Purchasing Power of the Dollar Goes WHOOSH!

Worst inflation in 40 years is spreading deeper into the economy.

By Wolf Richter for WOLF STREET.

The broadest Consumer Price Index (CPI-U) jumped by 0.5% in December from November, and by 7.04% from a year ago, the highest since June 1982, according to data released by the Bureau of Labor Statistics today.

But there’s a big difference between now and 1982. Now, the inflation index is spiking, and has been getting worse month after month; back in 1982, inflation was coming down. The last time inflation actually spiked like this on the way up and broke through the 7%-mark was in June 1978:

By a narrower measure, the Consumer Price Index for All Urban Wage Earners and Clerical Workers (CPI-W), the index used for Social Security COLAs, spiked by 7.8%, the worst since January 1982.

Inflation without food and energy – tracked by the “core” CPI – spiked by 5.5%, the most since February 1991. Food and energy prices can move with the volatile prices of the underlying commodities, and there have been some big surges among those commodities. But this “core” CPI shows how deep inflation has moved into the economy beyond prices that depend on volatile commodities.

And here is Fed Chair Jerome Powell’s reaction to today’s inflation WOOSH, as captured by cartoonist Marco Ricolli for WOLF STREET:

But so far, the Fed has refused to deal with this inflation. It is still repressing short-term interest rates to near 0%, and it’s still printing money in large amounts, though less than it did two months ago.

The effective federal funds rate (EFFR), which the Fed targets with its interest rate policy, is now at 0.08%. With CPI-U inflation at 7.04%, the inflation-adjusted or “real” EFFR is a negative 6.96%, the most negative “real” EFFR in the data going back to 1954, the hallmark of the most reckless Fed ever.

The purchasing power of the consumer’s dollar dropped further – that’s what inflation in consumer prices means. Inflation is the loss of the purchasing power of the dollar and everything denominated in dollars, such as wages and salaries. By December 2021, the purchasing power of $100 in January 2000 dwindled to $60.60:

Rent Factors, nearly one-third of CPI, started to jump.

The CPI contains two measures of rent that account for 32% of the CPI. These rent factors are the biggie. They dropped sharply in 2020 and early 2021, then U-turned in June and have been rising every month since, gradually picking up the increases in market rents. Because both measures are still below CPI, they’re still holding down CPI, but less than before.

“Rent of primary residence” (makes up 7.6% of overall CPI), rose by 3.3% year-over-year but remains below where it had been before the pandemic, as it is gradually pushed higher by the surge in market rents (red in the chart below).

“Owner’s equivalent rent of residences” (makes up 23.5% of overall CPI), the stand-in for the costs of homeownership, is based on surveys that ask homeowners to estimate what their home might rent for. It rose 3.8% year-over-year (green line).

The two indices are now picking up the surges in market rents that started many months ago. Together, they account for nearly 1/3 of CPI, and while they’re still pushing down CPI, they’re pushing down less.

Given the surge in market rents last year that are now gradually filtering into these indices, we can see what direction they’re going this year, providing upward pressure on CPI.

The actual costs of buying a home spiked in 2021 by around 20%, according to the Case-Shiller Home Price Index, depicted in my series, The Most Splendid Housing Bubbles in America. This price spike leaves in the dust the “Owner’s equivalent of rent,” the stand-in for the costs of homeownership. Both, the Case-Shiller index (purple) and the “Owner’s equivalent of rent” (red) are set to 100 for January 2000:

Food costs (14% of overall CPI) jumped 6.3% year-over-year. The sub-index for “beef and veal” jumped by 18.6%. OK, switch to pork, which jumped by 15.1%. OK, switch to chicken, which jumped by 10.4%. OK, switch to “fresh fish and seafood,” which jumped “only” 10.2%, hahahaha. OK, forget it, switch to lentils….

Energy costs (7.5% of overall CPI) spiked by 29.3% year-over-year:

  • Gasoline +49.6% year-over-year
  • Utility natural gas to the home: +24.1% year-over-year
  • Electricity service: +10.4% year-over-year.

The CPI for used cars and trucks (3.4% in overall CPI) jumped by 37.3% year-over-year. And it’s still going to get worse over the next month or two because wholesale prices, which lead the CPI by about two months, spiked majestically over the past three months, and are up 47% year-over-year, and the December CPI just picked up a portion of the spike (chart shows index value, not % change):

The CPI for new cars and trucks (3.9% in overall CPI) spiked by 11.8% year-over-year, the highest since 1975, and just below the two historic records set in 1975, as dealers have been selling new vehicles with addendum stickers of $2,000 or even $10,000 or more on top of MSRP. And consumers are paying no matter what as price resistance has completely fallen apart (chart shows the year-over-year % change):

Surely someday, the ridiculous price increases of new and used vehicles will back off. Spikes like this cannot continue spiking like this. But then other prices are spiking, including in services, and we can already see the rent factors, which account for one-third of CPI, pulling up to provide oomph in 2022. And they have nothing to do with the semiconductor shortages.

This is what inflation looks like when price resistance among consumers and businesses has collapsed, allowing companies to raise prices without losing customers, and thereby allowing inflation to spiral higher. Inflation is in part a psychological phenomenon. The inflationary mindset set in last year for the first time in decades. Why it has set in isn’t hard to pin down: The world is awash in newly created money, and it’s circulating, and enough people got enough of it through stimulus and asset price bubbles and cheap loans that they’re paying whatever and don’t even care anymore. And the most reckless Fed ever is still fueling this raging inflation.

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  270 comments for “Purchasing Power of the Dollar Goes WHOOSH!

  1. Apple says:

    The cure for high prices is high prices.

    Maybe minimalism will become popular?

    • andy says:

      “Yeah, and then maybe baldness will catch on. This will all be turning your way.”

      • historicus says:

        andy
        Baldness has caught on….big time. Shave your head and join the movement. /s

      • Steve Sovring says:

        I’m a used truck dealer. Price resistance has certainly started happening. My beautiful low mile
        10 – 15 y.o. trucks which are up to even half the price of the lowest same ones for sale on AutoTrader are not getting calls now. I’ve noticed many trucks now been sitting on dealers lots for long time now. Most people just won’t pay the way overpriced price now but everyone who does and doesn’t care was probably a crypto success which appears over. When money is free Price doesn’t matter IMHO.

        • Allen says:

          I’m looking for a nice Pete for some short trips hauling grain and fertilizer. Please send me some info on your trucks.

    • historicus says:

      Apple.
      Yep…. unless the world is upside down and the supply of money leaps by 30% in two years….
      THEN, we speak of the RACHET effect.

      • Jake says:

        I hadn’t heard of the Ratchet Effect before. Prezi has a pretty good slideshow on it.

      • Nathan Dumbrowski says:

        The ratchet effect first came to light in Alan Peacock and Jack Wiseman’s work: The Growth of Public Expenditure in the United Kingdom. Peacock and Wiseman found that public spending increases like a ratchet following periods of crisis.[3] The term was later used by American historian, Robert Higgs to highlight Peacock and Wiseman’s research in his book, “Crisis and Leviathan”.[4] Similarly, governments have difficulty in rolling back huge bureaucratic organizations created initially for temporary needs, e.g., at times of war, natural or economic crisis.[5] The effect may likewise afflict large business corporations with myriad layers of bureaucracy which resist reform or dismantling

    • Beardawg says:

      Has been since GFC.

      It’s kinda cool actually.

    • Old school says:

      Professor Steve Hanke predicted inflation would be between 6% and 9% by end of 2021 when Powell was saying it was going to be transitory.

      It’s been a while since I heard him, but if I am not mistaken he said based on what Fed has done already we were going to have about 20% of excess inflation to eat and it’s just a question of how long it’s going to be spread out. Look for 13% more to come. Maybe another 7% this year, but it’s baked in already.

    • BobM says:

      Perhaps, but in an inflationary environment that old adage may no longer be 100% correct. In other words, don’t expect rents or home prices to go back down to pre-scamdemic values.

  2. michael says:

    Powell was right inflation was transitory on its way to WTF

    • WES says:

      Meanwhile Powell is still talking about getting tuff on inflation!

      The Fed simply can not raise interest rates in a Ponzi economy.

      A Ponzi economy needs a constant flow of new money to survive.

      Powell will keep printing money.

      Can you say “crack-up boom”?

      • RH says:

        Amen. It is not just the economy that could crash and the consequences would be more than just collapsed, ponzi-scheme companies that were always over leveraged (thanks to the “Fed” banksters’ ultra low interest rates for their cornies) or over-hyped.

        The CCP have waged economic war against the US for decades with the help of their Wall-Streeter cronies and banksters, who are worse than Benedict Arnold: successfully, repeatedly subsidizing CCP-crony companies that use quasi-slave labor to build things with utter disregard for the environment or pollution considerations on subsidized land, with subsidize energy and subsidized materials to drive US and EU companies out of business. China is now a hyper-polluted, industry-ravaged land that a prominent, Chinese economist has predicted will effectively be a hellscape in a few years.

        They now control entire areas of technology, which products are produced almost exclusively in China: TVs, drones, etc. Thank god, the US just blacklisted on of the main companies that was using US financing and US pension plans funds to create awesome weapons for the PLA to use against US and allied soldiers: FPV drones.

        • RH says:

          Correction: the prominent Chinese economist predicted that China will be a hellscape in about two or so decades. The CCP clearly took a poison pill for Chinese people in exchange for getting the weapons with which to dominate the world.

        • RH says:

          I forgot this portion:

          Read “Interest Payments in the Federal Budget” from the committee for a responsible federal budget. I predict that the trillionaire families that make up and control the banksters and Wall Streeters will not allow a responsible closing of the tax loopholes and rise in the taxes that they have avoided paying for decades by keeping foreign income earned outside the USA from coming to the US, to take advantage of the exclusion of foreign income from US taxation.

          Thus, without additional funds from taxes, since ordinary Americans could not even afford a $400 emergency expense BEFORE this pandemic, and now are even worse off, the US government cannot afford a substantial rise in the interest rates that it must pay on rolled over US treasuries.

      • gametv says:

        The Fed members understand that in addition to pulling back on QE, the Treasury is also selling alot more bonds, bills and notes. Give it a month or two and interest rates will be alot higher.

        It takes time to turn around a big ship, but once it is headed in the opposite direction, watch out!

        • historicus says:

          gametv
          I thought I heard the Fed has $350 Billion in tbills on the balance sheet.
          They SHOULD let that roll off….and if so, it will happen soon.
          This with the QE reductions should have an impact.

      • Old school says:

        Yep. Heard it put another way. Society’s debt service payments are the limiting factor. We can now handle 1% or 2% above where we are at and then will be in recession.

    • historicus says:

      Michael
      The transitory inflation will make everyone (90%) “transients” in flop houses.

    • MonkeyBusiness says:

      Called this last year.

      • phleep says:

        The real question is, did you devise and place an active bet on that? If not, it was basically noise in a windstorm.

  3. The Bob who cried Wolf says:

    There’s no broom and rug big enough to sweep this under. It all goes kerplooey when Joe six pack finally realizes he’s screwed and that time is coming soon.
    This is unprecedented in American history. What is the wise ones advice for how to prepare for what’s coming. Even better question: what’s coming next. All I know is it’ll be bad.

    • jon says:

      Per CNN, the biggest issue country is facing currently is “Threat to Democracy and Jan-6 insurrection”.

      The administration as well as Powell has full confidence upon the stupidity of the common Joe six pack. Joe six pack has no idea what’s hitting him and I doubt if he’d ever realize it. The biggest problem for Joe six pack would be threat to democracy, racial issues and other social issues.

      • LK says:

        Social problems obfuscate the economic problems that create social problems.

        • Sams says:

          And so the power that be want it.

          Still there is a catch. In the end the alternative to poor people uprising against poverty may not be any better. Anarchy may be the alternative to organised uprising.

      • Truckman says:

        Basic problem for the Dems is that less than 50% of people are dependent on government, and their actions will therefore lose them the midterms.
        Of course, as soon as over 50% are dependent on government, the economy collapses anyway because of loss of real productivity!
        This is why socialism never works.

        • That’s horse puckey. People who work for the government hate the government, many many of the capitol rioters were current and former government employees. Anyone who thinks socialism doesn’t work should study the stock market.

        • Apple says:

          I know several Social Security recipients who are virulently anti-government.

        • Red says:

          Nordic country’s would like to have a word with you on that.

        • Swamp Creature says:

          I got a dose of “Woke” culture when I went to the Wells Fargo ATM machine. While the transaction was processing the screen came up with a subtle message accusing me of not being for social justice. I wonder if this all over the country. Wells is based in SFO. Someone in SFO should check this out on their ATM machines. I’m getting ready to dump my account with them for other reasons.

      • gametv says:

        joe six pack doesnt care about racial issues and social issues, that is woke hollywood and our young people.

        is there a degree in virtue signaling from a university yet?

      • hmmm says:

        “Per CNN, the biggest issue country is facing currently is “Threat to Democracy and Jan-6 insurrection”.”

        uhh, because it is. 6% inflation will seem like a quaint problem if 2024 goes sideways due to a mob or state legislature trying to overturn a presidential election. it’s like the Jan 6 people needed to wear “this is an attempted coup” on their shirt for people to think it was serious.

        • Haus says:

          How adorable. You still think voting actually matters.

          The beatings will continue until moral improves.

      • Wisdom Seeker says:

        @jon – No one watches CNN anymore. Seriously – google their ratings history. Media sites are like midnight bogeymen – if you stop looking for them and worrying about them and repeating what they say, they literally just go “poof”.

        All elections are mostly about the economy and 2022 will be no different.

        Inflation and crappy working conditions (COVID-related) are killing J6P and all other issues are secondary.

        And the biggest threat to democracy is local: schools are forgetting they work for community-elected school boards.

        • Pipo says:

          CNN is video wallpaer in the airport just like USA Today is a new doormat every day on motel thresholds.

          Biden’s inflation, or “bidenflation” is eating us alive.
          Ask people if they would object to a 20% yearly tax on their savings and wages. Can’t agree what inflation is? OK, how about a 10% yearly tax on savings and wages?

        • Pea Sea says:

          Trumpbidenflation.

          It is simply beyond stupid to pretend that one of those presidents has inflationary policies and the other didn’t. Assuming for simplicity’s sake that any president is individually responsible for monetary policy, they both did/do. Trump poured the gasoline and lit the match, and Biden looked at the inferno and took a year long nap

      • JM says:

        No one watches CNN except a few die-hard ultra left crazy liberals

        • phoenix says:

          No one ultra left is watching CNN. CNN is for old neolibs. Honestly, no one under the age of 60 is watching cable television.

      • Robert Russell says:

        Joe six-pack has no idea what is going on, but he knows his salary buys less and his six-pack for the weekend ball game is more expensive, he is paying more taxes, his woman is more uppity, it is all Biden’s fault, and Trump is the answer. We are doomed.

        • p coyle says:

          trump’s not the answer. the poors had 4 years to see that fact.

          we have, for better or worse, another three years to come to the same conclusion about the other team.

          where this goes is anyone’s guess.

      • Happy1 says:

        You forgot climate change (eye roll emoji)

      • kam says:

        Mommy, what’s a CNN?

      • polecat says:

        Me thinks Joe and Jane Republic have different ideas..

      • Dana says:

        Even the teenage bag boy down at the local supermarket was discussing the theories of inflation yesterday. People are beginning to try to figure out where to point the finger of blame.

        • 728huey says:

          If that’s the case, then a massive recession and deflation are just around the corner. Think Joe Kennedy and his shoe shine person giving stock tips in the summer of 1929.

    • fajensen says:

      It all goes kerplooey when Joe six pack finally realizes he’s screwed and that time is coming soon.

      Those suckers will always buy the line about someone, somewhere, doing som-a-thing that they disagree with, which then must be stopped or else the entire country (and their guns) will be in peril!

      Instead, “It” goes BooM some time after China, Russia followed by most of Asia, goes “sanction proof”. They will transition out of doing business in USD, route financial transactions outside of US State Department infested channels like SWIFT, and avoid keeping funds at any US-based financial institutions.

      After the spectacle of that thug Pompeo openly throwing threats around over Nord Stream 2, with Bidens people continuing in private, the ever-so-loyal Germany were finally forced to admit what kind of regime they are dealing with and even take action on it: Germany are pulling their gold reserves from the USA, home to Germany, because they expect the USA to eventually pull the same numbers on them as they did to Iran and Venezuela!

      The EU as a whole prefers to pretend to not take sides on anything, and yet, the EU’s ECB is also setting up a “non-SWIFT” system for payments.

      America has declared war on everything and everyone, and the rest of the world are trying keep well clear of any of it, exactly like one avoids that ranting crack-head on the way to work.

      • Sams says:

        And in Denmark the head of the espionage services is in jail. Very hush, hush, the rumor is that he spied on Danes on behaf of a foreign power, the USA.

        • Andy Marino says:

          Colluded with NSA to spy on Danish citizens, it is reported. If so, every spy chief should be under lock and key lol.

      • masked ghost says:

        FAJensen has been reading Michael Hudson’s books.

        If the Muppets think stuff is expensive now, wait until other countries really are able to ditch the USD.

    • VintageVNvet says:

      Un fortune at lee Bob, it is NOT unprecedented in USA,,, OR anywhere else in our world.
      What we could have and should have learned from the past SO similar events has clearly been either ignored deliberately, or not even recognized,,, so here we are, once again…
      While I just hope to continue to NOT give any respect to the vast number of conspiracy theories,,, it is becoming more challenging constantly.
      Fortune at lee,,, Wolf and his very clear communications helps me to turn away from the vast majority of such idiocies…

  4. Yort says:

    “The cure for high prices is money printing” (JPow, 2023)

    From 1.4% inflation to 7% inflation in only 12 months, the Fed now has the title as the most reckless Fed in the entire 107 year history of the Federal Reserve…Congrats!

    And with China just starting to lock down due zero policy measures, the mother of all supply shortages could easily push inflation up much higher in 2022.

    So how exactly does the Fed print its way out of supply shortages??? Oh, it can’t…

    And please, Jay, telling the stock markets on Monday that you can magically attack high inflation AND keep financial markets stable??? I’m guessing you already are planning to buy stock AND bond ETFs when the markets finally figure out that inflation is out of control and drop 20%??? Maybe once again buy Apple bonds, and then Apple stock to push their stock value from $3 trillion to $5 trillion so your stock holdings can move up another $50 million in paper wealth?

    And Jay…don’t forget to visit those homeless camps, you promised…

    Hugs and kisses for the grotesquely wealthy, debilitating inflation for everyone else…what a jackass…

    • Flea says:

      Only 2 corporate bonds rated triple aaa ,Microsoft and j&j this country is screwed ,we elected the idiots for last 20 years look in the mirror ,you’ll see the problem

      • hmmm says:

        Fidelity shows apple as having been moved to AAA by moody’s at least.

      • Harvey Mushman says:

        I look in the mirror and see one handsome Son Bitch, thank you.

      • TimTN says:

        Doesn’t matter you political leanings, this is a true statement.

      • Steve M says:

        I looked in the mirror and it reflected the same expression of disbelief I had when looking at the ballots over the past 20 years.

        Idiots were the only choice we were given!

        You’re right. I see the problem. Just like the reflection in my mirror, I can say; This shit is getting old!

      • Old school says:

        Berkshire is one notch below AAA last I checked, but is probably would be the last to go down because of structure.

        $150 billion cash plus all the equities that can be sold. Nearly all the subs are debt free. Railroad and Utility have to borrow on their own so Berkshire Holding company liable if they go under.

        My favorite at the right price is PETS. No debt and $5 plus cash/ share on balance sheet. Tough to go bankrupt if you don’t have a loan.

    • Bob Tankel says:

      Oh yes and Jay, stop frontrunning the markets with trades in the millions or we’ll put you in leg irons, er I mean retire and work at a quant fund…

    • Old school says:

      Maybe they can work magic. When holding cash is minus 7% that might make people hang around in stocks and junk bonds

  5. andy says:

    Wolf, looking at the third chart.. I think we will see WTF vertical spike in dollar’s puchasing power from 60 cents to something like buck fifty.

  6. Pelican says:

    Cathie Wood thinks the Fed is jaw-boning here about rate hikes. And she believes inflation is transitory and reiteration deflation remains her focus.. this is in the context of her fund ARKK getting beaten up recently.

    “What we believe has happened here is that the Fed, having suggested that inflation was transitory since the beginning of the coronavirus, was becoming concerned when it saw CPI inflation year-over-year at 6.8%, and it does not want to be blamed for inflation being sustained and certainly not moving out of control,” she said in the video.

    “We think this is a bit of jaw-boning here,” she added. “The Fed wants to err on the side of hawkishness, certainly from a jaw-boning point of view because they don’t want inflation to continue to escalate.”

    • Wolf Richter says:

      I love Cathie!

      Her ARKK is down 45% since February 2021!

      She’s going to nail that deflation prediction too!

      • gametv says:

        Since many of her investors entered her funds late, she has probably lost more money in the past year than she made in the previous many years for investors.

        She is possibly the most bone-headed investment advisor around.

        There is nothing wrong with her premise that investing in disruption is smart, but honestly, she and her team cant recognize true disruption.

        • Bet says:

          Cathy Woods when asked why
          Her funds have had such severe losses replied “ the markets are irrational “. Irony is dead

        • Peanut Gallery says:

          Agreed gametv. Modern day snake oil salesman

        • Old school says:

          Investing in disruption has a poor track record unless you know who the winners are going to be in advance.

      • Danno says:

        Please do not use the word “nail” with Cathie together in any further posts Wolf.

        I need to keep my food down.

        Thank you.

      • polecat says:

        As in a coffin?

    • DawnsEarlyLight says:

      In other words, all talk, no action.

    • Yeah it’s interesting, they did nothing at 2%, then they tried jawboning, (no real action so far) at 6%, what are they going to do at 10%? Raise rates?

    • phleep says:

      Wood is just “talking her book” — shilling for her earlier choices which are looking ludicrous. Sic transit gloria mundi.

    • Depth Charge says:

      Looking at the FED’s comments today, it is clear they are jawboning and not-so-secretly still worshiping at the “transitory” altar. They’re just waiting until they can doctor up some stats and tell everybody “see, it’s coming down just like we said.” Nevermind the fact that it’s not, and the middle class and poor are still getting crucified.

  7. Pelican says:

    As a renter, I would love to see the Case-Shiller index (purple) come down to touch the “Owner’s equivalent of rent” (red) like it seems to have done in 2012. Not sure how many decades it will take though! We’ll see.

    • DawnsEarlyLight says:

      The only time it will happen is when you look down a long dark tunnel, and welcome the oncoming light.

    • Beardawg says:

      Pelican

      As a savvy investor who jumped on rental real estate from 2009 to 2013 (and paid cash), I can tell you I do NOT believe it will happen.

      If it does, you better get into rental real estate. It allowed me to retire at 51, but it was a hellatious ride. 😳

      • Enlightened Libertarian says:

        I agree. I realize there are negatives to RE investing but my experience was [is] that the positives far outweigh the negatives. Of course I started in 1986 with my first house and retired 10 years ago to live off my rentals. It seems like far and away the best investment for a young person starting out with nothing. Inflation, fixed long term interest rates, a [government orchestrated housing shortage] and favorable tax advantages make RE a very profitable investment
        I am long retired, I just want to help young people get started on building wealth.

        • Jon says:

          I also have rentals in Southern California and keep them for personal reasons.

          I agree with you but never say never is my attitude after having seen many real estate boom and bust.
          This time is particularly dangerous as the valuations have detached big time from fundamentals.

          At the end of the day someone has to pay for these valuations.

          But enjoy the show as long as the music is ON

        • phoenix says:

          The focus on real estate as a method to build wealth is one of the main reasons why everything is turbo fucked. So please stop telling young people to contribute to the problem. k thx. also, lol at it being the best investment for a young person starting with nothing. what’s your definition of nothing?

        • Jake W says:

          phoenix, the problem is that people assume that “because something was a great investment if bought in 1990, it’s also a great investment if bought today.”

          obviously, buying an S&P index at any point in the past or buying real estate 10 years ago was a great investment, in retrospect, as of right now.

          but i don’t see the conditions that existed in the past 30 years to repeat themselves over the next 30 years.

        • phleep says:

          Like other investments, there are upsides and down. The crucial thing for me (southern CA homeowner on great terms) was buy-in situation, and I was 37 before I bought. Yes, the demographics are different, but RE has the advantage, you can live in it, and inflation always looms. Crypto among other failed hype is not so far hedging inflation much. Stocks, not so clearly.

        • Pea Sea says:

          You silly young people need to stop complaining, and simply take some of the money you don’t have and invest it in an asset that is more stupendously expensive than it ever has been before in history!

  8. scholarandrogue says:

    goes whoosh from 98 percent less buying power than 106 years ago.

    • Walker87 says:

      It’s always funny watching movies from 50 or 60 years ago, and when they happen to refer to money at some point you have to check the CPI to get an idea of how much they are really talking about. Turns out that $25K in 1970 was pretty good money!

  9. GMac says:

    Raising interest rates won’t do anything to resolve the supply side. Sure, us peons got a few crumbs from the trillions that were printed. I’d expect a modicum of inflation on the demand side. But lockdowns and fear mongering have kept workers away from the supply side of this equation, and raising interest rates won’t suddenly get this global economic machine lubricated again.

    Also, AFAIK, govt tariffs are still in place on the bulk of Chinese imports. Why not remove those? Heck, why not jump track a bit and rebate those same goods on the tariff list for a year?

    Lastly, govt pushing for add’l trillions to spend will impact on inflation if it gets passed.

    This is basic stuff, not rocket science.

    As for preparing for inflation, I would love to read productive/helpful comments from Wolf Street subscribers. Wolf, I don’t suppose you could dig into data from the 70’s to see what worked?

    As for now, I’m hodling my XOM and BP shares.

    • OutWest says:

      My strategy for dealing with rising costs across the board was to move out of a large city center to a small town 60 miles away. Spouse of 27 years and I now share a 700sq home that I can easily maintain myself. Overall expenses after the move dropped radically while my quality of life skyrocketed.

      Second to that, staying is good physical health is central to my plan for dealing with inflation. Being in poor physical health is a budget killer and those costs are exploding exponentially for the foreseeable future.

      • Beardawg says:

        OutWest

        Ditto. But I got ya beat…320SF and 100% OTG !! 😝 Hiking in the mountains 2X a week.

        Minimalism is actually quite rewarding. Sticking it to Unka Sam daily.

        Good to hear you found a way to beat the system.

        • Old school says:

          Good job Beardawg. A man with too much stuff is a man with too many problems IMHO.

    • Depth Charge says:

      We have way too much money chasing too few goods. The FED is criminally behind the curve. They should have ended QE immediately many, many months ago, and already been raising rates. Instead, they are STILL printing, CAUSING INFLATION, and doing the opposite of what they are jawboning about.

      It was once said that it was the FED’s job to take away the punch bowl as the party was just getting started. That has morphed into an unlimited “all you can drink” free for all, with the punch bowl spiked with Everclear and the FED operating a shooting gallery in the back room.

      Jerome Powell needs to be removed from office immediately, forcefully if necessary. He should be arrested on domestic terrorism charges for what he is doing to the middle class and the poor. The sidewalks are littered, across the country, with the people who sleep on them due to the class warfare he has waged against the vulnerable and unsuspecting.

      • Swamp Creature says:

        DC

        I was in the heart of the Swamp to do some appraisal work after being off for 2 months. The place has degenerated into a third world cesspool almost overnight. Homeless encampments are all over the place including some in some very expensive neighborhoods near the Capitol. Trash is not being picked up. Liquor bottles litter the parks and side roads. No one cares.

        Agreed. J Powell needs to be arrested as a domestic terrorist and sent to Gitmo.

        • Wisdom Seeker says:

          Usually trash, homelessness and litter are municipal government issues, not central bank issues?

          An Election is Coming.

        • Swamp Creature says:

          Wisdom Seeker

          Disagree. This is the Nation’s Capitol. This is where many of our war dead our buried. This is a national symbol. It shouldn’t be marred by these disgraceful distractions. If the municipalities can’t handle this then they should make this a Federal City and get rid of the entire municiple government.

        • Apple says:

          Arlington National Cemetery is in Arlington.

        • Tony says:

          Yes, the least we should do is make our Capital as beautiful as that in The Hunger Games. A true Potemkin Village.

        • Anthony A. says:

          I guess the 8 th grade class trip to D.C. will be a real eye opener this Spring!

        • phleep says:

          Inequality is a by-product of freedom. People can take different paths, meaning they get to different destinations, outcomes. Making us all caretakers and insurers for each others’ choices by force is called socialism or communism. Freedom and security are dynamically at odds with each other. So D.C. is a showplace of this. I see so much externalization of blame by all sides of the political spectrum, and so little of taking responsibility.

      • Old school says:

        Zirp has put stock prices on most measures at all time high valuations.. This makes us vulnerable to breaking all time loss record of close to 90% if Fed blows policy.

      • Happy1 says:

        +1000

    • Motorcycle guy says:

      GMac,

      In the past, the best way to hedge against a coming inflationary spiral was via commodities that you could barter with. Items that will not go bad while sitting on the shelf. Items such as bottles of whiskey or other types of liquor. Sugar works well also if you keep it dry. These suggestions came from past clients of mine who survived the hyperinflation of Germany in the 1920 and also the late 1940s.

      • Beardawg says:

        Wow

        Righteous

        Scary

      • phoenix says:

        In that case, maybe try meth or fent. Both seem to be in demand commodities

        • Anthony A. says:

          Now that you mention this, I have not heard a word in quite a while about how the government’s “war on drugs” is going?

        • NBay says:

          Give me Librium or give me Meth

        • NBay says:

          Actually, even though we all said that, it wasn’t true. We knew the two combined was a really mellow high. The meth (beans, cross tops, whatever….) was easy to get, but the Librium had to be swiped from somebody’s mom or gramma.

    • GrassRanger says:

      In 1972, I bought some farm acreage. In 1992 I sold it. The annualized gain was about 7%. Annualized inflation over that 20 year period was about 6% so it looks like I made some profit. But, capital gains tax took a bite out of the inflated increase on the sale. Essentially, I barely maintained the purchasing power of the funds I invested. I would have made a lot more if I had put it in the stock market. Today, both land and stocks seem awful expensive and I am disinclined to put any funds into either, but 20 years of inflation at 6% or more will make these assets appear cheap, looking back. What to do today? Your guess will be as good as mine.

      • phleep says:

        The issue I see at this point with with stocks is, especially with these high multiples, it has become a crowded trade, and with the trading tech now, crowds can decide to leave and cash out in a moment. Will there be more support to buy the dip? Yes, until there isn’t. So diversification (and mediocre returns) is not the worst of worlds. It has a kind of embedded insurance which, like anything else of value, is costly.

      • Jon says:

        The problem is real estate prices are greatly intertwined with mortgage rates.

        If the inflation is high then at some point in time the rates would go up and that won’t be good for real estate.

        At the end of the day buying a home is about monthly payments and people cn afford only so much.

        • The Real Tony says:

          Remember the Chinese didn’t exist in the 1970’s inflation. Since they only buy homes no matter what the price is interest rates won’t matter as many of them pay all cash and some of it is laundered money. So you’ll see Canada, Australia and New Zealand go even higher even as interest rates increase. The Chinese basically never buy into falling markets they on buy into rising markets. When prices skyrocket all the Chinese flood into buy.

      • Depth Charge says:

        Raw land is highly speculative. Farm land is good because you can oftentimes lease it out for some monthly income. Desert scrub is a money suck. The taxes alone will put you in the red for good. Timberland is hit and miss depending upon the trees and the entry price. There is no land that makes sense right now from a price standpoint, unless you’re Bill Gates where price doesn’t matter, who ironically is gobbling it all up right now.

        • Depth Charge says:

          I forgot to include my main point – land is generally not a good investment unless you buy it in a bust. It is an expense every year, and provides no return on capital. It is not liquid, and can be very, VERY difficult to find a buyer. That’s why banks don’t like to lend on it.

    • historicus says:

      GMAC
      “Raising interest rates won’t do anything to resolve the supply side.”
      You assume the supply side caused this.
      I disagree.
      ““Obviously the pandemic disrupted the economy and contributed to inflationary pressures, but U.S. production is higher today, and U.S. ports are moving 27% more goods than before the pandemic. Inflation, driven by excess demand, always faces supply-chain problems as production struggles to keep up. But supply-chain problems increasingly are the result of inflation rather than its cause.” Phill Gramm Mike Solon WSJ 1/13/2022
      Didnt hear that at the Senate hearing did we?

    • kam says:

      “govt tariffs are still in place on the bulk of Chinese imports. Why not remove those?”
      Why not sell the entire USA to the CCP?

  10. Delivered says:

    Apple is right. The best cure for high prices is, well, high prices. This may take a while to figure out as the average Joe/Jane (being politically correct) doesn’t understand the basics of real versus nominal interest rates, wage increases, etc., etc., etc.

    To start, the average Joe/Jane will spend whatever stimulus they have left (as what the heck, it’s free money). Next, they will move into their savings which they believe they increased over the last two years (probably more of a function of not paying debt as opposed to real savings). And finally, they will lean on consumer debt again to fuel their spending (i.e., credit cards, consumer revolving loans, auto, etc.). We’re already seeing the move into using consumer debt as last month’s stats referenced record borrowing in some areas.

    Eventually, all of the money runs out as does access to consumer debt (as repaying debt becomes a bigger slice of the economic pie each month) and just like that, spending slows, demand decreases, and the fix for higher prices where, higher prices.

    Of course, this is all going to take a while to play out and assumes the government doesn’t attempt to “stimulate” the economy again with free money or the Fed panics at the first sign of trouble (and bows to almighty Wall Street) but eventually, if left to market forces, demand will eventually decrease and price pressure will subside.

    The real question is do we have any leaders in Washington or Wall Street (i.e., the Fed) that understand the importance of taking on some significant pain today to clear the malinvestment that has accumulated for the past 10+ years to allow for the next round of real economic growth. If left to the politicians and the Fed, doubtful. If left to the market, hopeful. Place your bets.

    • Truckman says:

      The money runs out a lot quicker for some than others, especially with savings levels where they are for the bottom 50%. This process will not last years once inflation really hits – say within 6 months. Furthermore, every lurch in economic progress tends to produce more government action, and every action recently has made the situation worse. That’s another accelerator of the process.

    • Cookdoggie says:

      “ The best cure for high prices is, well, high prices”

      If that’s the case, that we just need to let it play out, then why is there such a legend around Paul Volcker? Why didn’t he just let it play out?

  11. dishonest says:

    Who here thinks Jerome is at all surprised by what’s going on economically right now? Do you suppose that Mrs. Powell is going to say, at dinner tonight, “Honey, somebodies simply got to do something about the price of boeuf bourguignon and these bordeaux costs are scandalous.”

    • Mora Aurora says:

      Jerome Powell would be as surprised as General Sir Anthony Cecil Hogmanay Melchett’s character in Blackadder Goes Forth:

      “Yes, God I wish I was out there with them, dodging the bullets instead of having to sit here drinking this Chateau Lafitte, eating this filet mignon with sauce béarnaise.”

      “My thoughts exactly Sir, damn this Chateau Lafitte.”

    • Anthony A. says:

      You are insinuating JP’s wife cooks for him? And knows the prices of the boeuf bourguignon and bordeaux? LOL!!

  12. Charles Ponzi says:

    Thanks for detailing the cause and effects of inflationary psychology. It is evident that the mentality of the American consumer has become unhinged from economic reality. Buying new and used cars and trucks without consideration of price as compared to value is a symptom of an alarming mindset.

    The Fed will have to inflict significant pain to cure the problem. The question will Jerome Powell stay the house or will he be rolled by Joe Biden like he was by Donald Trump in 2018?

    There’s an election coming and the Democrats are desperate to minimize their loses in the House and Senate.

    • Nathan Dumbrowski says:

      after living in a fantasy for ~20 years it would seem hard to believe that there is really a price to pay. It would seem it was about to collapse into a house of cards. Sadly that is just a TV show that truly did come undone. The fantasy MUST be preserved. There is still the ability for the FED / JPOW to wow the everyday folks and put on a good show. He really is trying his hardest. If you only knew how hard it was. Winking to the stage hands behind the scenes about tightening the belts. He is a showman first and foremost. Our generations Phineas Taylor Barnum

      • Anthony says:

        I think, for the future, you would be better watching the rather nasty, Game of Thrones. If you take the lessons from it, you will see what is coming with clear vision.

      • Jake W says:

        everyone knew that we could live beyond our means and play financial games for a while. after all, the usd is the reserve currency.

        i think what people, including myself, underestimated is just how long the game could go on for.

        the one thing i do know is that there won’t be a warning when the game is about to end.

        • phleep says:

          There could be some really fun bumps in the ride down. History as tragedy, then farce, then …? In this lurid fantasyland, so long detached from cause and effect, what could be a road back? I can see all the action movie fantasists whipping out their guns ….

  13. Harry Houndstooth says:

    It is a privilege not only to have access to Wolf’s assessment of the facts in real time, but, in addition, the collection of commentators that Wolf has attracted to his media mogul empire are also dispensing enormous wisdom daily.

    • Resjudicata says:

      I agree partially. Wolf’s articles are fantastic. The commenters “it’s all gonna crash any second” are probably wrong. The commenters “Powell is stoopid” and “the fed only cares about the 1%” are definitely wrong. The fed is in the business of keeping the American economy running, even if artificially, even if it hurts average people a little each year. That just happens to benefit the 1% more than anyone else. CPI is meaningless to them other than as a pitchfork gauge. They’ll slow it down if need be but they’re not even going to try to stop inflation. They want inflation and said so openly all through 2020 “we will let inflation run above mean”. They already told you they would let it run hot. All they’re saying now is they’ll slow it down a little if it gets too hot.

      • Depth Charge says:

        “The fed is in the business of keeping the American economy running, even if artificially, even if it hurts average people a little each year.”

        This, folks, is what the FED relies upon – a dumbed down electorate who believe the FED is actually helping the economy.

        • Resjudicata says:

          We’re both on the record. Time will tell.

          And thanks for the sober and enlightened response.

        • random guy 62 says:

          Despite reading many many comments here, I am still stuck between both views. On one hand, FED is a necessary evil doing a public service with mixed results. On the other, it exists entirely to serve as a control mechanism for ultra-wealthy. Will keep watching it until one becomes clearer.

          I do think that we the people need to look a little harder in the mirror before placing all the blame at the feet of politicians. Too many entitled people… young and old. Too many people on the cart, not enough people pulling it. Most people think they deserve a minimum standard of living, world class healthcare till their dying breath, and 30 years of cushy retirement to sit and bitch about the news and young people these days. Those things are fine but they have to be EARNED. The nations that are on the rise still recognize that. The ones that are in decline forgot that because they got to the top and got too comfortable.

          We are a nation of selfish, ignorant people (maybe all of them are). Naturally our government will show that.

      • PNWGUY says:

        Dude…

        1) Most commenters here are articulate and thoughtful, don’t exaggerate.

        2) Are you honestly suggesting the Fed is “doing the right thing” when they manipulate the information value of money/prices? Fudging the numbers doesn’t make the economy collapse less. It just shifts the pain from the reckless to the responsible, and makes the actual repair job more difficult. We can do better than that.

        • Resjudicata says:

          Right by who? Was Eisenhower doing the right thing on Dday? Sure sucked for the allied soldiers involved.

          The fed cares no more about individual participants than a general cares about individual soldiers. It’s aim is to push the entire economy forward. That requires perpetual inflation and new debt. That is a fact writ large from Greenspan to Powell. They took rates to zero and then started qe. They aren’t quitters.

        • Resjudicata says:

          And for the record I agree “ Most commenters here are articulate and thoughtful” including depth charge – about the constantly impending doom.

        • 91B20 1stCav (AUS) says:

          Res-just curious, when/where did you serve?

          (sidebar-perhaps because it was good strategy, but the U.S. devoted large resources to recovering/rehabbing their wounded (and yes, during a real shooting war there is lonely death in any operation) where the Axis’ did not invest same in their troops. It made a difference. My maternal grandfather crewed an LST at Utah Beach, and trust me, he knew why he was there…).

          may we all find a better day.

        • Cookdoggie says:

          When commenters provide analysis, information and perspective this site rocks. When they try to divine future events, it’s a clown show.

      • J-Pow!!! says:

        Bear blog be hatin’ on me. It’s cool. Not sure y’all woulda liked the alternative Covid crash ending, though.

      • Petunia says:

        Resjudicata,

        The fed doesn’t give a crap about the economy, the average Joe, or employment. Their only job is to keep their member banks solvent.

        I don’t know why people refuse to accept this basic fact, especially when their behavior reinforces it daily.

        • Happy1 says:

          Dead correct

        • Resjudicata says:

          What’s the difference in a well-functioning economy and a well-functioning banking system? Can we have one without the other? Do we have any good historical examples?

        • Jake W says:

          resjudicata, banks with bad balance sheets can fail, and their assets are taken over by stronger banks. that doesn’t have any negative implications for the economy as a whole. much like the lie that businesses need to be bailed out to preserve jobs. if a company is allowed to go bankrupt, its assets will be bought out by other companies who will maintain the business, if it has a viable business model.

        • Resjudicata says:

          Ok I have no serious quarrel with that Jake. General Motors, the airlines this time, some banks last time, etc could have been allowed to fail.

          But my original comment was that the Fed is aimed at helping the economy and several replies were that “no the Fed is just helping the banks.” I don’t see the difference. If the banking system – the system not a single bank – goes down, so does the economy. Similarly, if the economy goes down, so does the banking system. What am I missing?

        • Depth Charge says:

          “What am I missing?”

          In a word, everything. Your myopic view of the FED, the banking system, and the economy and world we live in is so out of touch that it’s hard to know where to start. I’m certainly not interested in trying to enlighten you, but you should first familiarize yourself with the banking system to realize that big Wall St. banks and the corporate behemoths which dominate the headlines and grease the palms and pockets of the politicians are but a fraction of the actual banks out there, and the FED has destroyed competition in the sector, with the small banks getting the shaft just like the little guy in the middle class.

      • Softtail Rider says:

        Question on that pitchfork. Is it a three prong hay fork, or is it a five prong Manure fork?

        • Tom H says:

          Very funny Softtail!

          I’ve used the three prong for either manure or hay- the manure just needs to have cured and dried into a crust a bit and it actually works much better than the five tine. This fed & government are pretty crusty.

          Now can I count myself among the hallowed geniuses here?

        • VintageVNvet says:

          Not SO fast SR:
          Neither is as good as the shit shovel,, you might have seen one in the tool shed of any real farm…
          Having been one of those shoveling shit from age single digits,,, I have tried all those ”forks” and found them far less efficient than the short handled shit shovel…
          And, now back to the economy, where all the ”powers that be” are totally ignorant of ANY shovel, etc., etc.,,,
          WE the Peons can only hope,,, that is really and truly ALL we can do,,, HOPE…
          Our owners once again have taken total control of almost every aspect of our lives,,, and it appears that WE PEONS will not have any chance for another major correction until WE have to fight the Wars, and give up our lives, again, to settle trivial differences between our LORDS once again,,,
          SO similar to the last 9 or 10 centuries,,,

      • Happy1 says:

        No, the Fed is not keeping the economy running, it is a banker’s cartel appointed by politicians, it’s interest is in enriching bankers and not being fired by the politicians, whether the economy functions or not is secondary or tertiary.

        • random guy 62 says:

          I like to think of the Fed’s (unstated) primary mandate as “pitchfork avoidance”.

          Their job is to be the fence that blocks the BS that happens on wall street from harming the economy to a point that it ticks off average joe enough to start marching in large numbers.

          They do this by putting out financial fires before they can burn down the whole forest. They have succeeded in keeping the fire at bay for a while, but there are side effects. And now the forest is chock full of dead underbrush that can ignite at any time.

        • Anthony A. says:

          Funny thing about the economy……it was running along OK for over 200 years before the FED was created.

    • Beardawg says:

      HH

      I concur wholeheartedly.

      Hooray Wolf !!

      Hooray to the Commentariat !!

  14. Benjamin Sargent says:

    I wish I knew how to invest in a period of high inflation at my age. Plus 60. Basically there is not much that works similar to hyperinflation. Hard assets works great but does not generate income. No one to sell to and the money you get becomes worthless quickly.

  15. COWG says:

    We need a new cartoon…

    One with Powell sticking his fingers in his ears singing “ La La La La La La”…

  16. Seen This Movie Before says:

    “Surely someday, the ridiculous price increases of new and used vehicles will back off. Spikes like this cannot continue spiking like this.”

    Wolf, prices can certainly continue accelerating to the upside as it did in Argentina, Germany Venezuela, Israel in the past. Markets are simply generating rapid price discovery as the humongous inflation of the money supply since 2009 had been tempered by slow worldwide growth and is just now showing up in actual prices. With housing prices up all over not just in Florida we are seeing the first stage of unprecedented HYPRER-inflation. Unless and until central banks drain and cut, and if they do not allow true interest rate price discovery, there is reason to expect more of the same inflation followed by higher inflation followed by higher inflation we have seen this movie before just never in modern USA.

    • Sams says:

      Actually, money supply rather interest rate is the culprit. Price hikes comes from monetary inflation. As the monetary system is rigged, high interest rates cause monetary inflation. Only defaults and quantative tightening do reduce the amount of money.

      If the amount of money is deflated, the prices may fall. The interest rates may rise, but the problem is a possible liquidity squeeze that may freeze economic transactions.

  17. Catxman says:

    The poor are going to be hit hardest by the spike in food prices. When you don’t have any money to begin with, your rent and food are your twin pincers that nail you to the wall. Luckily, if you’re already renting, the amount you pay will often be rent-controlled depending on where you live. So that’s that. But there isn’t any “food-control” price laws in place. With the depreciation in purchasing power of the dollar, going to the supermarket is about to become a nerve-wracking proposition for the masses.

    • Truckman says:

      Learn to cook, grow your own.
      Prices of raw ingredients are going up a lot less rapidly than processed foods/ready meals/take out.
      I remember back in the 1970s; mom took us kids out gathering wild berries, she started growing veggies (just like her family had done in ww2), and, crucially, bought a chest freezer. With the freezer, she could buy discounted food in bulk, store her homegrown veggies, and occasionally take stuff direct from farmers.
      Also has the benefit of being extremely healthy, which helps solve the healthcare crisis also.

      • Petunia says:

        truckman,

        I lived thru the inflation of the 1970’s in NYC. No room for a garden or extra fridge. One of the biggest safeguards we had was rent control, called rent stabilization for our building. Our rent was capped at 3% for a 3 year lease for most of those years. I think rent control will come to the entire country before this is over.

        • Beardawg says:

          Petunia

          I think you are right. The appetite for government intervention is much stronger now.

          Mom n Pop real estaters may be a thing of the past within 5 to 10 years as corporate landlords will take over the landscape, in bed with government authorities.

        • Old school says:

          Wouldn’t surprise me, but you are pretty desperate when you do price controls as that is going to kill new supply of housing making situation worse over time.

        • Jason says:

          Funny thing is…The FEDS are the ones setting the market so high on rent.. In most cases..
          Look up Section 8 fair market rent and the majority of the time it’s higher then what’s out there..
          I usually get a 20-30% raise when I go with section 8 on my homes…

        • Jake W says:

          jason, yes, and you also get section 8 tenants then.

          i’d rather make 20% less.

      • Texas23 says:

        Unfortunately the prices for the inputs to grow your own food are rising just as quick as everything else. Fertilizer, seeds, fencing, water, tools, irrigation supplies, etc.
        I was going through the seed catalog getting ready for spring and started comparing this year’s prices to last year…..30% to 100% increases. Just bought some onion sets, for years been in the $3 to $3.50 range, now $5. Feed for the pigs, chickens, & goats are up 20% to 30%.
        So I guess if you’re shifting from from your daily Starbucks and grass fed beef from Whole Foods, to growing your own veggies. There’s room to save money. But if you’ve already been growing your own veggies and meat there’s limited room for further savings.
        Going to be turnip soup for all.

      • Pea Sea says:

        “Grow your own”

        Yeah, I’ll make sure to grow enough food to feed a grown adult daily on the porch of my apartment.

        What would we do without these nuggets of boomer wisdom dispensed here every day?

    • Massbytes says:

      Correct me if I am wrong, but didn’t I see Biden greatly increase the foodstamps program to where a family of 4 can qualify for $900 a month of them?
      If the are giving away food at that level, with all of the new mouths to feed flooding this country, that gives me some insight as to the source of food inflation.

      • Sams says:

        Bread and circuis for the masses.
        Only stupid rulers do not provide that. Others know that unrest start when people go hungry.

    • Petunia says:

      Cat,

      About 3 years ago, I started mentioning that our food bill had doubled in the previous 3 or 4 years and I got called a liar and a spendthrift. Now I’m on my way to doubling it again from 6 years ago. We are terrified of retirement because we know we can’t keep up with this kind of inflation.

      • El Katz says:

        The local food bank is now accepting “back yard citrus”. They stopped accepting it three years ago, but now they have changed their tune.

  18. The Main Man says:

    The NY Fed is the evil and corrupt epicentre of all the fake money printing but is extraordinarily subject to its shareholders venal needs.

    America has been completely taken over by these money lenders who have sucked dry the economy until now there is a bloated dying corpse
    with farcically inflated prices in everything. There is nothing left other than revolution or immediate shut down of the Fed and confiscation of all its shareholders ill gotten gains and imprisonment of all these bad players
    Change Must now come. We have been duped for too long with the comperes of Bloomberg and CNBC and all the other charlatans shouting from the rooftops.

    Everything the Fed says is a lie. And so do its main shareholders like JPM and GS amongst others. It is a giant Ponzi scheme. God Help Us

  19. red pill economics says:

    I copied my comment from the last post as it seems apropos here as well…

    1. The inflation is intentional by the Fed; it’s a feature, not a bug. They want to “inflate away” the huge steaming pile of debt to GDP ratio. Analogy [The current situation, where inflation is defined at its core as an increase in the money supply, and the “money” is created by the Fed ex nihilo, or “out of nothing,” or “out of thin air.”]: Congress is the alcoholic spendaholic. The Fed enables them by buying U.S. Treasuries and MBS to suppress rates. This is a combo of debt monetization (think Banana Republic stuff) and financial repression. The objective here is to reduce debt to GDP to “something less.”
    2. The Fed is only jawboning here. They’re not “tightening” (actually raising rates) until they’re done “tapering” (ending QE in March). The current Fed policy is still easy/loose; as loose as it’s ever been in history. Talk is cheap. Wake me up after they’ve actually raised rates at least 100 bps (1%). In the mean time “Party on, Garth!”
    3. The Fed is deathly afraid of crashing the stonk and housing markets, since these are now proxies for the economy, and in fact are now the economy effectively.
    4. The Fed can’t really raise rates much due to massive overindebtedness as increasing the cost of money (interest rates) very much will kill the entire system (house of cards).
    5. Actual inflation is at least double the current bogus CPI number of 7%. Owners Equivalent Rent (OER)? Seriously?
    6. Inflation is a covert, regressive tax that wasn’t approved by the Legislative branch (read do-nothing Congress). It hits the poor (growing by the day) and middle class (what’s left of it) most.
    7. It seems that the 5th Amendment, Takings Clause applies here: “Nor shall private property be taken for public use, without just compensation.” Inflation is a covert tax and outright theft. The U.S. Constitution says I should be fairly compensated. If this was enforced, you’d see an end to inflation pretty quickly.
    8. All of this inflation results in negative real rates. This is going to drive investors into real assets and precious metals and not to mention it will kill the stonk markets.
    9. A centrally-planned, command-and-control economy always fails. Think (former) USSR. I’m told though that the Fed members are “the smartest guys in the room.” How’d that work out in 2000 and 2008-2009? Wile E. Coyote, Super Genius.
    10. The closest historical analogy is John Law and the Mississippi Bubble.

    Finally, for those that didn’t already know this:

    The Ten Planks of the
    Communist Manifesto
    1848 by Karl Heinrich Marx

    Plank #5:

    5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.

    “The surest way to destroy a nation is to debauch its currency.” – Vladimir Ilyich Lenin

    “The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.” – Vladimir Ilyich Lenin

    “The establishment of a central bank is 90% of communizing a nation.” – Vladimir Ilyich Ulyanov Lenin

    Have a nice day.

    • Truckman says:

      The politicians who propose big cuts in government spending (thereby eliminating the root cause from your point 1) don’t get elected.
      So, basically, the plurality may not ‘want’ this, but they have so far failed to vote for the alternative.
      And the rest of us are now under the tyranny of the majority.
      Tyranny, taxes…we’ve been here before. Anyone for some Boston tea? ;)

      • BuySome says:

        In re: “Talk is cheap. Wake me up after….raise rates….” & “Anyone for some Boston tea?”………reference line from Zabriskie Point as such…”I’m willing to die, but not from boredom.” Repeating that line publikly will likely get you added to the same list as the people caught purchasing Catcher In The Rye. 🤔 Uncle Sammy Klaws will move you to the naughty list for Christmas.😹

    • Gomp says:

      Nice post except the 100 BP’s. That will do nothing. So…as I understand… choices are raise rates to combat inflation or food riots in the streets. I’m thinking they might raise rates.

      • Truckman says:

        What, raise rates and collapse all those zombie companies, cause mass unemployment, and food riots in the streets? ;)

        Rock meet Hard Place.
        Scylla, meet Charybdis.

      • Jason says:

        Exactly….We need to see 7%…

    • Wisdom Seeker says:

      You can’t “inflate away Debt/GDP” when the debt is growing faster than the GDP, no one is making an effort to restrain debt, and GDP growth is hamstrung by workforce decline and production bottlenecks.

      Japan and the EU already tried and failed.

      Conclusion: the Fed wants us to think that because it’s convenient and simple, but they have some other agenda.

      • Nathan Dumbrowski says:

        The everything bubble contains the stocks market, RE market and US debt. All are on a straight line. Not the one Wolf mentions either. They are heading to the top right portion of each and every chart he posts. Can’t forget, CPI, healthcare costs, taxes, GDP (via dark magic from the FED) and debt at all levels…

    • Petunia says:

      Red Pill,

      I don’t disagree with anything you said. Just wanted to mention that I have a major in Economics and was never assigned Marx to read. Now I can see why, he would have explained where capitalism and central banking would lead.

  20. Enlightened Libertarian says:

    I have been wondering [for many years] what will happen when the inflation genie gets loose and runs headlong straight into all those inflation indexed city/county/state/federal pensions [plus SS].
    Raise taxes-on who, when, how? What if the taxpayers just leave/quit working?
    Cut pensions for unionized militant government employees? Not likely.
    Just print up the money and hand it out? Most likely but then you are throwing gasoline on the inflation fire.
    Glad I am old.

    • BuySome says:

      I thought we have now just accomplished adding de-facto government unionized militant employees, but without the pension guarantees. Strikes are organized on smartphones when everyone just agrees to up and quit for the move to the next higher bidder knowing that Uncle Spend Freely will see to it one-way-or-tuther that all is funded into eternity. No employers left behind, regardless of how crappy their product or services are.

    • COWG says:

      Back of the envelope cpi-w index for Dec already has 1.9% toward next years COLA with 9 months to go…

    • phleep says:

      Welcome to the Weimar Republic.

  21. Rowen says:

    I want to thank Greta and Jerome for allowing me to purchase boatloads of XOM at $34 with a divvy yield of 11%. It’ll make me feel a bit better about the 7% CPI.

    • Yort says:

      You and me both, I actually posted on Wolf Street the exact time I bought XOM in the low 30s (I had sold a bunch of puts that exercised), then sold at almost double, and then bought again in the low 30s and am holding for at least a decade. I could not believe how naïve investors had become to think the world could switch from fossil fuels to green energy instantly. That was the first and last time I have every posted a stock tip, as it was 95% probable IMHO…as I don’t want to give people advice that might lose money…

      I’d also like to think Fed Mester today for pushing my stock portfolio to all time highs, and to Jay on Monday for using his word magic to spike markets higher with his near promise that inflation will be controlled easily without hurting financial stability…aka stock market highs…

      Bloomberg – Mester Says Shrink Fed Balance Sheet Fast But Don’t Roil Markets

      “Frankly I would like to reduce it as fast as we can conditional on it not being disruptive to the functioning of the financial markets.”

      • Resjudicata says:

        Lol

      • John V says:

        Yort, I DID pay attention to your post and think you made a wise buy, I am already invested in CVX and didn’t want to be too heavy in oils. If I could go back I would take your suggestion.
        Enjoy your 11% dividends!

      • tom15 says:

        Rotated in after the election. I keep a large energy source graph on my note book page. Simple reminder of facts to keep you grounded.

      • Anthony A. says:

        Yort, I spent 35 year in oi & gas and this golden opportunity has done my retirement portfolio well. XOM is my largest position outside of my whole market ETF’s. I also have FENY (Fidelity’s XLE type etf) and EPD, both purchased at very low prices.

        The net decade will be interesting for energy, for sure.

  22. Michael Engel says:

    $29T x 1Y x (-) 5% = $(-)1.45T, JP profit.
    $25T x 10Y x (-) 3% = $(-) 7.5T, accumulated gov profit.

  23. breamrod says:

    Wolf you need a new beer mug. how about ” the most reckless fed ever” with a picture of Jerome on it. I’d buy 4!

    • Swamp Creature says:

      breamrod

      Didn’t you hear that he’s all out of them because of supply chain issues. You’ll have to go on Ebay to get Wolf’s mugs. I saw one on there advertised for the sum of $350 or best offer.

  24. The conditions for persistently high inflation (tight credit) simply don’t exist. (Too little money chasing too few goods) So if I am Powell I don’t read the headlines, and I don’t use the word transitory anymore. I just say “We’re ready to fight inflation when it becomes a problem..” Inflation is not a proble while GDP matches CPI. The (inflation) problems have to do with global trade and supply chain issues. The Treasury and Fed raised cash based on the (new) political solution and the ground is shifting. The only real solution left to the Fed is slam the economy into reverse and trigger a recession. If I were Powell I would travel to China and figure out the semiconductor supply issues, (and their Real Estate finance bubble) then I would form my own Health Organization (WHO and CDIC are in more trouble than Fed) and I would cure Covid. Then I would host a bipartisan summit to get explain budget continuity and get both parties to agree not to tear apart the process every four years. Then I would quietly assume my role as Clark Kent, Fed chief and editor of the Daily Planet.

    • Wolf Richter says:

      “The conditions for persistently high inflation (tight credit) simply don’t exist.”

      This is backwards. Totally. And upside-down. And upon closer look, inside-out too.

    • historicus says:

      “We’re ready to fight inflation when it becomes a problem..””

      Powell said if it runs longer and hotter, we will act
      Well, it was supposed to be transitory, and wasnt……I would say that checks one box.
      And if 7% isnt hot…?? That’s the second box checked.

      “” The people who do the work, pay the taxes, and pull the wagon in America—especially blue-collar workers who have no automatic inflation adjustments in their employment contracts and who put their savings in certificates of deposit—will find no shelter in this storm” Gramm WSJ 1/13/2022

      That is what Powell doesnt see, wont see. But he sees the tent people he walks past as an excuse to keep rates low……but Jay, they’re still there. Watch out for the needles….and also watch out for the “the Americans who soldiered through the pandemic, stayed at their jobs, cared for the sick, kept food on our tables, and kept the country secure. ” Because they are getting whacked by YOUR inflation Jay.

  25. drifterprof says:

    Should the second figure (graph of core CPI) not have “CPI-U” in the title?

    • Wolf Richter says:

      It does. What are you seeing?

      • drifterprof says:

        Okay, I was confused, didn’t have my morning coffee yet.

        The first paragraphs were about CPI-U, which had a chart. Then a paragraph mentioned CPI-W, which had no chart. Then the next paragraph described core CPI, which I was thinking should just be labeled “Core” CPI, not “Core” CPI-U

        But indeed, it is the core of the CPI-U, which would be different from a possible “Core” CPI-W. Or maybe need more coffee.

  26. Prophet says:

    Jay’s skin color just does not look good in the depiction above. Makes me wonder if the chairman might be coming down from a multi-day hookers n’ blow binge.

    • drifterprof says:

      It also could be diet. Eating so much crow may cause digestive issues, or maybe bad cholesterol.

  27. Brent says:

    Ahhh… the gently sloping curves in Paul Samuelson’ “Economics”.

    They even looked more like straight lines than curves for the past 50 years…

    New winds are a-blowin’

    Lets advance from boring straight lines to more interesting things.

    Displacement is the vector that specifies the change in position of a point, particle, or object.

    Of which:

    1st derivative is velocity

    2nd derivative is acceleration

    3rd derivative is jerk

    4th derivative is jounce also known as snap

    I think that 3rd derivatives aka jerks of Mr.Richter “Well,That’s Fantastic” graphs (I mean their right ends) are already more than zero.

    And that’s why, instead of slowly growing sadness caused by gradual rise of prices, we will experience mental jerks,jounces and even snaps 😀

    • historicus says:

      Brent
      ” Paul Samuelson’ “Economics”.

      Wow, that is old school. It jogged a memory cell that hasnt been touched in decades. Buy the turns, etc. Nope, this is a managed market with a 45 degree guarantee trend line for a long time….

      • Brent says:


        Mr Samuelson died in 2009 but his book is still in print.20th edition appeared in 2019…

        There are books that try to describe economics in terms of non-equilibrium thermodynamics or flow of energy through the system,which makes much more sense,but none of those books is on par with Mr.Samuelson magnum opus.

        IMHO all-powerful Fed has no more control of events than the boy riding wooden horse on merry-go-round yelling “Yee-haw !!!”

        • historicus says:

          ” Fed has no more control of events”
          Eventually

          But give me the power to create $4 Trillion at my discretion, and I too can be the toast of Wall St and the best guest at a cocktail party in the Hamptons.

        • Anthony A. says:

          The FED may not have complete control of events, but they sure can cause them to happen.

  28. drifterprof says:

    Looking at yesterday’s stock market gains, I’m feeling some ROMO (regret of missing out) due to having sold 80% of my stocks in the last year or so. I’m not money-smart enough, and not willing to put the time into become competent at options, etc.

    But psychological defense mechanisms can reduce the sorrow of ROMO. Defense mechanisms depend on personality type, and rationalization (creating logical arguments) tends to be my go-to defense mechanism.

    Maybe those buying these “dips” are like hiking on a path near a peak, which dips down a hundred feet or so before going up to the top and facing a steep descent. What are people doing, who are entering non-dividend positions now, or adding more at the nose-bleed stock valuations?

    They will have to change stocks it back in to money to use it. And if they take a loss in selling, the money they get from it will likely have less purchase power.

    • Prophet says:

      Not all stocks are at nose-bleed valuations. As one example, and this is not investment advice, mind you, but Intel (INTC) seems to be making a move of late. I personally don’t give one shite about fundamentals; I view all stocks as dog shite, completely unmoored from the company they represent. Nevertheless, Intel sports a PE of 10.8. Unloved by the market ever since 2001. Of late, Intel is outperforming some of the other high-flyers in the semi space, namely, Nvidia and AMD. Tawain Semiconductor Manufacturing Co. (TSM) looks poised to break out to an all-time high. Probably safe at least through the olympic games but I don’t have a crystal ball.

      But this advice I will give to you for free: If you do decide to buy an individual stock, NEVER BUY AHEAD OF AN EARNINGS REPORT! Therefore, you must know when the report is due. After earnings are reported, see how the stock reacts to the news.

      For example, a few months back, Ford reported earnings and the stock got whacked after hours. Mr. Richter even posted an article that same afternoon. But that was pretty much the extent of the selling pressure because within a few days the stock reversed and went right back up….AND ON BAD NEWS! A major clue.

      The energy sector, metals and mining sectors are showing strength now.

      Many stocks have been whacked but you’d never know it if you just paid attention to the major indices. Baidu.com and Roku come to mind and many others. Again, not investment advice! You must make your own decisions.

      Earnings season is just ahead, so beware.

      The small cap Russell 2000 index is and has been testing support for quite some time now and I’m watching this index to see if it breaks that support and falls off the cliff. This is the weakest index, as of today. But that support level is proving very strong thus far. I don’t anticipate, I watch and react very quickly.

      DWAC, the SPAC associated with T’s social media platform, is on the move of late. Super, super volatile. I’ll give you my free investment advice on this one: stay out. Don’t think you’re a T fan anyways, based on past comments. But you can always track it or any other stock from the comfort of cash.

      Don’t F with options unless you’re a writer of options. It’s hard enough getting the direction right and with options you must take into consideration yet another variable: time decay.

      Avoid derivatives of all types, if possible.

      Start small and see how your initial purchase performs. Average up, not down.

      Don’t really know what else to say, except know what your strategy and tactics are before you get in and follow your rules. From your statement above, you sold 80% of your stocks, so you’re obviously not a buy-and-holder. Nor am I.

      Most importantly, “ROMO” is not a good reason to get in. There is nothing wrong with sitting and waiting and keeping your cash warm and dry and “close to your balls,” to quote Jesse Livermore.

      • drifterprof says:

        Thx for interesting descriptions.

        • Anthony A. says:

          Let me add that put/call option selling and buying are just pure gambling. Why not just go to the racetrack and have a good time losing your money. At least you can go with friends and have a few beers!

        • Prophet says:

          drifterprof,
          Another option you might consider is selling the remaining 20% of your portfolio and being 100% cash! The market looks ready to drop! Do be careful sir!

          Anthony A.,

          Couldn’t agree more but in my case, I can and do lose money right from the comfort of my own home. And once that’s done, I break out the Ardbeg 10 and can a Schlitz malt liquor for back up, again, in the comfort of my own home.

  29. Gen Z says:

    Milton Friedman has to resurrect from the grave to talk to Weimar Boy Powell about inflation.

    • historicus says:

      It all began with the self authored 2% inflation target.
      That was new, and no one questioned it. The Fed has no duty to promote inflation, acutally their duty lays in exactly the opposite direction. (Stable prices, with a dictionary definition of “stable””.

      Inflation is a tax, and the Fed should not have the power to tax the people…that power resides with Congress per Article I sect 8. Congress must answer to voters.

      • Jake W says:

        not to mention that the idea of letting inflation run hot to compensate for the time when it was ran under was nonsense too. because employers used the lack of inflation in the past as a reason not to increase wages. so if inflation runs hot to “make up for the past” then employees are getting hammered, as they didn’t get wage increases when inflation was low.

      • phleep says:

        The Constitution allowed certain (propertied) elites to have a veto on Congress’ possible mob-driven excesses via the Senate (which is grossly non-representational on a per capita measure: half a million voters in some backwater or other have as much clout as my state’s almost 40 million). That compromise at the Convention allowed these elite backers, among other things, to retain slavery for many decades, but also to avoid mob rule via money-printing orgies. Lately this deadlock (no longer vast postwar spoils to promise and share with more and more citizens) led creative technocrats to find another method. It has maybe avoided what could have been multiple civil wars, via elastic currency. Not a pretty picture, to my thinking, but maybe not the worst possible state of the world. Any kind of working balance is a tough thing to achieve, and we have one, tattered as it is.

  30. Jan de Jong says:

    Macroheathen dot com Jan 11 piece: Volcker impossible – debt service / GDP historical cap – 10 yr will not be allowed to exceed 2.5%. I tend to believe it.
    Interesting times.

  31. David Hall says:

    One year there was bad weather and the price of soybeans went up, the next year some farmers switched acreage to soybeans or plowed and planted a fallow field. Elsewhere they built houses and towns over fertile fields. The price of oil went up, oil companies could afford to drill more of their acreage and increased oil supply, until the oil field went dry. Most copper miners are mining lower grade copper than was mined twenty years ago. Wages go up, some more people apply for jobs that pay more than a beggar’s take. This can not erase all the money supply inflation as it is easier to print money than increase worker productivity.

    There are more safety devices in newer cars. This results in fewer accidents, decreases auto body damage and medical expenses, should be lowering expenses. A robotic auto assembly plant bypassed some wage inflation until the chip shortage.

    • historicus says:

      David
      “One year there was bad weather and the price of soybeans went up”

      And one year the price of gasoline doubled and the price of fertilizer more than doubled….
      then what? What assuages that dystopia?

    • Anthony A. says:

      “Most copper miners are mining lower grade copper than was mined twenty years ago.”

      This is nonsense. New copper comes from new finds of ore extraction. 75% (or more) of copper is recycled from scrap. I was in that business with Anaconda.

  32. historicus says:

    Don’t miss the WSJ today, Jan 13.
    Great article on inflation by Phil Gramm and Mike Solon.
    Also great book review “Lords of Easy Money”.

    Gramm says what no Senator could muster to lay on Powell…
    ““Obviously the pandemic disrupted the economy and contributed to inflationary pressures, but U.S. production is higher today, and U.S. ports are moving 27% more goods than before the pandemic. Inflation, driven by excess demand, always faces supply-chain problems as production struggles to keep up. But supply-chain problems increasingly are the result of inflation rather than its cause.”

    and
    “” The people who do the work, pay the taxes, and pull the wagon in America—especially blue-collar workers who have no automatic inflation adjustments in their employment contracts and who put their savings in certificates of deposit—will find no shelter in this storm. Those who were paid extra to come back to work and those who got big government checks will take a smaller hit, but the biggest losers will be the Americans who soldiered through the pandemic, stayed at their jobs, cared for the sick, kept food on our tables, and kept the country secure. No Democrat in Washington is standing up for their interests—except Mr. Manchin” Phil Gramm and Mike Solon.

    • historicus says:

      from the book review “Lords of Easy Money”

      To which Chairman Ben Bernanke replied: “President Fisher … I do want to urge you not to overweight the macroeconomic opinions of private-sector people who are not trained in economics.”

      Bernanke’s hubris is suffocating. What would Hayek say? I think I know.
      Central planners do not have the capacity to know what all the market participants collectively know. But Ben was so “certain”.

      and more from the review “Lords of Easy Money”
      “The truth is that any monetary-policy intervention must be mediated through the financial system, a complex organism made up of millions of individual bankers, pension savers, fund managers, privateequity investors, day traders and others, all with their own incentives. The Fed understands startlingly little about how this financial system transmits its policies to Main Street.”

      So true.

    • MarkinSF says:

      Whoa. This is the same Phil Gramm who was instrumental in pushing through the repeal of the Glass-Steagall Act?! The act that ensured banks could not act as investment banks and allow the kind of activities that led to the Great Depression. Whose repeal has put us in this predicament? And now, after being confronted with the likely result when this was going through the rounds, he’s writing that the Fed has messed things up.
      Absurd

  33. I’d like to thank Wolf for this site and also every commentator for your thoughts. The site is a refreshing change from the click-bait he-said websites and the lamestream media.

    Also, it seems to me that the shot-callers at the top are the ones deciding to go all in and attempting to literally own the world. It won’t be a shock to me if they unexpectedly tighten the credit market til it sings like a banjo string, call in all debts by Friday 3 PM and force the 99 percent onto a dandelion tea diet.

    How are you at foraging?

  34. Winston says:

    This crash is going to be epic.

    • Truckman says:

      Wind it up to 10 and rip the knob off

      or

      This one goes to 11

      ?

    • Danno says:

      It’s not coming for a long time and at a time convenient to the 1% when they have no other choice but out of danger to themselves to actually take action…I still feel we are in the 2nd inning….

      Things take a lot longer than anyone thinks to have a change happen but am at least glad a few (like .000001%) of the population here are at least recognising the farce taking place and commenting on it.

      I hope all of our comments are shared elsewhere to educate the public.

  35. Walker87 says:

    If you happen to remember the 1984 Gremlins movie.

    Brain Gremlin: Well right now we are advising our clients to put all they can into canned food and shotguns.

  36. Anthony says:

    I don’t think the USa and the West can actually cope now, with 1970’s inflation. Trouble ahead, meethinks.

  37. Michael Engel says:

    1) RRP down from $1.9T to $1.54T.
    2) JP suck banks liquidity to prevent lending.
    3) The Fed “promised” to liquidate and raise rates.
    4) QQQ jab #1 and jab #2 might stop the inflation spread.
    5) The radical left leader hurt Bezus, Satya & Pichai, but help JP.
    6) If QQQ monthly reach Aug 2021 fractal zone, RRP rates might hit zero
    or below, dive to NR, to boost bank’s lending, especially to small business
    which couldn’t breath.

  38. craignobot says:

    hello consequence my old friend, i’ve come to talk to you again, because a vision softly creeping, left its seeds while i was sleeping

  39. Swamp Creature says:

    Judy Shelton was on CNBC this morning. She said the Fed should prioritize reducing the balance sheet first and foremost. Instead, they are promoting climate change mitigation and social justice as their primary mandates going forward. To achieve this the Fed is discouraging banks from making loans to fossil fuel companies. In addition, she said everything the Fed is doing now including raising interest rates on deposits at the Fed will not do one thing to help the struggling middle class. It will only help those who own all the assets and are in the top 1%. The three empty seats on the Fed will replaced by “Woke” appointees who will promote the current administration’s agenda.

    She is 100% correct on all counts.

    • historicus says:

      a comment from Judy in the WSJ the other day

      “when emergencies arise that require the central bank to intervene in financial markets as lender of last resort, it is important to ensure that its presence in those markets doesn’t become a permanent feature of the economic landscape. Commercial banks shouldn’t be induced to maintain deposits at the Fed, nor should Treasury yields convey misleading price signals”

      Curious that the Senators cant ask good questions.
      I watched the hearings…
      First Senator, the alleged head of the Senate Banking committee (D) which allegedly oversees the Fed was most concerned with employment inclusiveness. The next Democrat Senator was concerned about climate change, the next Democrat Senator was about the racial balance on the Federal Reserve board.
      Act I, Scene I according to script.
      I’d like to see some charts ala this web site put up for discussion. I bet the Senators would be informed, uncomfortably so.

  40. fred flintstone says:

    The FOMC members that suddenly see a danger and want to confront inflation should open up a hot air stand.
    While they continue to pump more dollars into the system.
    There is stupid……and incompetent……and crooked.
    but when you get the trifecta you have to admire the crap they keep issuing………I guess they think that their credibility will somehow slow inflation…….message to the FOMC…….you have no credibility.
    Everybody knows you sold yourselves to the highest bidder like a pack of ………. So stop with the grand speeches you get paid $50,000 a take to provide.

  41. Poor like you says:

    Does tax refund season typically have any meaningful impact on inflation?

    • Anthony A. says:

      Most people who are planning on getting tax refunds (of their own money, BTW) have already spent it using credit cards before the refund check is in their hands. LOL

    • Petunia says:

      Yes, because most tax refund money is spent in the spring.

  42. Bobber says:

    Resjudicata,

    D-Day was well planned out, and the generals knew what they were going to do next. They saw how a battle would help win the war.

    The Fed, on the other hand, has no viable plan, period.

    • BuySome says:

      Goal was to secure a place for port facilities to support and conduct a frontal sweep. Seems like they’re working in the same direction……… for their overlords in China. I saw a little bird, his name was Enza. I opened the window, and In Flew Enza. They’re heeere.

  43. Phoenix_Ikki says:

    Yet, I just read an article talking about how employers are giving bigger pay raise this year because of inflation, then read instead of average whopping 2.8% on average, it’s now expected to be 3.5% on average…wooohooo…talk about microscopic bread crumbs so small you can’t even see..

    Looks like on average majority are getting a giant pay decrease this year, well unless you’re an executive…otherwise 3.5% raise in an environment with lame duck measure of 7% inflation, in reality likely 10%+

    Good job Weimar Powell, you truly are the enemy of the average Joe and yet most average Joe don’t know who you are or the damage you unleashed on them.

    • fred flintstone says:

      The middle class is like a frog in water that is having the temp moved up slowly to the boiling point.

      • historicus says:

        Savers punished at at least 7% per year….theft some might call it.
        When stocks roll over …. much of the magic wealth created magically will disappear, magically.
        Stocks lose
        Cash lose
        There is no shelter from this storm.
        Now China starts closing ports? We can’t import deflation.
        Self sufficiency beats dependency every time.

        • BuySome says:

          Icrease exports…begin by sending the traitors back to the places their ancestors escaped from, without the wealth they stole. See what kind of a welcome home they get wearing a big T on their orange jump suits….after informing their hosts that the cargo holds for food were emptied to fit the deportees in. Next shipment at 10x previous price, or starve.

  44. DR DOOM says:

    This is kinda bent but it went through my brain pan when I was filling the Heck Mug with a Black and Tan. It was a mug with Jerome working the pole in fish nets with a few well known politicians around the platform slopping down whiskey sticking T-Bills under the G-string. For artistic flair oversize BTC pasties and heels are included. Hey, I waited a while before I commented as not to get that image in too many brain pains. This may need the Big M treatment.

  45. STOP blaming the FED.
    A capitalist is like a two-year old who blames his diapers every time he soils himself.

    What we are witnessing is NOT monetary inflation; it’s system failure.

    Western economies have been living off a free lunch at the expense of the rest of the world. Free lunch is over.

    In 1945 the US controlled 85% of the world resources; today, that number is less than 40% and shrinking fast. For once in decades, the US and its allies are having to pay fair prices for resources, like labor., they used to get for free. That’s over, and nothing Jerome Powell can do to help other than to keep the pretense going by keeping the corpse of Western capitalism zombied up.

    So, STOP blaming the FED, and learn to say, “Thank You.” But for the FED you’d all be working at legitimate occupations.

    Capitalism died September 15, 2008; and you all have been in denial ever since.

    • drifterprof says:

      Hahaha

      The Fed represents an oligarch big bank cartel which did those things you describe (American empire “living off a free lunch at the expense of the rest of the world”).

      And also the Fed bleeds DOMESTIC industry and economic health of the average American citizen to enrich the top 1%.

      So, what you’re saying is don’t blame the godfathers for their mafia operations.

    • The Real Tony says:

      They saw what happen to Japan and made sure that wouldn’t happen to America. That’s why all this is happening. Unfortunately the result will be worse than the deflation Japan quote suffered. Put the blame where it should be put squarely on Powell.

      • Swamp Creature says:

        When you see the 3 losers that Biden appoints to the Fed to fill the vacant positions you will be looking at J Powell as the hard money man and the least of the evils.

  46. OM says:

    While some people are angry at what FED is doing, imho it’s doing what is best in current situation, it needs to remove extra liquidity, and remove it from the right place, where it’s causing real problems.
    The current spike in inflation is not caused by QE. In some part yes, but free money from Congress are the issue, same is true for Europe as well.
    Let me explain. Imagine you have a grass lawn and a swimming pool with high walls out there. Lawn is a broad economy, pool – is the assets, and water- is a money flow. When original QE started, all water went into the pool. And stayed there, lifting up all the boats (stock, real estate, crypto, you name it). There were some spill over effects from the pool to the lawn, but very limited. Inside the pool the inflation, not only in assets prices, but also in expenses – was and is going at 10% rate for years. Some luxury companies, like LV, were simply raising prices by 5-7% every year as a matter of policy. Eating out, tickets, services, rents, everything was moving up for 10%+ each year. But as almost all of this was inside the pool, no effects, be they positive or negative were felt on the lawn.
    Was this necessary, have very big doubts about this.
    Then came the covid and free cash to everyone. When you increase money supply by 40% in broad economy with a year, double digit inflation is hardly a surprise as a consequence.
    What can be done? Remember, almost all QE went to the pool. Doing QT – it will start draining the pool, but not the water from the lawn. Raising rates – by how much those need to be raised, to 15-20%, to drain the 40% extra water from the lawn within 1-2 years. Such rates will crash the economy.
    So, FED is doing what is best here. QT will have no effect outside the pool, rates a-la Volker style will kill economy, so keeping inflation high and letting it go higher, to drain the extra money from the lawn as quick, as possible, looks like the only possible option left. It’s not good, but other options will either have no effect, or will be much worse.

    • The Real Tony says:

      The first thing they should do is get rid of Powell. He’s exporting inflation to the entire world. He’s killing America and the rest of the world as the U.S. is still the world’s reserve currency.

    • Cookdoggie says:

      “The current spike in inflation is not caused by QE. In some part yes, but free money from Congress are the issue”

      Agree, and that point is missed here often. Monetary stimulus leads to asset price inflation only because those funds never make it to Main Street. Instead, they sit as bank reserves. That’s why we had no general goods/services inflation throughout the last decade, until the pandemic. That’s when fiscal stimulus went crazy, with predictable results we’re seeing now. The question now is what happens with fiscal stimulus going forward.

  47. Swamp Creature says:

    Was in the grocery store the other day. They were cleaned out of nearly every item in the produce department. The only thing they had in abundant supply was junk food and frozen dinners, all crap that makes you sick if you are not already. The manager of the store had no idea what was causing the bottleneck, but then blamed the customers for hoarding.

    • Wolf Richter says:

      Snowstorm and I-95 closure? And that store’s produce delivery truck didn’t show up because the truck was stuck somewhere or skidded off the road?

    • Swamp Creature says:

      I forgot to add. The manger blamed the snowstorm, Covid as well as customer hoarding. I said the snowstorm was 4 days ago. THEN HE LOOKED AT ME LIKE I WAS AN IDIOT. This is customer relations version 2022.

      Top story on the local news here today. California train robbers stealing Amazon boxes off of trains. We get more news here about California than we get about what is going on locally.

  48. BiggyG says:

    Where the inflation hedges at?

    Stonks: how about a falling knife?
    Bonds: is it already in?
    Gold: ask the wizard of Oz.
    BTC: you’re a funny man.
    NFT: to the blue moon.
    Art: going once, going twice, sold!

    Seriously, is there anything out there or are used Hondas the most pristine assets in this grave new world?

  49. Larry D Shull says:

    I read recently that the shortage of automobiles is mostly due to the demand for computers as computer makers are getting most of the chips. Would someone on your staff please investigate and let the public know where the true shortage is and why?

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