule minimum payments. Or just not parrot what dum dums preach on the web and realize that most working class people are covered by the ACA or are poor enough to have full subsidized care where medical debt doesn’t mean anything.

          3. Be exceptionally lucky and live in small population high tax western Europe where the govt pays for state of the art healthcare.

          Approximately 15% of the world is classified as developed. The rest is substantially further behind in a myriad of aspects. Healthcare being one small realm of them.

          People really do not realize how lucky they are to be a US citizen. The states aren’t perfect for sure but I still cannot understand how I can be called out for thinking in terms of American exceptionalism as I point out that bottom poorest of American homeless often live out of their cars and watch TV on smart phones while there is a substantial portion of the world that doesn’t even have a car for their entire town and have to carry stuff in buckets to their mud huts.

          What and absolute absurdity how stupid people are. I’m only thinking about America and not blindly marching to the crowd about how God damn awful it is here. The US is just literally unbearable and even life on Mars would be better. I should get out more because clearly, life in some destitute village where literacy about as scant as toilet paper is a million times better than this utter dump of a country.

          The US doesn’t beat some rich European country in this or that metric so we’re just the utter worst of the worst. Just utter scum I tell ya. Cry me a river you bunch of fools. Tell the 2 billion people who don’t know where their next meal will come from how fucking awful the most overfed country in the world is. Bet they slap the shit out of you.

          (And it was on this day Trucker Guy was permanently banned from yet another website.)

      • Dave k says:

        Trucker Guy
        Amen. Couldn’t agree with you more!

        • Cookdoggie says:

          Can’t you read? Don’t praise him. Don’t make eye contact, you’ll spook him.

      • 91B20 1stCav (AUS) says:

        Trucker-or, as the late, great Mort Sahl was wont to say: “…the United States is the WORST country in the world, AFTER all the rest…” (caps mine).

        And, to reprise: Perfection is NEVER attainable, improvement ALWAYS is. Something many of us here seem to forget.

        i still look forward to, and appreciate, your comments anyway…

        may we all find a better day.

    • JCH says:

      LOL, unfortunately I’ve been finding myself reading Zerohedge far too much lately (for economic take/Evergrande updates only) and I think that WolfStreet is a breath of fresh air by comparison!!

      Talk about toxic comments, nothing here comes close :)

      Thank you, Wolf & commenters for (mostly) being a voice of reason and civility!

    • Swamp Creature says:

      JakSiemasz

      I like the comments on this site. So do most people that read the comments. They are not clueless nor hatefull. They have more accurate information than you get from mainstream news sources. If you don’t like the comments on this site then don’t read them. Better yet, go find some other site to vent your frustrations on.

    • Happy1 says:

      I disagree. This comment section is quite civil by internet standards and the political comments are not the main component.

    • Billybob says:

      I mostly come here for the senseless hate. /snark

  29. Bruski says:

    The American “Crowd” continues to believe that the Fed in their best interests.

    Sorry to report that the Fed is so deep into monetizing massive debt that they cannot stop.

    Debt will continue to be inflated away by the inflation tax the Fed is enforcing without the public’s realizing what is happening to them.

    For me, it looks like a very rough road ahead unless one is in the “protected class”.

    Semper Fi.

    B

    • otishertz says:

      Or, the government is so into its orgiastic over the top “emergency” spending that the Fed will never stop monetizing. The monetization comes after profligate fiscal policy by the octogenarian kleptocrats in government.

      The Fed sucks ferret nuts, but the current inflation is coming from government borrowing, not from the Fed. Remember, Biden spent Trump’s borrowed $1.4 trillion that he left at the Treasury General Account.

      Spent it like Hunter in Vegas.

      • otishertz says:

        Might be more accurate to say the previous and present administration instead of T and B since it’s congress that has the authority to spend money but they are all working together and there is essentially no difference between the dialectical left wing and the right wing.

        The problem is the hidden head of the bird that controls both wings.

        • otishertz says:

          Granted, the Fed is almost solely responsible for the mispricing of risk and the crisis in unaffordability of shelter (don’t call it homes) due to their self serving interest rate suppression and purchases of MBS at any price.

        • El Katz says:

          I wish the hidden head of the bird wasn’t up it’s tuchus.

  30. Rowen says:

    Crypto solves this, right?

    • Depth Charge says:

      Is that some sort of joke?

    • Wolf Richter says:

      Not totally 100% sure. BTC lost about 25% of its purchasing power over the past month, vs the dollar which lost 0.7%.

      • Depth Charge says:

        He repeated a crypto shill talking point verbatim.

        • historicus says:

          IF the Fed raises rates, if ….if…then

          CRYPTOS will evaporate…..pronto

          Part one is dubious.

      • Cryptobugg says:

        If there is so much inflation why isn’t gold moving? Or crypto?

        • Wolf Richter says:

          Cryptobugg,

          The price of gold rises because people are eagerly buying it while sellers are reluctant to sell it at current prices, which is applying upward pressure on its price. Gold doesn’t get used up, unlike commodities. So the gold that is above ground, stays above ground and is being largely hoarded. That’s the charm of gold. But if there are plenty of sellers at current prices, the price doesn’t go up.

          So the better question would be, why are so many holders still willing to sell at current prices? Gold had a great run over the past few years. It’s up by a lot. And that may be part of the reason why enough people are selling.

          Cryptos are gambling tokens. They have nothing to do with anything except lots of liquidity that’s chasing a place to go and a desire for massive risk-taking (gambling). And cryptos have moved, bitcoin is down 25% over the past month, a result of it being a gambling token, and nothing else.

      • Duke says:

        But BTC went from $18.8k a year ago,, to $67k before it “lost 25% in the past month”.

        Was there a better asset class to hold in the past 10 years? (Or dollar cost average into)

        Also it is wise not to lump all crypto together. BTC has different programming than what are often termed “shitcoins” , which minters hold most of.

        BTC is crypto. Crypto is not BTC.
        Gold and cash is hard to transport and store. BTC you can transfer instantly to anyone anywhere. It has drawbacks, but is not without its utility. Most importantly it can’t be inflated.

        • Wolf Richter says:

          Duke,

          The thing is, people need to quit calling BTC a “hedge against inflation.” It’s a gambling token that can make and lose a ton of money. That’s all it is. Your numbers demonstrate that.

    • Brant Lee says:

      Gold and silver solve this (for individuals). Substantial precious metal increases will mean the party is over because it indicates the U.S. has lost the leverage to suppress the price. There is no room in the world for two monetary kings.

      • Old school says:

        Fed doesn’t care about things that doesn’t substantiality affect them. Gold is only about 1/2% of current investment assets, so no big deal. If it or Bitcoin gets big enough to affect their management of fiat, they will try to put the hammer down on it.

        • Brant Lee says:

          Not talking investment. There have really only ever been two dominant monetary stores of value, Gold and the U.S. Dollar. Gold has always been involved (British Pound, etc.) until the gold standard was conveniently dropped on the dollar for other purposes than representing a store of value.

          All of Asia, almost five billion people, along with many others, see gold as the only true monetary standard. They have all seen in the past how governments recklessly inflated away their labor income through paper and promises. We’re out-voted in our paper republics and we are about to have a change of heart as well because there is no difference here in the outcome.

          Here we are now, wondering how we will keep our savings from eroding away by inflation holding a paper dollar.

  31. gametv says:

    The debt ceiling process was just passed in the Senate, so within the next week the Fed will begin to sell a ton of new debt and that will finally trigger much higher interest rates, as all forms of debt will simply sell off.

    Next week, Powell will drop the bomb on cutting the monetary support. And watch the fireworks.

    • Jackson Y says:

      The reason Wall St is completely shrugging off the prospect of tapering & tightening is the current level of monetary accommodation is orders of magnitude greater than what they could ever have anticipated.

      Even 10 years ago, suggest rates should be at 0% with unemployment at 4% and inflation at 7%, any economist would have thought you were insane.

      Hedge funds are borrowing trillions at -5% real interest rates and throwing every penny of it into market speculation. The threat of real rates potentially rising to -4.5% next year simply doesn’t scare them.

      And even in the worst case, Wall St knows they have Powell by the balls, and a 10% market correction is enough to get him to delay or cancel any tightening plans. As he has already demonstrated time & time again during his tenure.

      • Jake W says:

        i think the market is misjudging just how much this house of cards is teetering on the edge. leverage is so insane and debt so out of control that changing “real rates” from -5 to -4.5 could easily topple it over.

        • Jackson Y says:

          There are also distortions caused by tax laws. In a year with 25% ytd returns like this one, nobody wants to sell before year-end, because doing so means realizing gains & potentially getting a hefty tax bill. But this is also somewhat offset by millionaires betting on whether & when Build Back Better passes – if the higher capital gains taxes are not retroactive to 2021, they’d be better off selling this year.

          After a 30% return in 2013, the S&P 500 had a 7% correction from mid-Jan to early-Feb 2014.

      • Ron says:

        Plus margin

      • drifterprof says:

        “Wall St knows they have Powell by the balls”

        Sooo, Powell has himself by the balls. Damn onanist.

        • historicus says:

          Wall St? I’ll bet it is one entity……the one the Fed partnered up with for the first time in history.
          Clearly , the Fed has been hijacked.

          They ignore “stable prices” mandate.
          They have completely carved out the 3rd mandate “promote moderate long term interest rates”, which is clearly in Federal Reserve Act as amended in the 70s, BUT CAN NOT BE FOUND ON THE FED website nor in any of its recent publications.

          Keeping long rates “not extreme”, high or low, which is what “moderate means” would have short circuited the Fed’s game of pounding down long rates and flattening the yield curve. It would have also stopped the raiding of future generation’s wealth and pulling it forward to fluff the present. ($20 Trillion)

      • otishertz says:

        People thought I was insane when I was making the case for NIRP in 2010 at hoocoodanode.

    • Swamp Creature says:

      gametv

      Agreed

      Powell will lower the boom very quickly before the new “Woke” appointees are confirmed for the vacant posts.

    • Cookdoggie says:

      Ok, it’s a week later when I customarily come stumbling along thru the comments. I see no fireworks. Another commentariat forecast gone awry. This site is awesome for shining a light on what’s going on, but absolutely worthless for divining what the future holds. Nobody here knows the future (cough, including Wolf) please just stop pretending like you do.

  32. John Vermeer says:

    The problem is, smart people who should be caring about this and concerned, aren’t, they’re putting their fingers in their ears, don’t want to see or hear about it. My classmates who have all been retired for years are looking the other way, most of them too well-off and comfortable to bother with this, or so they tell me. I’ve given up trying to discuss it. My own brother won’t say the “i” word because he still makes money off of options and is totally invested in the stock market. I don’t know whether to cry or scream. Neither seems very manly. I keep half my money in cash, the other half is invested in blue chips and etf’s, funds. I can no longer drive, no longer own a car or a cell and I must sit
    here and watch the country fall apart. It was all so unnecessary.

    • COWG says:

      Brother,

      Get yourself a cell, a bottle of good bourbon, a good cigar and give me a call…

      I’d be happy to hear your take on anything…

    • historicus says:

      John
      “It was all so unnecessary.”

      And it was clearly by design. Some adherence to MMT, so idea the suddenly debt didnt matter, negative real rates were okay, and that those not fully invested in stocks and real estate are to be PUNISHED.
      The Fed has admitted that their idea was to FORCE investors to take greater risks. When did it become the directive of the Fed to FORCE people to do anything ? What they did was FORCE people to buy that which the string pullers already owned……stocks and real estate.
      IT will be the devil to pay eventually.
      The inflation will RUIN this country……and it will begin in spade in Jan 2022 when new pricings structures hit the entire economic spectrum of this nation.

  33. Bernanke promised to fix inflation in 15 minutes. If the Congress flips in 22 a lot of this new spending will never be funded. The ME wars are over. Then if the Fed has to tap the brakes in a slowing economy that will be interesting. When GDP and CPI diverge, look out.

    • Depth Charge says:

      “Slowing economy?”

      This pig is so overheated it’s sickening.

      • Wisdom Seeker says:

        It’s not a slowing economy, it’s a self-roasting economy!

        Sorta like roasting an overfed pig by lighting the belly on fire … you can pretty much cook the meat by burning up the fat…

      • A tight labor market means the economy has no room to expand. When the economy begins to slow, (only way left to go) inflation (not transitory) puts pressure on those who are losing their jobs. If this were a stock market at the highs they could just print more money, (and they do) but you can’t print more workers. Just in time inventory, which helps cut costs, gives way to hoarding inventory against supply chain issues. Excess inventory impacts the bottom line when business pulls back (see consumer sentiment). Not sure why the Fed made their employment benchmark., now that they have met that number they are of course ignoring the warning, just as Bernanke did before him. They cannot control employment. Usually not long after the economy reaches full employment they roll over just as it was in 2019, which in turn provides the Fed cover to keep policy accomodative. The Fed never has to get off the snide. You never need to lower interest rates if you keep them permanently low. Raising interest rates isn’t what kills the economy, its lowering them after you have realized the bird has flown. The Fed has dotplotted their hikes so far in the future that a recession is almost guaranteed, ergo no hikes will be needed. The relative merits of a permanent condition of economic stagnation, keeping debt costs low, are debatable. The benefits of Fed
        repression is massive consolidation of industry, technological s turned inward. New products which appear to be innovative, only serve existing needs. We are shrinking and the Fed is doing it’s part, crypto will reduce the role of money to a transaction only fee.

  34. silverdog says:

    I just got done reading a book that tracked the lives of a few ordinary North Koreans during the famine in the 1990s, the books title is “Nothing to Envy”.

    One of the points that struck me was that the ordinary people that died first and in larger numbers were the ones who believed in the system/party/Kim Jong Il/etc. They were unable to adapt to the new normal and therefore starved waiting for the old system to get back on its feet and distribute food again, it never happened. The people who were able to survive were the ones who never believed much in the system and were able to adapt to the new reality.

    The same is going to happen here with regards to prosperity/wealth/ownership, if you still believe in 401Ks, Stocks, Social Security, Dollar bills, etc. then I see a hard future ahead for you financially.

    Don’t follow the script that is being sold to you, fix your own cars, push for actual(non debt) ownership(home, car, etc), stable families, etc. Forget all the political left/right talk, that’s just a trap most get caught in. Look out for yourself and your family first, then your neighbors, etc.

    This ship is going down but you can come out of it for the better. Adapt and accept it is over and start to build the next version of this great country.

    • Wisdom Seeker says:

      This is a great comment. Sheeple get slaughtered.

      The most valuable thing you can ever have is both free and priceless – a strong and supportive family.

      The best investments you and your family can make are not sold on Wall Street: practical education & useful skills, “personal capital equipment” and the tools to maintain it, and most importantly developing a skeptical mind capable of critical thinking and creative problem solving.

      • TXRancher says:

        “The most valuable thing you can ever have is both free and priceless – a strong and supportive family.”

        Thanks WS. I captured that one in my file of “sayings” which include from Aristotle to Wisdom Seeker.

        I might add “good health” to those valuable things.

  35. Truckman says:

    I’ve been keeping a list of prices for the last two years. I’ve just completed my big Christmas shop and done the math. This is Canada. Food inflation in the last 6 months is 19.7%, so annualized around 40%. That’s on the flyer discounted prices, which is relevant round here as only about a quarter of people pay full price for anything. The official government figure is 3.8%. The pricing regime has been very odd lately, e.g. stuff is sometimes discounted but not in the flyer, which never used to happen. I would bet the big box groceries are setting their prices on particular dates to give the government the numbers it wants.
    Rental inflation over the last two years is 37% per annum. That’s whilst the officially permitted increase is about 2%. The reasons are because many old rentals have been AirB&B’ed, and quite a few more have been renovicted. The local government has just banned renovictions completely. Availability is under 1%. And Canada is not a place to be homeless in winter.

    • drifterprof says:

      Thanks for the on-the-ground information.

    • El Katz says:

      Went into the local Safeway on Thursday. My bill came to $12.01. The “discounts” were over $20 to arrive at that bill from the original total of @$34.

      It appears that there are many hidden discounts that seem to only be available to those customers who download apps for the various grocery stores. There was one for $5 off the total bill for spending at least $20. Kroger does the same nonsense with in store coupons that you have to scan with your mobile phone in order to participate. Those are not on their website.

      In other words, food shopping (at least here) has become a blood sport. I guess the data that they gather from these exercises is worth a lot to them.

      • Truckman says:

        Grocery stores in Canada do not have discounts of that number and size yet, though Canadian Tire does do the online member secret-discount thing. However, I would guess half the Canadian population are members, so it’s hardly a secret!
        Just been speaking with someone in the UK who tells me that a 20% rise in grocery prices in the last 6 months would be about right there too, and the official inflation figure would be about 4% in the same time period. Shortages have almost disappeared there (and Western Europe in general), whilst there are still a few in Canada, but really weird pricing and discounting is going on in both.

  36. BigAl says:

    Wolf,

    Would the traditional tightening measures even work this time around? I have my doubts.

    A lot of small and medium size businesses are more dependent on short-term, variable-rate debt than at any time in history. I think that raising short-term interest rates might be akin to raising the cost of a critical input of production.

    And then there is the dollar.

    The dollar has remained strong vs. most other currencies. It’s lost a little ground to the Yuan…but it’s more or less at the highest it’s been in the last 18 years – if you use the DXY as your guide.

    What’s driving that?

    The reserve currency arguments arising from geopolitical reasons and means-of-exchange (SWIFT) are being eroded constantly. To say nothing of the debt-GDP picture. At the same time, foreign purchases of US residential real estate (a non-trivial source of dollar demand) – are also declining.

    Much of the residual demand for dollars, I am sure, is being driven by the purchase of US stocks. A tightening should reduce their value – and thus cause a strong source of US dollar demand to dry up. Would demand for US bonds come to it’s rescue as a result of higher interest rates? I do not think so. I don’t think large investors seriously consider Western sovereign debt any longer – let alone that of the USA variety.

    I think the above is worthy of contemplation.

    • Wolf Richter says:

      BigAl,

      I think letting the balance sheet shrink to allow long-term rates to rise; and raising short-term rates to somewhere near the rate of inflation would eventually vanquish inflation.

      It would also cause asset prices to sag in a major way and might cause a recession.

      But that’s what recessions used to do. They were part of the business cycle and got rid of excesses in prices and debts (through bankruptcies and debt restructurings at investors’ expense). Investors used to accept those costs. Now there is a huge hue and cry from those investors every time a recession approaches.

      • Gilbert says:

        Wolf, I find it hard to believe you really think the Fed will shrink it’s balance sheet, when so far they have only jaw-boned us with the prospect. Their one greatest asset is lying with a straight face.

    • otishertz says:

      @BigAl

      “A lot of small and medium size businesses are more dependent on short-term, variable-rate debt than at any time in history.”

      I concur. More than a lot. Probably 95%. No one mentions this. They are usually interest only loans that will convert or balloon in five years, but all those interest only loans are variable.

      If a company can’t pay it off or refinance they are in for a shock. Thing is, if there is an interest rate spike and credit crunch then the loans become much harder to carry or refi. Lots of business financing is getting five years ripe about now.

      Don’t ask me how I know.

  37. Auldyin says:

    “And this inflation isn’t going away under these circumstances.”
    I’m hearing in one or two places that input producer prices are up around 26%. If true, on historical precedent this would tend to imply around 13% general inflation in six months time, June-ish.
    If people don’t have access to similarly increased incomes, there’s a wall coming if the cards are maxed out and the savings accounts are empty.
    IMO they’ll do a 70’s and finance the new price level. What else can they do?

    • Janna says:

      Auldyin,
      Our farmers are being told their inputs will go up, but unlike in the past, their suppliers are not letting them pre-purchase to lock in current prices. We soil test and treat next year and I’m bracing myself now for those increases. Now, the USDA projects an easing of (food) price increases in 2022. Who really knows though? It seems like there is a weather event, new variant, etc, and it throws projects off.

  38. MonkeyBusiness says:

    “Inflation without food and energy – OK, Americans, go ahead and try to live without food and energy”

    To that statement, someone at the Fed used to say “but laptops are now 1000 bucks a piece and you are getting more!!!”

  39. WES says:

    Since the White House is celebrating reaching 6.8%, I guess we should be happy. If that number climbs higher, then we should expect more celebrations. As a retiree, for some strange unknown reason, I just don’t feel in the mood to celebrate.

    • Depth Charge says:

      They’ve decided that rather than take it seriously and try to curb inflation, they are going to gaslight the American public by lying about it. I mean, the spokesperson for this incredibly inept administration told us “inflation is a good thing” a month or so ago.

      • otishertz says:

        You mean Chucky?

      • historicus says:

        Depth
        ” they are going to gaslight the American public ”

        Recall,
        There is no fear of inflation, rather we are concerned about deflation
        The inflation is a good sign of economic activity
        This inflation is transitory, and will be gone when the supply chain issues subside.
        Inflation is good
        Free Beer tomorrow

  40. Matthew Scott says:

    Wolf,
    On an related note, your graph of homeowner estimates of what their home would rent for and the Case-Shiller home prices show the two meeting again around 2012 – 2013. Do you think there is any significance to that? Would we expect that to happen if/when the current housing bubble bursts? Did it happen before if you were to make similar graphs?

    • Wolf Richter says:

      I think it’s meaningful. It marked (with a lag) the bottom of the housing market. There is a relationship between rents and home prices, but this relationship is non-existent over the short term and iffy over the medium term. If it happens again, we should see it coming this time since I’ll be charting it every month, and I’ll be trying to figure it out.

    • historicus says:

      It is ridiculous for the bean counters to look to a “survey” when there is hard Case Shiller data available.

      Who audits the “survey”, who “calculates” the results? Who knows the validity of the survey and the published results?

  41. Depth Charge says:

    The FED and .gov have done ABSOLUTELY ZERO to curb this inflation thus far. In fact, they continue to CAUSE it. The FED has shown they need to be abolished. They are in complete violation of their mandate. Such a dereliction of duty is unheard of, and no precedence in the history of the US could be found. Jerome “Weimar Boy” Powell should be arrested!

    • historicus says:

      DC…
      There needs to be a Taylor Rule or something to that effect.
      The inflation “dog” is off the leash and will be damaging beyond belief.
      Some talk on this thread of the Reagan Admin hurting the middle class.
      What do these people think is going on now? Never have earners and savers been more PUNISHED in this nation, and it seems to be all intentional.
      Powell arrested? Let’s start with the Fed Govs that front ran Fed policy with their own trading. Where is the punishment?
      Then turn to the complete disregard for the Mandates of the Federal Reserve Act by Powell.

      *Mandate #1 The Fed is supposed to promote maximum employment yet what they do with rates has had the OPPOSITE EFFECT. The free money to promote inflation is borrowed by the federal government and paid out in a fashion that discourages employment. Fail.
      Mandate #2 The Fed is supposed to promote stable prices, yet they promote just the opposite, INFLATION, which is now running circa 7%. Fail
      Mandate #3 The Fed is supposed to promote moderate (not extreme) long term rates, but we have near record lows, 30yrs almost 4% below inflation. Those rates are IMMODERATE and EXTREMELY low. Fail.

  42. Michael Engel says:

    In Mar 1975 King Faisal was assassinated. US consumers were elated
    after the bottom of 1974 in Oct & Dec, when the recession was over.
    In 1975 American bought 325K Oldsmobile Cutlass.

    • Old school says:

      Remember when the Cutlass was selling so hot, that they put Chevy engines I them and that created lawsuits I think.

      My in-laws were stupid with money and just had to have one. I remember they had to refinance it to keep it. I still think they lost it.

      • otishertz says:

        Still miss my 71 Cutlass Supreme Convertible. What a great car. I think I sold it for $7k in 1994.

        • Ron says:

          Sold my 1969 442 convertible also 9k great car no chips ,better go back to those cars

        • Anthony A. says:

          Ron: you can buy that ’69 442 on Bring A Trailer classic car site. Just get ready to shell out $40,000 for a clean one.

  43. Seen it all before, Bob says:

    Maybe I’m being naive, but it does not seem like a traditional inflation issue.

    It is an issue of supply and demand.

    Supply is being throttled with shipping and production delays. Freeing up the shipping delays will help drive down this inflation as well as ramping up production. Our company is seeing massive lead times on critical chips. Production has not ramped up yet to 2019. Some items like cars, gas, and lumber see massive short term inflation. When the gas and lumber supply increase, the prices drop drastically. That isn’t deflation so why is the rise in prices considered inflation?

    Demand has gone through the roof. As Wolf said, sales are up and the economy is booming because everyone is buying stuff. Consumers have enough money to buy cars over list price so they do. What happens when money becomes tight? Will demand slow and prices fall?

    The post-pandemic lack of supply and production as well as overwhelming demand is driving up prices. What happens when the forces of capitalism equalize? It is like turning a cruise ship. It will take time.

    The question is how sticky are these price increases. ie lumber prices soared and then plummeted when increased supply came online but not quite back down to 2019.

    My guess is that we will see negative inflation as supply increases and people run out of money to spend. We saw this in 2007-2008 when demand plummeted after the GFC when consumers had less money.

    Am I being too simplistic?

    • Seen it all before, Bob says:

      I am likely looking at this from my lifestyle perspective.

      Thanks to the pandemic, I have so much more money.

      1) Commute costs are gone.
      2) I don’t need nice clothes and my 10 year old Nikes are all I need.
      3) I didn’t go out to eat at all last year. (This is changing now)
      4) We didn’t go on an expensive vacation.
      5) I refi’d into a loan that is saving me $300/month. Thanks Fed!
      6) My conservative ETFs have gone through the roof. Thanks Fed!

      I saved it all. (Most of it)

      My neighbor bought a new truck, is adding a new sunroom with a hot tub, and bought a new fancy cell phone. He even cut back on his work hours because he is not a saver and has more than enough money to live his lifestyle for now. He is the reason demand is so high and production is low. :-) Eventually, he will run out of money, stop buying stuff, and go back to work. It may take a stock market/Bitcoin crash or at least a levelling off to get there. When that happens, we might have deflation or a recession. The Fed is terrified of this.

      • Jake W says:

        but like most people who are spending because of their etfs, you and he are likely not selling and realizing gains. so if the values drop, the “wealth effect” spending goes with it.

    • Wolf Richter says:

      This inflation is transitioning from goods to services. Services = two-thirds of the economy. No bottlenecks and transportation issues involved in services.

    • historicus says:

      Bob
      “Supply is being throttled with shipping and production delays.”
      What caused the bottlenecks? They came out of nowhere.

      I suggest the bottlenecks were CAUSED by the inflation, not the other way around, though now the bottlenecks contribute to the situation.
      Inflation was acknowledged and manifest. Every purchasing agent in the country called their suppliers and said “I’ll take all you got at that price.”
      (to have inventory in an inflation is everything)
      THIS, caused the bottlenecks IMO. The Fed who caused the inflation and the administration who pushes this spending, push the narrative that this is a supply chain issue. But one must ask, “What came first? The inflation or the bottlenecks?”

    • cb says:

      Bob said:

      1. “What happens when the forces of capitalism equalize?
      2. “Am I being too simplistic?”
      —————————————

      1. Capitalism? You mean creating vast amounts of money from nothing to bail out band and asset holders? Then creating vast amounts of money to maintain or increase demand? That money is in the system where it is staying.

      2. Yes.

    • JeffD says:

      The supply problem is due to people buying now to avoid cost increases later. They believe a worldwide hyperinflation will be the way that world governments resolve their debt problems. In other words, the jig is up, and even the the shoeshine boys can see it.

  44. otishertz says:

    That cartoon is no good. You can’t see the fangs.

  45. JM says:

    Well, at least I own AG/AU, the ultimate inflation hedge. Lol, not really, worst “investment” I ever made, should have bought BTC and TSLA back in 2014 and would have been rich. Maybe PM’s will finally catch a bid in 2022.

    • Old school says:

      Probably shouldn’t even call gold or silver an investment. They are something permanently valuable and liquid worldwide so a special form of savings.

      The thing about manias is recency bias about what has gone up makes prudent investing and good risk management look stupid.

      Public companies in theory should live forever, but most CEOs don’t really set the balance sheet up to survive 1 in a hundred year events. If you are politically connected government might bail you out.

    • sunny129 says:

      JM

      Best inflation hedges as of now and in short-intermediate term are Energy (fossil fuel including natural gas and even some coal!) Agricultural comodities(corn,wheat and soyabeans++) , rear earth minerals, Lithium, graphites and copper. Plus income procing RE across the globe! If disinflation ( I expect global recession within 12-18 months!) follows after a year or two, PM will tank!

  46. joe2 says:

    “It’s going to be a bitch to get this under control.”

    Nah. starting next month BLS will adjust the weights for its Consumer Price Index basket “based on consumer expenditure data from 2019-2020.” So they just move the baseline and goalposts and metrics.

    What will be a bitch is for us peons to survive.

    • Truckman says:

      The moving of the goalposts and the redefinitions is all the authorities and media have left. What’s happening on the ground is obviously worse, but how much worse? The only question is when, not if, enough of the populus has had enough. This, of course, is very difficult to judge with only anecdotal evidence available. On the other hand, decisive points are also likely to be highly localized. So, hanging around the coffee shop, local garage, or bar and listening in is likely to tell you all you need to know.

      • Depth Charge says:

        The populous has already had enough. If you think all that rioting in Portland, etc. was due to the previous administration, social injustice, or any other excuse then I’ve got a bridge to sell you. It’s young people who don’t have a pot to piss in that are fed up. Sure, they get caught up in some silly groups, but the angst is all a byproduct of this cruel system the FED and their rich buddies have created.

    • Wolf Richter says:

      joe2,

      The CPI-U weights are updated EVERY two years, based on the purchase basket of the prior years. So this is normal and routine. ZH forgot to point that out and started a whole new conspiracy theory.

      I will look at the new weights when they come out, and if there are any big changes in it, I will cover the whole thing.

      I suspect that housing (rent and owner’s equivalent of rent) will get a larger share than the current 32% combined, because of the increased portion of income that is taken up by rent. There might be some other interesting changes.

      But remember, all weights combined must = 100%. If one weight is increased, another must be decreased.

      • joe2 says:

        Thanks Wolf, but that just means the BLS is even more corrupt than I thought. I look forward to your analysis.

        Wolf – THE major item in my cost of living is taxes, fees, licenses, and other government levies. Not to mention the cost in hours of complying with record-keeping and reporting. For example: we got awarded a county covid grant that did not cover the cost of the county taxes that were still levied during that year we were forced to close.

        How are these, and the annual increases, taken into consideration in the COL?

        • joe2 says:

          BTW, applying for the little 10K county grant was as complicated as filing Federal taxes.

          The county found from all the collected applications that on average all small businesses lost 50% of revenue in 2020.

          I just finished the calculations for the Employee Retention Credits for 2020 and 2021 (what a goat screw) for our accountant who has to now file a bunch of 941x’s. But he is too busy right now handling bankruptcies.

        • joe2 says:

          Another BTW, after all that the little 10K county grant had to be turned over to the SBA under the terms of our EIDL.

  47. Michael Engel says:

    1) US treasury is “ahead” of the curve. Their COLA booster will rise the most, but from early 2022 we will have a disinflation, – positive CPI with lower highs and lower rates of inflation, but COLA will stay the same in 2022. That will change.
    2) Disinflation might become deflation. The focal point will be NYC. It might be a battleground. Chaos and destruction out of control.
    3) The gov will not be able to function. Retirees will complain that the gov is robbing them. The gov will blame the republicans.
    4) Those who believe in the old system, will not be able to adapt. They will suffer the most.
    5) Riots, men made shortages caused by strife might charge a heavy toll .
    6) The rich will survive, the poor will die.

  48. dishonest says:

    I wonder if Biden even registers the price increase when he goes to the supermarket or pumps gas?

    • restingbetchface says:

      “I think you’re gonna see you’ve already begun to see and you’re gonna see over the next couple of months oil prices gas prices of gas pump go down.”

      J.B.

      you know how hard that was to transcribe?!!

      • Wolf Richter says:

        Even if gas prices go down over the next few months — and it could be — the rent factors in CPI will go up, we already know that, that’s baked in because they’re lagging. And the rent factors weigh 1/3 of CPI, much more than gasoline. And prices of all kinds of other services are going up too.

    • Ron says:

      He never shopped in his life

      • drifterprof says:

        “Biden’s father had been wealthy, but suffered financial setbacks around the time Biden was born, and for several years the family lived with Biden’s maternal grandparents. Scranton fell into economic decline during the 1950s and Biden’s father could not find steady work. Beginning in 1953 when Biden was ten, the family lived an apartment in Claymont, Delaware, before moving to a house in nearby Mayfield.”

        Biden was probably familiar with shopping during those years.

    • Gilbert says:

      “ I wonder if Biden even registers the price increase when he goes to the supermarket or pumps gas?”
      He hasn’t done either of those …. for decades if ever.

  49. makruger says:

    Well the FED did say they’re going to let inflation run hot for a while. It’s just now becoming apparent to everyone what that actually means.

    It’s not like either congress of the executive branch are actually going to increase taxes on those most able to pay, especially after decades of giveaways to the most wealthy citizens and corporations.

    So, melt away the deficit the old fashioned way, with inflation and pay if off with future dollars which are simply worth less. Naturally this is all by design and is simply a continuation of balancing the budgets and deficits on the backs of those lease able to pay.

    • GSH says:

      Yes, nominal inflation around 10+% for years to come seems to be the plan. It would inflate away the debt *IF* we stopped deficit spending like crazy. But, of course, we have tripled down on deficit spending instead. It is going to be an interesting ride.

  50. Crush the Peasants! says:

    How do you think folks who purchased their nice craftsman style homes in 2014 or 2015 for $450,000 are feeling now when these same homes are going for $800-$900,000?

    Prices are not going down. And this accumulated wealth spurs consumption and makes for secure retirements and familial wealth building.

    • Jake W says:

      i’m sure they’re feeling great. people in their 20s, like many of my younger coworkers, trying to be a house who aren’t set to inherit millions in real estate and stocks don’t feel so great.

      seriously, what is wrong with you people? i’ve never seen such a group of sycophants praising the disastrous “wealth effect.”

      • Crush the Peasants! says:

        Seriously, what is wrong with you people? I’ve never seen such a group of whiners with ”entitlement syndrome.”

        Tell your co-workers to obtain a marketable job skill, whether via trades or college, save up some money for a down and buy a starter home. And quit moaning, it never solved anything.

        • El Katz says:

          I might add to CTP’s comment:

          A “starter” home doesn’t have 2,500 square feet, 2.5 bathrooms, 4 bedrooms, a family room, an “open concept” floorplan, hardwood floors, a his and hers home office, granite counter tops, a 3 car garage, and a Beverly Hills zip code.

          They have 2-3 bedrooms (maybe), a living/dining room combination, a galley kitchen, a small 3 piece bathroom (single sink, toilet, bathtub – shower head optional), @ 1,100 square feet, and certainly aren’t in the best school districts nor have an ocean view. I would imagine that most on here had to climb the property ladder as we did…. (but we also went down a few rungs in retirement).

          That’s the problem that many young folks have. They have eyes bigger than their bank accounts. Temper your expectations for the *now* and work towards the *then*.

        • Jake W says:

          give me a frigging break. the government’s reckless policies have rewarded those who already have their homes at the expense of everyone else. even the 1500 square foot “starter homes” are now priced at 8x average income in many places. cut the crap.

        • stan65 says:

          I am with Jake on this one. Anywhere in the world now it is 7-8x income. Here in U.K., if you try and get a house in Leeds (not very appealing), the lowest priced starters will be 5-6x. If you want London or anywhere south, then it’s 12-15x.

          If you are starting on the property ladder now, tough luck.

          When I immigrated into U.K., I was skint. Lived in rough houses, three jobs, worked 16 hour days seven days a week. I figured, I can’t afford to pay rent, have to buy. The only way I bought my first unmodernised 2 bed cottage was by faking my income books to show my annual earnings were 35% of the price of the property, and a not too investigative a lender.

          That was 30 years ago, and was the move that allowed me to collect a few. Try that now with all data at their disposal ata a lock of a button.

          The yufs may have very big wants, but the income multiplier is the very real show stopper for them.

        • NBay says:

          So, EXACTLY WHAT “reckless government policy” FORCED the homebuilders to STOP building the 0.9-1.3 K sq ft 2-3 bed 1 bath no frills (but solid) homes like I, and the whole damned rest of the post war middle class, grew up in?…..Jake?

          BUT IF there was NO “reckless government causative policy”, then how does one get into the C suites and boardroom of the homebuilders and show their displeasure with such things?

    • joe2 says:

      Look. If your house goes from 450K to 900K your taxes and insurance also double. How does this make you feel great? Wow you can sell it and cash out. Where do you live now? In a car or a tent?

      If you sell your house and buy another, the transfer and moving costs are on the magnitude of 10% of the value of the sold house. How does this make you feel great?

      You could get some cash out of your $900K home with a 2nd or 3rd or HELOC but you could just as easily have done that on your $450K house.

      Anyone who falls for this false idea that inflation puts money in your pocket is “confused”. Hell get yourself a fistfull of Zimbabwe 100,000,000,000,000 dollar bills and feel rich. You can buy them on eBay for about US$5.

      • georgist says:

        Unlike Adam Smith, Americans do not differentiate between rentier activity and actual value creation.
        Until that changes, nothing will.

      • Crush the Peasants! says:

        Yes, if you stay in the same area and want to upsize or move to a comparable home, things could be better for sure. But if you are young and have seen your starter home, in which you have resided for several years, rise in value, you can use the increased wealth, minus selling costs, as a down payment on a step up home, and stay put for the duration. It will be worth more over the long run.

        Or, you can buy a fixer upper in the same area, and rehab it to the level of your current home.

        Or you can move to a lower cost area, buy a lower cost comparable home, and pocket the wealth.

        Or, if you are at the end of your journey and can no longer care for yourself, you can use the wealth to enter into a nice assisted living home.

        And in an inflationary era, if you do not put your money into assets that are also inflating, you get left behind. A rising tide lifts all boats, but only if you have one.

        • historicus says:

          And how about if you want to downsize?
          You sell you house for X, buy a house or condo for Y and bank the balance. Then watch it drop 7% a year in your bank account. Or, you could buy into the longest bull market in history supported by fake interest rates…….nice choice.
          So people sit, and this contributes to the real estate market seizing up
          How can people let go of their largest hard asset in an inflation?

        • joe2 says:

          Yes there are circumstances where you can make out. But most people so not have that much flexibility. Moving to another area is a big deal and costly.

          And remember over $500K you get to pay capital gains at whatever rate it is then.

          Basically, owning an asset that keeps up with inflation is better than losing the inflation cut each year, but it is not guaranteed (e.g.., Federal law against zoning and Section 8 housing built next door) and associated costs are dragged up also. So the calculation is not straight forward.

        • SoCalJohn says:

          How can you be so ignorant? You timed it right. Congratulations. Many others couldn’t do that, for whatever reason, and now they suffer, and you enjoy this. What is wrong with you. Please get help.

        • El Katz says:

          SoCalJohn:

          So, what pray tell, should a person do? Not take advantage of opportunities that present themselves because it may offend someone else? Isn’t that what your angst is over – that you didn’t get the same opportunity? Life isn’t fair. That’s been proven to me over and over. The only “fair” you’ll likely find will have a Ferris wheel marking the spot.

          Maybe your chance will come later. Or not at all. That’s up to you and how you prepare.

          As far as “downsizing”…. if you have a $500K house with a $200K mortgage and you sell it, you realize @$270K ($300K less fees / brokerage). You buy a smaller property for cash. Then your cost of housing isn’t subject to variables other than insurance and taxes. That is what we did. It was all planned in advance and we worked our plan – moving our timing (which wasn’t perfect by any means) for what was the best outcome for us (not all of which was financial outcome) at that stage of life. Certainly, we could have kept our previous house that had some leverage and *made* $100’s of thousands more, but to do that, we’d have to remain in an area of the country we couldn’t stand for a variety of reasons. Plus it was too big and had two stories – not ideal for geezers. We sold it to a young family whose wife taught in the local school district (turned down an investor that had a more solid offer), and they, in turn, have made oh….. 40% in 4 years if they were to sell it.

          A life is nothing more than the sum total of the decisions you make – good and bad. The outcome depends on which of those two categories of decisions is the dominant type. It is you, SoCalJohn, that should seek help. Envy is a sin.

    • Jon says:

      I believe FED won’t hike rates in proportion to real inflation.
      The government would do their best to further manipulate the inflation metric.

      But if the rates do go up in proportion to inflation then think what would happen to real estate which is already all time high!

    • Old school says:

      A lot of the real estate and stock prices can’t be justified by income so they are justified by Zirp. You can’t run negative real rates at minus 6% for very long without causing some bad stuff to happen. Real interest income, real dividends, real wage growth are all negative. System can’t tolerate that.

    • cb says:

      if they are intelligent, they feel lucky and benefitted by a corrupt government and FED

      if they buy the cool-aid, they feel think they have “earned it”

  51. Depth Charge says:

    “The Fed is still repressing interest rates and it’s still printing money – which positions it as likely the most reckless Fed ever.”

    Without a doubt, this is the most reckless band of money-printers the US has ever seen. The FED has morphed exclusively into an asset pumping arm for the rich. They are in complete violation of their mandates and they don’t even try to hide it anymore. Even billionaires – the biggest beneficiaries of their policies – are calling them out on it.

    The real question is WTF are these lunatics DOING right now? Who in T F are these economic terrorists beholden to, and how can we immediately remove them from power? This is the most dangerous situation we have ever encountered in the US. It is breathtaking corruption and dereliction of duty.

    • DR DOOM says:

      Depth Charge. I am a saver that’s been ground down too.I am 70 and have been a saver since my first Pass Book Savings account I got for depositing my earnings for helping my family grow Burley Tobacco when I was 10. I got 5% interest. It was great to lay in bed at night knowing my money was making money. Hard work,save,dream, and repeat. Sound familiar?Burley was hard to grow and had to be stripped leaf by leaf, graded and hand tied with a leaf. If we blow a gasket and fall over dead we will miss watching these bastards lose what they covet most. What does Powell covet? It is not money. He covets being a heroic historical figure and have this as his legacy. I believe that He could turn on the administration like a rabid dog if he gets a tiny wiff that they will throw him under the bus. Biden and Congress will have to throw him under the bus before they own inflation and get cleaned out in the mid-terms. They will not own their bastard step child called inflation. Let’s sit back and watch. This will not be a checkers game it will be a chess game. Powell could end up being a formidable figure if his legacy gets threatend by a manipulative and divisive bottom feeding politician.” The game is afoot” as Sherlock Holmes wrote and the game requires that first blood must be drawn.

      • Anthony A. says:

        I’m convinced that the reason he was re-appointed was because if things got out of control, he will be the fall guy and be blamed for all of the damage.

      • drifterprof says:

        “Powell could end up being a formidable figure if his legacy gets threatend by a manipulative and divisive bottom feeding politician.”

        Nope, he caved to Trump. Legacy is way beyond repair.

        • DR DOOM says:

          drifterprof. You might be right about that. Consider however that if inflation was running wild would he have caved. I think not because Trump and Powell could have blamed Obama for the inflation. The dynamics are completely different now especially the politics. People that claim they know Powell say he is “down deep” a public servant. We shall see.

        • drifterprof says:

          Dr. Doom,

          Okay, point taken. I don’t know enough about Powell’s real personality. However, if he is really “down deep” a public servant as some say, that doesn’t seem consistent with your hypothesis that he would have implemented a policy blamed Obama for resultant inflation.

          A good public servant takes responsibility for what they do, not use political games to blame it on others.

        • Old school says:

          Mnuchin was smart enough to know that Fed slightly tightening policy was killing the economy and so Trump put a whooping on Powell to try to get him to back off.

          Eventually you have to get off the stimulus crack or you become a walking skeleton but each administration tries to kick can to the next.

      • historicus says:

        Dr Doom
        I would like to ask Powell if anyone in his family, like his parents or himself, ever saved their money.
        Saving has always been a path for people to get on their financial feet, to make a major purchase such as a home or car. No more. Punished in spades by DELIBERATE Fed policy.
        So why has Powell done this? Why has he and his string pullers “pulled up the ladder” on the rest of this country that doesnt happen to be fully invested and levered up in stocks and real estate?

        • DR DOOM says:

          historicus. I would like to see your question being asked on your behalf by your Senator to Powell in the forceful tone it is due. Your question is my question. The problem is that both the Senator and Powell have gotten rich off of the theft of de-basement and the time value of money. We are the prey of both the Senator and Powell. They are both thieves. Which was the basis of my comment. If we the people accept the blame for inflation we will stay under the bus. If we place the blame on Gov’t they will try to throw Powell under the bus. The theif Powell could be a heroic man of the people like Paul Volker by turning on the whole Gov’t den of thieves and attacking inflation which will give us at least one bad recession as the price, if we are lucky. It could take two because Powell is way behind already. The Gov’t using its MSM/MIC “news” outlets are slowly trying to turn the blame on us to get all the thieves off the hook. If we the people show up “the game is afoot”

      • silvergirl says:

        Great comment. Thank you!

    • Swamp Creature says:

      DC

      This is the same thing that happened in Germany in 1922/1923. Dr Havenstein the architect of the hyperinflation said that the reason he printed all that money at the pace that he did was to offset the decline in purchasing power of the currency. In other words he had to “destroy the currency in order to save it”

  52. fred flintstone says:

    One of the things I appreciate about this site is Wolf is able to sometimes look beyond the headlines. For example, the fed and lots of financial folks have been stating that inflation would ease as soon as the congestion at the ports and oil dropped. Wolf has pointed out consistently that salaries, rents, cars are now becoming inflationary and showing the numbers…….so even if corn, Natural gas, oil slow the increase, the others will keep killing us all until Mr Powell gets the call from the super rich that control him to start moving…..hopefully next week……but I’ll believe it when I see it.

    • joe2 says:

      Wolf correctly points out that services, such as hair cuts lawn care, tax assistance, and apartment rentals do not rely on a supply chain or port transit. And inflation is hitting these also. Service providers need to eat too.

      Talk is cheap and there are no auditable metrics on talk so no blame. So our government talks instead of doing anything substantive. The first rule of a complaint department, for example, is to talk and convince the complainant that it is their problem or there is no problem.

      A government cannot govern by talking, platitudes, and lies, but they sure as hell try.

      • Old school says:

        Speaking of haircuts, I only get one about every four months since covid. When I get one I pay twice the posted rate as taking off four months of hair is a little more work and the person is taking more risk with the close interaction. Plus some lost a lot of income during restrictions.

        • Wolf Richter says:

          I still cut my own. Getting pretty good at it too.

        • Wolf Richter says:

          Less bad at it…

        • nicko2 says:

          Also cut my own hair. Mirror plus Wahl trimmer. Easy!

        • Old school says:

          Wolf,
          Thanks. You’ve inspired me.

        • Anthony A. says:

          My wife cut my hair for the last 25 years. Now her hands are shaking so badly, I have to go to the barber. It’s costing me $20 (with tip) every 4 weeks, but he has a big screen TV and sports is on all the time. It’s worth it.

        • Gilbert says:

          Been cutting my own for almost thirty years. Like you, Wolf, I “think” I’m getting pretty good at it too. And think of all the money we are saving!

        • Swamp Creature says:

          Ms Swamp now goes to her favorite hairdresser’s home to get her hair washed once a week and cut once a month. The hair salon she used to go to is now cut out of the loop. Her hairdresser is now booked solid at her home and has set up a separate area for her at home customers. I wonder how much of that income (all cash) shows up in the government’s GDP figures. I think you all know the answer.

          Zeeeeeeeeeeeeeeeeeeeeeeero

      • historicus says:

        “…points out that services, such as hair cuts lawn care, tax assistance, and apartment rentals do not rely on a supply chain or port transit….”

        and the list is very long.
        Car maintenance, AC or Furnace service or replacement, house roofing, parking lot fees, local produce, etc etc……
        the bottleneck excuse came second, inflation came FIRST. Dont believe the Fed and the admin’s narrative.

        • Gilbert says:

          We had a yearly furnace tuneup recently which took the man an hour. I was shocked when the company sent a bill for $200. Did a YouTube search for burner tuneup and decided that next time I will do it. I do know that I won’t leave a huge mess like the man left us this time.

      • Swamp Creature says:

        Powell is very upset about the homeless encampments he has to look at on the way to his job at 14th and Constitution Ave. I heard that he brought this up at his recent meeting with Biden in the Oval office.

        • joe2 says:

          Powell belongs in that camp. Extra bonus in cutting his commute. He can brag that his “starter home” tent proves that housing is still affordable in the US.

          Of course the last time veterans built a squatters village in DC protesting the government reneging on promised bonuses, they were bulldozed and shot. So Powell needs to be aware of that possibility.

        • Swamp Creature says:

          We just did an appriasal of a property that overlooked a homeless encampment on K Street NW. We wanted to point this in our appraisal report, but we not allowed to because we would get sued for redlining and discrimination. So the borrower will get stuck will a property that is nearly unsaleable. Everyone else gets to cash in.

    • Ron says:

      We’re never going back to old economy,why build cars keep shortage make more money best business plan ever quit buying

  53. Santa Claus rally says:

    It doesnt matter dude. The inflation is achieving fed’s objective of inflating its debt away. Watch S&p 5000 during Santa claus

  54. Brent says:

    “There’s class warfare, all right. But it’s my class, the rich class, that’s making war, and we’re winning.”
    Warren Buffet, in New York Times Magazine (November 2006)

    No shit,this is an actual quote.I will keep Nov 2006 NYT Mag paper copy forever as a source of inspiration.

    Now I’ll provide a glimpse into the future.Old timers who used to read books in high school (Pre-Smartphone Gen) will recognize this quintessential All-American story:

    ===
    “Bob Tidball replaced the spoil in the bag and tied the mouth of it tightly with a cord. When he looked up the most prominent object that he saw was the muzzle of Shark Dodson’s .45 held upon him without a waver.

    “Stop your funnin’,” said Bob, with a grin. “We got to be hittin’ the breeze.”

    “Set still,” said Shark. “You ain’t goin’ to hit no breeze, Bob. I hate to tell you, but there ain’t any chance for but one of us. Bolivar, he’s plenty tired, and he can’t carry double.”

    Shark Dodson’s face bore a deeply sorrowful look. “You don’t know how bad I feel,” he sighed, “about that sorrel of yourn breakin’ his leg, Bob.”

    The expression on Dodson’s face changed in an instant to one of cold ferocity mingled with inexorable cupidity. The soul of the man showed itself for a moment like an evil face in the window of a reputable house.

    Truly Bob Tidball was never to “hit the breeze” again. The deadly .45 of the false friend cracked and filled the gorge with a roar that the walls hurled back with indignant echoes. And Bolivar, unconscious accomplice, swiftly bore away the last of the holders-up of the “Sunset Express,” not put to the stress of “carrying double”.
    ===

    -There will be no MAGA
    -Build Back Better is a wet dream
    -Asset Bubbles big & small will burst sooner than one might reasonably expect
    -There will be neither Revolution nor CWII
    -Bolivar can’t carry double
    -Shark Dodson types will always steal the loot and come out on top

    • joe2 says:

      Yes there is a moral there. Everyone needs to answer the question: How close do you let a guy with a knife get to you before you shoot him?

      This is a classic question and the courts say 21 feet, any closer and you don’t have time to draw. Walking in a city lots of people get within 21 feet of you. And what if you only suspect he has a knife and intends to attack you? What if he is sidling up and asks you for a light or the time?

      There may not be any of the things you list occurring in the future, but I suspect there will be a lot of shooting.

  55. Janna says:

    “On cars, we have in recent weeks begun to see a decline in used car prices on the wholesale market which should translate into lower prices for Americans in the months ahead.”
    -President Biden, Dec 10, 2021

    • Wolf Richter says:

      Janna,

      Hahahaha, when I saw this last night or this morning, I can’t remember, I just cracked up. That was hilarious. The guy certainly isn’t getting his intel from Wolf Street. The WTF is for November:

      • MonkeyBusiness says:

        The man lost a lot of brain cells already. Anyone above 70 should not be a President really, otherwise it just reminds you of that movie Weekend at Bernie’s.

        • Wolf Richter says:

          “Anyone above 70 should not be a President really,”

          So what would we have left under this sort of age discrimination? During my adulthood: Carter, Clinton, Bush Jr, and Obama?

          Out as too old: Reagan, Bush Sr, Trump, and Biden?

          It’s OK to have someone in the White House who has been around the block a few times, as far as I’m concerned. 70s doesn’t bother me at all — on the contrary. But I agree that at some point, there’s a limit beyond which age becomes counterproductive for a high-pressure gig like that.

      • Swamp Creature says:

        I should have kept my 2005 Nissan with 175K miles on it and needing $5,000 in repairs instead of donating it. I could have cashed in big time

        • Anthony A. says:

          I could sell my 2005 Mustang convertible, which is in great shape and has 64, 800 miles on it, for enough to cover my recent dental implant. I’d even have enough left over to cover a few dinners out.

          But then I would miss it and be temped to buy something else.

        • Rusty Trawler says:

          And if my mom had not thrown out my Hot Wheel collection, I’d be rich.

  56. georgist says:

    Look at the house/rent price graph.

    Rents can’t go parabolic because they are set by wages.

    Prices can go absurdly high because they are set by available credit.

    Tax the unimproved value of land to fix this, and tax labour way less. The USA has it all totally wrong.

    • Old school says:

      I do agree that easy credit has made the housing market too subject to boom and bust. We really shouldn’t desire the roller coaster housing prices of the 21st century.

      • historicus says:

        last time inflation even near here (even lower in 99 and 06) 30 yr mortgages 6%
        Now 3.1%
        And the Fed is STILL BUYING MBSs…..why? who does this serve?

    • restingbetchface says:

      Where I reside, farms of ~80 acres pay about the same property tax as a very small, simple family home in town. 80 acres = 1 city lot! There is NO development because farmers have it so good.

      • Ron says:

        Don’t move yo Nebraska taxes so high there bankrupting farmers

        • restingbetchface says:

          38 Nebraska farms declared bankruptcy, june 2019 – june 2020.

          out of how many? 38 sure doesn’t sound like a huge number to me.

          i’m not familiar with NE taxes, but NE farmers likely have all their eggs in one basket.

          i know multi-millionaire extended-family farmers who suck off the taxpayer’s teat. i have absolutely no sympathy for them anymore. none whatsoever.

      • Ron says:

        Where is this

      • Janna says:

        Generally, developed land pays higher taxes. As someone who owns farmland, I know very few “rich” farmers. The few I do know have other investments and had money to begin with. Farm inputs are very high and the farmers I know work very hard. Their entire family farms the land. Most value is in the farmland itself, but no one wants to sell. They don’t just make more land. And, farmland is selling for ridiculously inflated prices right now. It took us 12 years to pay off the little bit of land we have. And it will be another 8 to get a return on the tiling.

        • restingbetchface says:

          “It took us 12 years to pay off the little bit of land we have.”

          Farmland has been very high for much more than 12 years—perhaps you bought at the wrong time (I know very few new farmers). The farmers I know have been in the business their whole lives, and perhaps their fathers’ lives. I know a farmer who just died and left $20M to his family.

    • The Real Tony says:

      In Canada residential rents are set by the selling price of the house/townhouse or apartment. Wages don’t mean anything and don’t factor into what the rent is.

  57. drifterprof says:

    Retired and not having to manage a million plus total assets, I try to follow the principle of diversifying what I have. For example, putting a small chunk into Treasury Series I Savings bonds (currently 7.1% annual, rate tied to inflation, and changes every six months). I put $10,000 a couple months ago (easy to do online via TreasuryDirect), and will put another 10k after January 1. I’ve heard one can put more by establishing a Revocable Living Trust, so checking that out is on my to-do list.

    Downsides of the I Savings bond are okay with me:
    1. Can’t redeem for one year.
    2. Forfeit last three months of interest if redeem before five years.

    Lucky for me, there are no current inflation issues living in Thailand. The USD keeps bobbing up and nudging highs against the Thai baht (has neared a 13% increase since beginning of year). So each time it breaks higher I convert small tranche of USD as another diversification.

    • Nicko2 says:

      I too live in a developing economy with high government USD debts….. inflation is hovering around 7%, higher for anything importted….but on the other hand, the local currency will continue slowly depreciating; so in reality, if you depend upon a relatively strong currency like USD or even CAD, then life here will continue being cheap.

      • drifterprof says:

        Inflation in Thailand has averaged about 2% over the last 5 years. Debt to GDP is about 50%, which places it about 104 out of 173 (where #1 has the highest percent of debt).

        Consumer sentiment here is increasing. Things could always plunge southward, but with tourism starting to trickle in. Desperation of those who worked in the tourist industry is slowly being replaced by rising hopes for normalization.

  58. 2BFrank says:

    Happy retirement in Thailand, the exact point I am trying to make, the USA is not the USA of the fifties and sixties,no more happy days, anyone fancy a walk through downtown Philly, the city of brotherly love, unarmed, or Detroit, or Baltimore, or Portland?, almost anywhere, with few exceptions is better to retire to than the USA, Malta, inflation 1.9%, Eisenhower was right, the Military Industrial Complex has robbed you all of your money and hope and retirement and the Govmint/ Wall street complex the rest, all for nothing, you haven’t won a war since 1945, you are going to defend Taiwan, LMAO you can’t defend Texas from an invasion of peasants, wake up! smell the coffee, oh yes that has shot up in price as well, there is only one way to save yourself, leave, renounce your citizenship and go, after all your ancestors did exactly that.

    • Nicko2 says:

      If America had sensible politicians, they would promote letting in plenty young, hard working immigrant families from Mexico, and in return, older Americans would retire to the relative low cost, healthy lifestyle offered South of the border. Everyone is happy….

      • The Real Tony says:

        Lowering the living standards of all Americans by taking in Mexicans is political suicide. The outrage would never end as workers salaries diminish.

        • historicus says:

          When illegal immigration becomes a problem in Scottsdale AZ and Austin TX, maybe there will be some real pushback.

      • Swamp Creature says:

        Nicko2

        In other words you’re for replacing the US population that plays by the rules with cheap labor from Latin America.

    • Wolf Richter says:

      2BFrank,

      Foreigners living overseas, or former Americans now living overseas, but writing about the US and telling Americans what to do is always a trip. Makes for hilarious reading. Why don’t you write about the crap in your country that you might actually know something about?

      • Ron says:

        If our economy crashes there social security,pensions take a bath how will they survive with no money garbage cans

      • joe2 says:

        It’s not so much living overseas, you and I both did that Wolf, and telling the US what to do, but comparing living overseas to living in the US. My last overseas period was very different having access to the Internet. They can read the US news there as easily as we can here – they are on Wolf Street for example. But real foreign news is not accessible from the US – different languages – so you are limited to a few English sources and very few have the time to follow any of it. US MSM news reporting of foreign news is crap.

        So actually they probably have a better ability to compare the US situation to where they are.

        • VintageVNvet says:

          Disagree j2:
          Quick and fast daily readings of/from all over Asia, India, all sides of Med/ME area, AUS and NZ, etc., are very available, along with the translations from Europe, BBC, etc., etc.
          South China Morning Post still ”fairly” independent, many other local Asia sources to confirm their reporting re situations and events there…
          IMHO, internet has provided world MUCH better access to information than ever previously, and I have tons of hope that eventually the flow of information will increase the aggregated power of WE THE PEONS!!!

        • joe2 says:

          VintageVNvet

          After spending so much time on WS and other stuff, I don’t have time to follow foreign news. So you may be right. But honestly how much of your time does it take and how much is geared to general financial and political versus living and quality of life – street market hours, street prices, current scams, local violence and burglaries, police practices, cheap hotels and rents, curfews, and other practical QOL stuff.

          When I planned a trip I would go to the expat blogs for the real scoop.

          MSM reporting is not reliable – BBC?. I have driven and walked through riots that were reported as the end of the world in US press. And some places that were dodgy as hell I never saw mentioned.

      • Orion says:

        I’m an American in Portland who is headed out. I think 2Bfranks advice is sound. Americans are too prone to believe all other countries are a step down from the US, without much firsthand knowledge. In other words, it is Americans who are actually judging countries incorrectly from afar. Also, side point, expats can know two (or more) countries well at the same time.

        ps thanks for the site, I’m a longtime reader in awe of your work.

      • Swamp Creature says:

        I may add that I’m getting really tired of some s%it ass relative telling me to move out of the house and community that I’m currently living and going to some retirement community in some God awful state in the middle of nowhere just to save money. I’ve heard this BS over and over. Heard it again in a Zoom call over Thanksgiving. I like being where the action is.

        • joe2 says:

          Yeah. There’s living and then dying, or just waiting to die.

          I feel robbed of living by the government with all the flu panic. Government locks you down and prevents you from living in order to save your life. Probably only to kill you later because you are too expensive to keep alive. Like Swiss suicide capsules.

          They have perfected their skill in burning down the village to save it.

  59. Red says:

    Lumber mills I have driven by in Oregon have more finished wood products then I have ever seen. Some were triple the normal stocks and some mills were so full the overflow employee parking has wood stacked on it. Raw trees is either average or above average piles. Could be greed of the mills wanting to sell at a top or a train shortage to move them. Also plywood was not that plentiful.

    • Wolf Richter says:

      Lumber isn’t in the inflation basket of CPI. Nor is timber, or cement or any other such materials. Only the most common consumer goods and services are in the CPI basket.

    • Ralph Hiesey says:

      Red–

      If you got a business, a GREAT time to raise your prices. Doesn’t matter if your costs have not gone up at all.

      ALL costs have not gone up. One big example right on this site: rental costs.

      Need an excuse? No problem. “Had to do it– Didn’t want to but the Fed forced me”

      “Had to. Didn’t you see the High voltage inflation panic from those bloggers?”

      RAISE YOUR PRICES NOW while the getting is good. Had to. Not my fault.

  60. Kenny Logouts says:

    In the UK GDP is being reported as low, so the interest rate rise probably won’t happen.
    Surprise surprise.
    At 5% inflation that vast debt they just created is shrinking fast…

    But don’t you need higher salaries to pay it down?

    Are people getting 5%+ salary rises across the board?

    It’d be good to see these charts in context of earnings.

    In Jan 2020 were people flush with unspent cash? Or were they living on the edge of income and outgoings?

    With energy, rents, and food all way up now, and rising, what will be left for discretionary spending?
    Even if interest rates remain low, and salaries rise, people must surely be looking at having to cut back spending hugely?

    Ie, average UK salary is about £30,000.
    5% salary rise is £1,500.
    After tax probably £1,000.
    Energy cap change alone is likely to be £500 for everyone this year.
    That’s half your good salary rise gone, before anything else.

    All the people without pay rises on lower incomes, the vast majority, WILL be cutting spending and that’s going to slow down GDP.

    GDP shrinking will mean interest rates never rise, and yet inflation is hot… causing GDP to shrink.
    Unless salaries rise hard (the usual driver of inflation), something will give.

    This is going to get messy. It’s absolutely baked in now.

    Wolf suggests everyone is happy to pay these higher prices.
    Yes, some people, with money. But a few rich people don’t make an economy.
    Everyone doesn’t have an infinite supply of money like the Fed.

    • historicus says:

      Precisely why INFLATION IS BAD and the Fed has no business in stoking ANY inflation.
      There should be a mandate for the Fed to “promote stable prices.”

    • Ralph Hiesey says:

      Kenny — I also suspect you are right.

      Lost on a lot of panicked bloggers: “A few rich people don’t make an economy.”

      The top 5% probably don’t care about prices. They are willing to pay whatever to get what they want despite shortages, they will make a big inflation splash when shortages happen.

      One example from Matt Klein’s website:
      As everyone MUST know by now –as many have been screaming: New cars have jumped in price!!!. BUT has anyone told you that inflation compensated total SALES for new automobiles have severely declined: September vs March-April total $$ sales have gone DOWN 35% in September compared to March-April sales despite higher prices.

      So demonstrates the very real possibility that inventory shortages have caused these prices to spike. Apparently not everyone is eager to spend higher prices. Did anyone learn in Economics 101 that shortages can frequently cause price rises? Anyone realize that we had a new virus that seemed to cause shortages of products/services? And that may be at least one reason for rising prices? Or would everyone rather blame the FED?

      Is it possible that total auto sales would rise again with LOWER car prices?

      • Wolf Richter says:

        Ralph,

        Most people in America buy cars. If you think that this is something only the “top 5%” are doing, you must have accidentally microwaved your brain.

        Used cars are bought by everyone, and prices spiked all the way up the age scale, including prices of 15-year-old half-beat-to-death pickups. Read this:
        https://wolfstreet.com/2021/12/07/biggest-mess-ive-ever-seen-used-vehicle-wholesale-prices-spike-to-ridiculousness-just-wait-till-they-hit-cpi-again/

        “BUT has anyone told you that inflation compensated total SALES for new automobiles have severely declined…”

        Ralph, please don’t quote morons here. If you’re going to talk about new car sales, and what’s behind the price spikes — consumers are paying no matter what — at least check out this, where I discuss dollars, units, dollar gross profit per unit, average transaction prices, and lots more:

        https://wolfstreet.com/2021/12/02/crushed-sales-volume-no-problem-november-was-most-profitable-month-ever-for-dealers-new-vehicle-sales-as-americans-paid-whatever/

        • Ralph Hiesey says:

          Hi Wolf–

          Microwaves could have taken a toll on my brain if the QAnon people are right about 5G. More likely it’s just the attrition of brain cells thinking too much and too long about these issues.

          But there seems to be a misunderstanding about what
          Matt Klein actually said. True, he’s taking a view of inflation different from yours.

          Here’s his exact claim on his site:
          “Inflation adjusted consumer spending for [new motor vehicles] in September vs March-April 2021 on average declined by 35%”

          I don’t have the data myself–just quoting him and you. Maybe a case of dueling data sources.

          However, there is no inherent conflict there with your claim that prices that were paid went radically higher. However if both you and Matt are correct, it follows that a LOT fewer vehicles must have been sold–but which we already knew since there IS a shortage.

          Also I’m not claiming only rich people buy cars. EXCEPT when there is a (presumably temporary) shortage, and poor and rich people both want to buy cars, the sellers will sell their limited inventory to whoever is willing to pay the higher price.

          I’m GUESSING that those cars, at least during the time of shortage, were mainly sold to the richer customers–and if fewer cars were sold it must have been that it was less wealthy people were the ones who decided wait for more supply.

          If both his and your facts are correct, and my assumptions are valid, then I believe it would be likely that when the shortages no longer exist, prices will decline again. By how much– we’ll have to wait. Eventually reality will resolve this issue

          By the way, I don’t want to be the one telling Matt Klein he’s a moron.

        • Wolf Richter says:

          VEHICLES ARE THE ULTIMATE DISCRETIONARY PURCHASE. I’ve said this a million times. Most people can drive whatever they have for a year or two or five. Americans have proven this during the Great Recession when they stopped buying cars, and the entire industry collapsed, and two of the big three US automakers filed for bankruptcy, along with much of the component makers. Auto sales didn’t get back to the peak until 2016.

          This proves that this whole story about shortages driving the price increases is BS. Most people do NOT HAVE to BUY these cars at these crazy prices. What has changed is psychological. The dam has broken. Businesses and consumers – even buyers of low-end old vehicles – are suddenly willing to pay no matter what.

          The fact that inflation has now switched to SERVICES, which have nothing to do with shortages and transportation, tells you that barking up the tree of shortages and new-vehicles-for-the-rich is BS.

        • Consumers buy cars totally inappropriate to their needs. The EV has been a success because it plays into this quest for more HP. The last time this automotive gluttony became an issue was the 70s when the American gaz guzzler became a liability (and you couldn’t afford to keep that perfectly good car). As long as the trains run on time, people might take rapid transit, but let government services lapse and a decent car becomes a necessity. Elderly consumers often buy the car they want to ride in, one driven by family or the caregiver.

  61. 2BFrank says:

    Snake Pliskin

  62. Observer says:

    Since 2000 the dollar purchasing power has fallen 40%

    Since 2000 gold has risen from $250 to $1783 or 7X

    • Old school says:

      I am a little nervous about gold price as it’s not exactly cheap and gross margins for miners are high. PE of big miners are only at 15 so stock market isn’t figuring in a rise in gold price. Anyway I bought a miner as an easy inflation hedge, but might not work out.

      Most of my holdings are in short term treasury bond fund which has correlation to SP500 of about minus 0.2 and gold stock which has correlation to SP500 of positive 0.2. It’s been a losers bet to be bearish at blowoff top, but I sleep well.

      • Swamp Creature says:

        Old school

        I have the same investment philosophy. At this stage in my life I’m not interested in making a fortune, just surviving. I have loser investments but with the current clueless administration, and corrupt Federal reserve there is nothing good on the horizon. I’ll stay on the sidelines.

      • sunny129 says:

        Old school
        ENERGY (fossil fuel including natural gas and cough, COAL also) is best investment in the short to medium term against inflation. Before Green energy ready to replace them is a long way at least a decade.

        Fossil fuels will become UNAFFORDABLE in a couple of years for the man on the street, unless there is global economy contraction and deflation replacing the stagflation. For the coming (slow) EV revolution the demand for Copper, Lithium, Graphyte will keep increasing! Don’t forget the rear minerals! Agricultural commodities (Corn, Wheat and Soybeans) seeds, farm lands and income producing RE across the globe are better hedge. There are various ETFs to all the above sectors (been in the mkt since ’82) There is always ‘bull’ mkt somewhere amidst the much dreaded BEAR mkt!

  63. historicus says:

    Wolf ..
    You have a picture of Powell pulling his hair as if in dismay.

    I think he is having the opposite emotions…
    I think he is saying
    “WE DID IT, and now we just have to let it run for a year or so.”

    As they say, don’t expect the arsonist to reach for the fire hose.
    Next time “Occupy Wall St” has a march, someone give them a map to the NY Fed.

  64. Yort says:

    Inflation was “only” 6.8% once you throw out the Wall Street non-essentials such as housing, food, energy, and autos.

    Annual inflation for the other 99.99% of humans:

    Gas +58%
    Rental car 37%
    Used car 31%
    Hotels 26%
    Steak 25%
    Utilities 25%
    Bacon 21%
    Pork 17%
    Furniture 12%
    Fish 11%
    New cars 11%
    Chicken 9%
    Bikes 9%
    Eggs 8%
    Coffee 7.5%
    Apples 7%
    Milk 7%
    Flour 6%
    Rent 3.5%

    • Swamp Creature says:

      Yort

      Yep, Inflation is closer to 15 to 20% for most households as I’ve been saying for months now. That also corresponds to the level of M2 expansion. The phony 6.8% rate is government BS which is just to keep the COLA increases at bay.

      • Kenny Logouts says:

        So what are people doing to afford it?

        Either they’re really rich and had money in excess each month… or people are cutting back on lots of stuff.
        There is no other way, GDP must be shrinking hard to pay for all this, because if it was equitable, no one would be complaining.

        GDP is going to crash and we’re looking at inflation at the inflection point into a bear market with deflation.

        It is absolutely new paradigm time, because there are no solutions to keep a status quo now.

        I see little point groaning at fudged numbers at this point, the reality will become evident in the next 12 months.

        It does make you wonder with everything that’s happened if covid19 has been the most fortuitous cycle end monetary swizzler and enabler of controls of people. Scratchy chinny time.

        I honestly hope the wheels completely and utterly fall off the bus for a generation… and angry disenfranchised people actually stand up for themselves and the right thing for once!

        • cb says:

          @ Kenny, who said: “GDP must be shrinking hard to pay for all this, because if it was equitable, no one would be complaining.”
          ==================

          Headline GDP is measured in dollars spent, not in goods and services provided.

        • Swamp Creature says:

          Kenny Logouts

          Most people who have any common sense and are not in the inflation lobby (those few that benefit from inflation) are dealing with inflation by product substitution and cutting their standard of living. We’ve always been living below out potential standard of living so it’s no big adjustment. I don’t like it but it’s better than going broke.

    • historicus says:

      The Fed should have STABLE PRICES mandate, wouldnt that be a good idea?

  65. Michael Engel says:

    1) The rent factor of the CPI in the Instant Pot and u cannot open
    it until the inflation steam is out. For entertainment purposes only :
    2) SPY daily resistance line : July 12 to Aug 30 highs // a parallel
    from July 19 close.
    3) Option #1 : Xmas rally to 5K area and gold to 2,700. COLA is robbing retirees
    4) Option #2 : SPY breach Dec 3 low on the way to the cloud, to
    Oct 13 fractal zone. Thereafter a lower high, before a deeper plunge.
    5) COLA is 10 year note from the 1980’s, next year COLA is 10 year note
    from the 90’s.

  66. Swamp Creature says:

    Its been over a couple of months since oil has dropped in price, but around here the gas prices have not dropped one inch. Price gauging anyone? I really don;t care that much but I feel for those who have long commutes.

    • Old school says:

      If you look at a lot of poorer countries a large percentage of people ride small motorcycles. I got into this in a fluke. If you can stay out of an accident your cost to purchase and operate is about 20% of cost to operate a car.

      Pretty easy to pick up a small bike for $1500 and usually get about 100 mpg. Been playing around with gear and found out I can be perfectly comfortable riding down to 33 degrees f.

      • Ron says:

        Really need cargo bicycle to haul groceries better health no polution

      • Auldyin says:

        @OS
        I want one of these sort of tricycle van things you see in India, etc. Can’t see them for sale in the UK. Thinking about starting a business to import them now that we are all too poor to afford proper cars.
        I’ll maybe do an IPO here, keep your eyes open.

  67. Micheal Engae says:

    1) Politicians need an enemy. Without them life suck.
    2) Truman had Stalin, Ike & Nikita in the wonderful 50’s.
    3) Joe & Xi and we and JP. Without JP life suck.

  68. COWG says:

    Hey, Wolf, delete this one too… didn’t see the other post was gone… sorry…

  69. AdamSmith says:

    The takeaway from this reality discussed is many here will be harmed irreparably. So then what is to be done? That is the unspoken FEAR and DREAD felt by many here.

    Those who are overseas may gloat but not for long because if it get worse here it will so all over the world.

    I am simple in my response to this reality in thinking that the first and most important thing is to own, outright, the land/home you live on.
    Enough land to survive with if needed….

    Ray Dalio’s new book released Nov 30th addresses all potential variables to analyze allowing those here to make more informed decisions with well-articulated variables that each person will have to consider.

    Living in California is becoming a nut house with things like a compost trash recycle can you must now fill with food scraps, next to your house, without any brilliant thought on what will keep the insects away from the odor fermenting in the garage or outside where you will have to go each time you eat food. CRAZY California where San Francisco is the metaphor of living in million dollar homes with homeless people sleeping next to your front door…..

    • Bobber says:

      It can’t get too bad. Assuming people continue working, the only issue is how fruits of production get allocated, not whether the system shuts down.

  70. DawnsEarlyLight says:

    Why are we dumping more gas on a raging fire?

  71. The Wealth Effect is a Ponzi Scheme says:

    “It’s almost like the people in charge have no idea what they are doing” me, a geriatric millennial, for the last 21 years.

  72. NotMe says:

    Possibly most of the inflation can be attributed to changes in government regulation and policy. The insane budget is a small factor compared to that.

    Cannot think of another period where that may have been true. What do the economists suggest for that? Raise interest rates? Buy bonds? Sell all the bonds they have? Destroy the dollar? Suport the dollar? Buy foreigh currency to support the deficit? Buy gold to devalue the dollar? Fed is in quicksand. The more they struggle, the worse it will get as gravity keeps pulling.

    • NotMe says:

      I was half joking about buying gold, but it derives from a possible crisis in the overnight repo market, when because of international markets, banks neither want to hold cash, nor securities? What gets exchanged in repo then?

  73. Michael Engel says:

    1) When AAPL reach $182.6 AAPL it be a $3T co. Can it be :
    2) AAPL weekly log :
    Support : Sept 21 2020 low to Mar 8 2021 low. // Two parallels from Aug 30
    2020 fractal zone. AAPL is inside ths diagonal fractal zone, at the bottom.
    Once it reach the middle, AAPL will be a $3T.
    3) GOOGL

    • DontMoveToAZ says:

      Can someone explain to me what this comment means? I’m trying to figure this out.

      • Petunia says:

        When you have to use fractal patterns to explain a financial product, it means, stay away.

      • Jake W says:

        i just ignore his comments. i think he has some good insights, but he refuses to present them in a way that makes sense, and i don’t have the energy to try to decipher.

  74. Michael Engel says:

    For entertainment only : it means that Jan 25 2021 high is a hurdle.

  75. Leo says:

    Wolf,
    What is the current inflation by old definitions? All the financial media says: “highest inflation rate since 1982”. But how really does the current rate compares to 1982 if measured the same way?
    If you write an article on this, it can be very useful. All the articles I found on this seemed to either completely ignore the change in calculation or go the other way and seem to overstate the effect. You seem very knowledgeable on this. What would the true numbers be?

    • Duke says:

      Also current inflation policy happened during a once in a lifetime global pandemic.
      Time will tell if FED policy was a success or not. We could have easily had a depression. Is high inflation better than a depression? If we can avoid a downturn after…. probably. ?
      We are booming now a.d have pent up demand for cars and houses. We also have to convert away from carbon.. should keep everyone busy for awhile.. Will the economy stay strong meeting all this demand?

  76. Swamp Creature says:

    Bidenflation just reared its ugly head once again.

    OOps, Just got a notice that parking in Downtown Bethesda,MD parking lots will go from $1.50/hour to $2.00/hour. That’s a 33% increase overnight. BUt the government says inflation is just 6%

    • Anthony A. says:

      I just got the letter Saturday from my HOA which said monthly payments are up 20% to cover increased annual costs of landscaping maintenance, insurance, accruals, etc, etc. How nice in a neighborhood of old retired folks (not wealthy ones with big boats, etc). This is a 55+ community of 437 smallish single family homes, no golf course, etc.

      • Nathan Dumbrowski says:

        Same here with SoCal HOA fee increase from $395 to $475. All costs are increasing faster than we can refill the funds. New youngish neighbors who just won a bidding war might be shocked to learn the coast of HOA living is expect an annual increase regardless of inflation.

      • Swamp Creature says:

        Anthony A.

        Maybe they have to pay some lawsuits. My parents lived in one of those retirement communities, and the complex got hit with a big lawsuit when they stole the cable TV easement.

  77. Duke says:

    WR. Keep cussing in post titles. Seems to get more engagement.

    • Wolf Richter says:

      Actually, it doesn’t, as prior articles have shown. And calling a tough job a bitch, isn’t cussing. “Fixing that old transmission was a bitch,” isn’t cussing; it’s just plain slang.

      What happened here is typical: I posted this on Friday around noon my time, and then didn’t post anything until about 10 a.m. Sunday. With no new posts to take away the thunder for 48 hours, the old post got all the comments. If I had posted three articles during that time, they might gotten 500 comments combined. This is very typical.

      • Duke says:

        Got it.
        Re bitch. I think Southpark gave us that lesson a few times.
        I like the title. (I grew up in California public schools. Lots of creative language. ) it just stands out in media article titles. But I’m sure it offends some as “It has been used as a “term of contempt towards women” for “over six centuries.”

        But I guess we have cunt for that now?

      • Alku says:

        Right. With all due respect – I mean it – many commenters post all the same stuff about criminal FED etc regardless of the article’s topic. Fresh ideas are getting rare, unfortunately.

  78. eg says:

    What if the distributional effects of the current inflation turn out to be socially beneficial?

    This “inflation is always and everywhere bad” strikes me as a narrow and incomplete understanding of its effects.

    • Wolf Richter says:

      Yes, the distributional effects of inflation make it very good for some (such as corporations that can raise their prices), and terrible for others (such as people who have to pay those prices).

      The distributional effects of deflation are reverse, great for people who see lower prices, and therefore their labor has a higher purchasing power; and terrible for corporations that have to compete with other companies by cutting their prices.

      The huge blowout in corporate profits shows you that this transfer from the people to the corporations is going on right now, at the expense of the people who pay for it all. If you think that this is “socially beneficial,” well OK.

    • cb says:

      Sounds like a FED plant …………

    • Swamp Creature says:

      eg

      Give us some examples of the socially beneficial effects of inflation?

      I’m all ears.

      • Swamp Creature says:

        No response from eg on the benificial effects of inflation. No surprise. There ain;t none.

      • eg says:

        I was thinking foremost about how inflation favours debtors at the expense of creditors. Aren’t debtors more numerous than creditors? Aren’t they also more reliably found towards the bottom of the income and wealth distributions?

        This is what I mean about socially beneficial outcomes of some inflation — to reduce inequality.

        • Wolf Richter says:

          Inflation doesn’t favor debtors in general. That’s a myth.

          It only favors debtors with fixed-rate long-term loans when their incomes also rise with inflation. It doesn’t favor debtors with variable rate loans, such as credit cards.

          And it doesn’t favor debtors if the debtors’ income doesn’t rise at least as much as inflation. Because the debtors’ expenses also rise with inflation, and after paying their debts, they can buy less other stuff.

          The entities that really benefit from inflation are corporations because they get to pocket the price increases, and they have lots of fixed-rate long-term debt, such as bonds.

          But there there is this: When interest rates are allowed to rise by the Fed to meet inflation, new debtors, or those that have to refinance their loans, are getting crushed.

  79. CreditGB says:

    News flash, out in the real “Livin’ in America” world, inflation is at least twice what these geniuses among imbeciles, publish.

    • Swamp Creature says:

      Agreed

      For most people Inflation is between 15% and 20%. Government figure are complete garbage.

      • historicus says:

        SC
        Who do we call? Bantering back and forth with each other is a vapid pastime.

  80. DawnsEarlyLight says:

    We’ve been trading with the devil (FED) labor for fiat, for decades and decades. This is the result of closing just one eye.

  81. historicus says:

    The GREATEST mistake over the past two years has been to assume the FED will do the right thing.

    To believe the Fed will stand to their post and do their duty to promote stable prices and moderate long term interest rates has been folly.

    And there is nothing to suggest they will leave this shirking of duty, sadly.

    The Fed has been hijacked, and they answer to another authority rather than their mandates/instructions/agreements that allow their existence.

    • historicus says:

      and whoever is controlling the Fed grows more and more powerful with every uptick.

  82. rich hulley says:

    The way they measure inflation has changed over the years. If they used the methods from 1975, current inflation numbers would be much higher.

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