WHOOSH Goes the Dollar’s Purchasing Power in January as Inflation Now Infests Services

Inflation burns out of control, but the Fed is still pouring fuel on it. You can no longer just blame supply chains. This is far bigger.

By Wolf Richter for WOLF STREET.

OK, the Fed and American consumers and wage earners have, excuse the technical jargon here, a serious-ass problem on their hands that has just gotten worse. The broadest Consumer Price Index (CPI-U) jumped by 0.6% in January from December, and by 7.5% from a year ago, the worst since February 1982, according to data released by the Bureau of Labor Statistics today.

The narrower “core” CPI-U, which removes the volatile commodities-dependent food and energy components from the measure to show how inflation has seeped into the broader economy, spiked to 6.0%, the highest since August 1982:

But back in 1982, Volcker was cracking down, interest rates were in the double digits, and inflation was heading lower.

Now, Powell has the foot still on the gas by still buying assets though at a slower pace, and by still repressing interest rates to near-zero.  The last time inflation spiked in this glorious manner was in 1978, but the Fed back then was pushing the federal funds rate toward 10%. Now the Fed is still repressing the federal funds rate to near 0%, which makes this Fed the most reckless Fed ever.

And folks, it’s no longer just supply chains, labor shortages, chip shortages, factories in China, used cars, and new cars.

It’s services that have begun to spike. The CPI for services spiked by 4.6% year-over-year, with big price increases now infesting every part of the economy:

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

The loss of the purchasing power of the consumer’s dollar – the politically incorrect term for inflation – worsened by 0.8% in January from December, and thereby the purchasing power of wages and salaries dropped by as much. The purchasing power of $100 in January 2000 has dwindled to $60.10, losing another 50 cents over the past 30 days:

Housing inflation is making it into CPI, little by little.

The CPI for housing is based on two measures of rent that account for 32% of the total CPI. Both measures, after a drop in 2020 through mid-2021, have been rising every month since June 2021, gradually picking up the actual increases in rents. With both measures still below CPI, they’re still holding down CPI, but less than before. And they’re going resolutely in the wrong direction.

“Rent of primary residence” (7.4% of overall CPI) rose by 3.8% in January compared to a year ago (red in the chart below).

“Owner’s equivalent rent of residences” (24.3% of overall CPI) rose 4.1%. This measure, used to estimate the costs of homeownership as a service, is based on surveys that ask homeowners what their home might rent for (green line).

The surging market rents are gradually filtering their way into these two rent measures, with a long lag to reality. Even if market rents stopped rising today, these two measures would continue to rise as they pick up the prior rent increases.

But good luck with rents stopping to rise today. In January, the median asking rent for one-bedroom apartments jumped by 12%, and in some cities by over 20%, which is why I addressed this to the guy in charge: Dear Mr. Fed Chair Powell Sir, Rents Are Blowing Out and People are Hurting.

Alas, the actual costs of purchasing a house spiked by 19% year-over-year, according to the Case-Shiller Home Price Index, as seen in The Most Splendid Housing Bubbles in America, which creates this unreal disconnect between the exploding house prices via the Case-Shiller index (purple) and the just now rising stand-in for house prices, the “Owner’s equivalent of rent” (red). Both indices are set to 100 for January 2000:

Food costs spiked by 0.9% for the month and 7.0% year-over-year. Food costs weigh 13.4% in the overall CPI. The two major components:

  • “Food at home” – what you buy at the grocery store – jumped by 1.0% for the month and by 7.4% year-over-year. The entire meat, poultry, fish, and eggs categories jumped by 12.2% year-over-year, and just don’t even try to buy beef, which jumped 16%.
  • “Food away from home” – restaurants, cafeterias, delis, etc. – jumped by 6.4% year-over-year, the most since 1982.

Energy costs (7.5% of overall CPI) jumped by 0.9% for the month and by 27.0% year-over-year. Among them:

  • Gasoline dipped 0.8% in January from December, but was still up by 40% year-over-year
  • Utility natural gas to the home dipped 0.5% in January but was up 23.9% year-over-year
  • Electricity service spiked by 4.2% for the month and by 10.7% year-over-year.

The CPI for new cars and trucks (weighs 4.1% in the overall CPI) spiked by 12.2% year-over-year, the third-highest in the history of the universe, behind only the record in March and April 1975 as consumers are paying no matter what, including addendum stickers on top of MSRP:

The CPI for used cars and trucks (weighs 4.1% in overall CPI) spiked 40.5% year-over-year. Wholesale prices in January started to level off, as pricing resistance has finally started to set in, and if that trend continues, it will filter into used vehicle CPI in about two months. There is no way that a spike like this can just keep spiking:

So this is inflation in the process of burning out of control, with the Fed – the most reckless Fed ever – still pouring huge amounts of fuel on the fire through its asset purchases that won’t end until early March, and through its interest-rate repression that it will only too slowly, too little, and too late back off from, and through its recklessly gargantuan balance sheet that it will unwind too slowly and too late.

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  278 comments for “WHOOSH Goes the Dollar’s Purchasing Power in January as Inflation Now Infests Services

  1. Dean says:

    Fun to watch them get egg on their faces.

    • J-Pow!!! says:

      How did you know I was eating caviar?

    • Kunal says:

      Who is getting egg on their faces?
      Its poor and middle class thats getting eggs if you think about it. And it will only get worse. And nothing will change. fed and US Govt works for the rich.

      • historicus says:

        Kunal…
        That’s right.
        The Fed has egg on their face. So what?
        There is no consequence for being wrong at the Fed. Yellen said the theories they chose were wrong. (Curiously, it wasnt Yellen for picking them)
        The workers/earners/savers are getting slaughtered…..and the elite northeasterner cabal of Brahmans got rich once again, and once again shrug their shoulders….”we tried”. BS.

        • Augustus Frost says:

          The majority of Americans are destined to become poorer or a lot poorer.

        • cas127 says:

          Congress didn’t surround themselves with 20,000 troops last year because they think the country loves and trusts them.

      • Gelbert says:

        True.
        The Social Darwinist nightmare ideology championed by Wall Street is THE cruel reality embraced by the 💰🎩 1% and their lackeys in the “Federal Reserve” Board.

    • Marcus Aurelius says:

      The FED could not care less.

      Just about everybody here KNOWS the truth about the FED, but we are all afraid to discuss it.

      The FED is doing exactly what it is supposed to do.

      • Kunal says:

        “Just about everybody here KNOWS the truth about the FED, but we are all afraid to discuss it.”
        Why afraid to discuss it? Wolf is openly discussing it like many other honest folks on YouTube, Podcasts etc.

      • historicus says:

        The Fed is doing what the Federal Powers and the New England Brahmans want to be done….see you in the Hamptons.

  2. WillV says:

    Thank you again for your fantastic work and hopefully the FED will understand that wage inflation is here and the genie is out of the bottle. Wages in our office are up 10-15% since mid summer 2021 to keep competitive in hiring. LIDL grocery store chain reportedly raising all midlevel salaries 10-15%. Nurses at local hospitals seeing 20K sign on bonuses for 3 year contracts and wages up 20% compared to just 2years ago minimum. Just a few samples in addition. Lactaid Milk winter 20-21 $4.49 now $5.29. Plastic Yellow Black storage totes at Home Depot – summer 2020 $9.99 now $12.99. Trinity stainless steel rack shelves at Costco in 2019 – $79.99 now $119.99. The inflation is real and as a middle class family were are just cutting spending as much as we can. refused to buy the new vehicle – the 2012 Honda Pilot runs just fine. To all stay safe, enjoy life low key.

    • Danno says:

      Hopefully? Hopefully?

      If they were a parent and did what they have done to date they would be charged with gross negligence. Convicted too. For life.

    • CaveMan of the people says:

      Interesting article on WSJ & others about traveling nurses. A bipartisan group of lawmakers is urging the White House to crack down on the nurses getting paid too much.

      Those greedy nurses are probably making a living wage while working their butts off & risking their health in a pandemic. They might even be able to afford a house & a used car! /s

      The hero status of healthcare workers didn’t last very long.
      But on a positive note, I’m glad to see Congress reach across the aisle on an important issue like stopping capitalism from allowing peasants to get ahead. Every time the market starts to shift in favor of the working class, “the man” has to step in.
      Maybe they will grant 10k work visas for nurses? If they can’t automate or outsource the labor to the third world, then they have to import the workers.
      Yay! Crony Capitalism!

      • RT says:

        Well, what you have described should be called correctly socialism, in which the state or the collective controls the market, means of production with whatever methods they can come up with. In this case, the collective is the state or those who are in control of the state.

        And side note: since the Football Team already got a new name now, shouldn’t the White House be renamed too? The name is too offensive!

        • Gelbert says:

          The claim that Capitalists are “against” anti-competitive government central control conveniently ignores the fact that it is the Capitalists that corrupt the government to stifle competition AND game the tax code so Capitalists can play their corrupt “unearned income” low tax game.

          As to equating Socialism with central control, that is a meme that Capitalists conveniently associate with Soviet Russia, which was NOT a socialist government, regardless of their claims. The Soviet Russian Government was a dictatorial single corporate owner of all the resources, which is precisely what a Capitalist corporation seeks to do in any country it operates in. Even the Russian government structure was exactly (i.e. CEO = Chairman, Board of Directors = Politburo, Stock Holders = Party – nobody else has ANY say in how it is run) like that of Exxon or any other large multinational corporation.

          Don’t pretend that large corporations “foster” competition. They do all they can to OWN the market and destroy all competitors, often using government, which they corrupt, as their cat’s paw to do the destroying.

          Yes, central control is deleterious to human society, regardless of the ideology supposedly “justifying” it, but socialist ideology defends the welfare of the majority of the population, while Capitalist ideology, which is Social Darwinist to core (see my other comments for details), regardless of anyone claiming otherwise, defends only those with the lion’s share of property and actively punishes the rest for not being as “fit” as the “fittest” (i.e the rich). That fosters gross inequality, which destabilizes society.

        • NBay says:

          Gelbert,

          VERY good post. The “winners” look the other way, promote it, or mentally block it, (depending on their economic level) while towards the bottom, many economic losers are mostly Calvinists that accept the supernatural reasons for wealth inequality that their preachers give them, patiently awaiting their eternal reward.

          No wonder the Romans jumped on Christianity as a better state religion than their old Pantheon….they knew a good thing when they saw it. They just had no idea how powerful that organization could get.

        • Finster says:

          Or maybe corporatism, since corporations control the state.

    • Harry Houndstooth says:

      WillV-

      Thank you for your contribution.

      Be sure to keep changing the oil on your 2012 Honda Pilot.

    • RT says:

      Our family has been driving a 2007 Kia Sedona. We cannot afford to replace it, even though its book value is only about $1500. We will continue to repair it and keep it alive, hopefully pass 300,000 miles or more! And totally agree that we will NOT buy any new vehicles at all, probably never if things continue to go this way.

  3. 2banana says:

    So…..not transitory????

    “So this is inflation in the process of burning out of control, with the Fed – the most reckless Fed ever – still pouring huge amounts of fuel on the fire through its asset purchases that won’t end until early March, and through its interest-rate repression that it will only too slowly, too little, and too late back off from, and through its recklessly gargantuan balance sheet that it will unwind too slowly and too late.”

    • dishonest says:

      Will Powell’s feet ever be held to the fire for that “transitory” nonsense?
      Will anyone wake up Biden?

      I think not.

      • Phoenix_Ikki says:

        Biden is too busy trying to please everyone which end up pleasing no one. He does deliver in disappointment for sure, what else can you expect from the previous Senator for MBNA?

        • 2banana says:

          I don’t think his problem is trying to please everyone.

          After all, this was going to be the winter of death and despair for certain folks.

        • Apple says:

          I guess you forgot who was in charge when the CARES Act was passed and who appointed Powell as Fed Chairman.

          Typical.

        • truth says:

          Don’t worry About Biden Because Yacht men Vladimir Putin has everything in Hand.
          He does deliver in disappointment for sure.
          So, Law Enforcement something I hear little about once again come to mind. Many Politian’s are complaining about HEAT upon them because they are trading Stocks and Bonds. With all this going on and Powells Money Pile becoming a Skyscraper do you really think he cares? or is he simply planning where to Build his mansion and in what Country with a 2,000 Sq Ft Vault

        • Danno says:

          Sounds like his buddy up here in Canada Justy.

        • Augustus Frost says:

          Apple,

          Biden has been President for a year. He owns the economy politically, good or bad. That’s the way it works.

          The majority don’t care that the CARES Act was passed during the last administration, either because they don’t remember or don’t connect the current inflation to excessive government spending. Most people are economic illiterates, they can’t connect the dots, and believe in something for nothing.

          Besides, the 2021 $1.9T porkulus bill was passed during this administration. They can’t blame anyone for that.

        • tom21 says:

          Interesting times. We are getting to see the urban socialists of Canada side against the working class.

          Here in America, workers who were heroes one day….were zeros the next by our socialists & Silicon Valley.

          Its gonna be one heck of a ride.

      • Leo1992 says:

        Fed must stop printing. If fed does not stop printing, we may have hyperinflation in less than 5 years as per my game theory model. To check this model go to scribd and search for leo1992.

        • Augustus Frost says:

          An asset market crash will interrupt any hyper inflation first, resulting in actual tight credit conditions regardless of what the FRB does or doesn’t do.

      • Catxman says:

        @dishonest

        President Biden is, as he has to be, a jack-of-all-trades. It’s true that he’s one giant MEH *slumps forward as I speak* but he is president, after all. Maybe he’ll redeem himself in foreign policy with this Ukraine thing heating up. America still holds most of the cards, not least of which being the “moral leader,” the “true north” the world points to. Putin goes to sleep thinking “America the Right” and wakes up feeling “Mother Russia is my land.”

        • Gordon McKay says:

          After Iraq, Libya, and Afghanistan America is only the ‘moral leader’ in its own imagination. The rest of the world sees a country that has been responsible for the deaths of more innocent people over the last 20 years than the rest of the world put together several times over. That’s without all the arbitrary sanctions.

      • historicus says:

        The Fed is doing what the Federal Powers and the New England Brahmans want to be done….see you in the Hamptons.b

      • RT says:

        I truly don’t think this is a partisan issue. The devaluation of the US dollar is a bipartisan effort. The Fed is supported by the establishment of both parties. Only people like Ron Paul had the audacity to push something like “Audit the Fed”. So judging from history, the Fed will just continue to do what it does, regardless which political partyh has a resident that lives in the color-shall-not-be-named-because-it’s-offensive house.

    • Djreef says:

      We’ve gotten to where we buy food and gas. Some used stuff, but that’s about it. We don’t need to make big purchases, so we don’t.

      • Gelbert says:

        Same here. As our purchasing power drops, we-the-poor-and-middle-class-people tighten our belts. Thus the economy is strangled as a result of Government directed Inflation theft on behalf of the morally bankrupt Social Darwinist (i.e. Capitalist) rich.

        “By this means the government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.” —
        John Maynard Keynes

        “Capitalism is the astounding belief, that the most wickedest of men, will do the most wickedest of things for the greatest good of everyone.” — John Maynard Keynes

        • Augustus Frost says:

          Unfortunately, the majority of the population is irrelevant to economic “growth”. It also seems to show in economic (fiscal and monetary) policy.

          Look at median household income and net worth since about 2000. Both have flatlined. Whatever “growth” the lower 60%+ of the population contribute is presumably from increased government transfer payments or debt. Where else would they get the money?

          It’s the top 5% of the income and wealth distribution accounting for most increased consumption spending over the last 20 years.

        • WolfGoat says:

          “Capitalism is the astounding belief, that the most wickedest of men, will do the most wickedest of things for the greatest good of everyone.” — John Maynard Keynes

          Classic! Thanks for THAT!

        • historicus says:

          This is NOT capitalism!
          This is a managed arrangement by unelected central bankers who act unsupervised and expand the money supply on their whims….and lay an inflation TAX on the People. Rife with insider knowledge.

          Connect that with “capitalism”.

        • cb says:

          @ historical –

          You are right, The FED was not elected. They were put their by BIG money ……………. Owners of big capital ………. Capitalists!

          How’s that for a connection.

        • Brian says:

          Keynes advocated for the central control of everything. Consolidation of power is the opposite of what you want to do to defuse the inherent selfish nature of man.

        • RT says:

          I believe what you railed again is not capitalism. Capitalism is the private control of means of production. This manipulation of the currency and monetary system by the government (state) is not capitalism. It is socialism. Socialism is the control of the means of production and the control (manipulation) of the market by the collective (state or any collective group). The state right now is devaluing our currency through the Fed, through inflation. It is not private citizens that are doing the devaluing. It is the state or the collective that is doing it. So that’s exactly the definition of socialism. Socialism always requires control from the state (collective) and always requires coercion. This is not free market and it is not capitalism.

          And btw, I believe the situation you are complaining about, is what generally called Keynesian economics. So I think the quote of Keynes is particularly ironic. Keynesian believe in government spending and debt. When the government like the US has the ability to print its own currency without immediate consequences (for it is the reserve currency of the world), then it is natural to see the US gov’t and the Fed prints currency into oblivion. Runaway inflation is a natural result of Keynesian economics.

          Also Social Darwinian are not capitalism. They are two different concepts. Capitalism is about who controls the means of production (capitals). Social Darwinian believes in the continual struggle between individuals or groups of individuals in the process of social evolution to a better society (progressives). Social Darwinian are not necessarily capitalist.

        • Gelbert says:

          RT, you labor under the happy talk version of Capitalism. Think about how contradictory your statements are.

          For example, anyone that believes Capitalism “fosters competition by keeping sources of production in private hands” is completely mentally at odds with the fact the purpose of any and all Capitalists is to concentrate wealth in the fewest hands in order to dictate product prices. That is de facto concentration of wealth. That is de facto central control. That is de facto monopoly.

          The claim that Capitalists are “against” anti-competitive government central control conveniently ignores the fact that it is the Capitalists that corrupt the government to stifle competition AND game the tax code so Capitalists can play their corrupt “unearned income” low tax game.

          As to equating Socialism with central control, that is a meme that Capitalists conveniently associate with Soviet Russia, which was NOT a socialist government, regardless of their claims. The Soviet Russian Government was a dictatorial single corporate owner of all the resources, which is precisely what a Capitalist corporation seeks to do in any country it operates in. Even the Russian government structure was exactly (i.e. CEO = Chairman, Board of Directors = Politburo, Stock Holders = Party – nobody else has ANY say in how it is run) like that of Exxon or any other large multinational corporation.

          Don’t pretend that large corporations “foster” competition. They do all they can to OWN the market and destroy all competitors, often using government, which they corrupt, as their cat’s paw to do the destroying.

          Yes, central control is deleterious to human society, regardless of the ideology supposedly “justifying” it, but socialist ideology defends the welfare of the majority of the population, while Capitalist ideology, which is Social Darwinist to core, regardless of anyone claiming otherwise, defends only those with the lion’s share of property and actively punishes the rest for not being as “fit” as the “fittest” (i.e the rich). That fosters gross inequality, which destabilizes society.

          Social Darwinists believe that ethics based principles are ‘limitations pretending to be virtues’. To them, ethics are ‘feel good illusions’ that humans invented to pretend our species has empathy. To Social Darwinists, empathy is irrefutable evidence of inexcusable weakness. To them, all who are guided by ethics are deluded fools that should be eliminated from the human ‘apex predator’ gene pool for the “good” of our species.

          Social Darwinism is the morally bankrupt world view that spawned the profit over people and planet neoliberal ideology. Neoliberal intellectuals like Friedrich von Hayek, Ludwig von Mises and Milton Friedman were all Social Darwinists long before they renamed laissez-faire liberalism (that had been thoroughly discredited by the Great Depression) with the catchy title of “Neoliberalism”.

          The celebrated social theorist and geographer David Harvey explains that neoliberal ideology serves the following principle:

          “There shall be no serious challenge to the absolute power of money to rule absolutely. And that power is to be exercised with one objective: Those possessed of money shall not only be privileged to accumulate wealth endlessly at will, but they shall have the right to inherit the earth, taking either direct or indirect dominion, not only of the land and all the resources and productive capacities that reside therein, but also assume absolute command, directly or indirectly, over the labor and creative capacities of all those others it needs. The rest of humanity shall be deemed disposable.”

          If the above isn’t Capitalism = Social Darwinsim, I don’t know what is.

        • NBay says:

          Two more good posts Gelbert, This one and the further expansion of the same situational awareness as above.

          RT is flailing. Whether he is unable to juggle seeming contradictions, assuming incorrect context, is just blocked by prejudices, or simply failed English comp, I don’t know.

          Keep up the good work.

      • Flea says:

        Same here

      • Depth Charge says:

        I’m driving less so I am actually using less fuel than before the price spiked.

        I had to buy a few pairs of new shoes recently. I was down to only a couple decent pair. I am hard on them. Inflation is rampant and inventory low in the shoe space.

        I mention this because I am pretty much done with my purchases for 2022 unless something comes up unexpectedly. I will only buy the bare necessities. My goal is to save even more during inflation than I did prior, which means small businesses will get none of mine. It’s a sad byproduct of this miserably mismanaged economy.

        • AlaskanSalmon says:

          Saving more during inflation… Isn’t that more harmful than spending it immediately?

        • Wolf Richter says:

          AlaskanSalmon,

          Not spending it is the one and only thing that you, the individual, can do to bring down inflation. If everyone does it, inflation dies.

          Spending it immediately is what fuels inflation. That’s why inflation can turn into a self-feeding cycle until something breaks the cycle, such as much higher interest rates and job losses, and masses of people reduce their spending together, and demand collapses.

          People could just refuse to pay the higher prices – the Japanese are known for this – and then it’s very difficult for inflation to thrive.

    • Marcus Aurelius says:

      Powell was telling the truth. He was honest. 2% Inflation was transitory.

      So is 7%.

      It is transitory. Relax. It won’t stay at 7%

      Soon, the 9-10% Inflation will, too, be transitory.

      Hell, the Federal Reserve Paper Note itself is transitory.

      • CaveMan of the people says:

        “2% Inflation was transitory.”

        HAHAHAHA! Thanks for the laugh. This is what makes this site great!

      • RT says:

        What a true and profound statement you have made, sir!

        Can’t wait to share it with others!

    • Janna says:

      “In the process of burning out of control.” How out of control are we talking here? I know that’s a tough question to answer, but I need perspective.

  4. Poor like you says:

    serious-ass problem, AND a serious ass problem. As in, I’m about to lose my ass when my landlord raises my rent.. AGAIN.

    • SilentC says:

      I feel you. Also it’s interesting how home price index went up 20%, new car price index up 20%, S&P up ~20% … must be transitory supply chain issues causing the inflation not the Fed…

      • SilentC says:

        Forgot to mention rents up 20%, on point with your comment. Anyway I know where I am directing my anger on this as a renter.

        • Gelbert says:

          Well, I suspect that the actual inflation increase is far closer to 20% than the Greenspan gamed CPI index number of 7.5%.

          Unlike the Chapwood Inflation Index, which is reality based, the BLS CPI Index is methodically low balled to avoid “upward adjustments” in the government “poverty level” numbers and inflation triggered government pension increases. Furthermore, a reality based approach to computing inflation would force our government to modify the tax tables which now (AND for the last 40 years or so) bracket creep punish we-the-people for income increases and reward “unearned” income dividend beneficiaries, populated mostly by the rich.

          The published BLS CPI is perception management propaganda that Goebbels would envy.

        • NBay says:

          Doesn’t ANYONE, besides me, find that DISCUSSION OF RAISING Tax schedules, (ESPECIALLY ESTATE TAXES, now that it has all gone so far into the totally ridiculous….a WTF, in WS jargon) to the modern equivalent of Eisenhower (or even Kennedy) are CONSPICUOUS by their total ABSENCE in most all media, even here?

          And or course strengthening the IRS….hell, I’d even make it part of the military and use bounty hunter techniques until this materialistic planet killing class warfare shit is finally realized to be stupid….which may take a while.

          Constitutional maximum net wealth is the real answer, I doubt $10-15M max would “kill incentive” to work hard towards things useful to everyone.

          They say one can learn a lot about a culture by what is NOT mentioned…..another one would be normal bodily functions, although us hippies helped trash a lot of that……

          Yer welcome.

      • John H. says:

        If the prices of these things have gone up 20% in dollar terms, then is it accurate to posit that the value of the dollar has dropped by 17%?

        ….Or is my math faulty?!

        The eventual results of a government’s drastic money production is a devaluation in that country’s currency.

        Just look at Turkey, Greece, Argentina, Venezuela or Zimbabwe for the general pattern.

        Weimar Germany, which started its currency euthanasia with deficit spending, also fits the bill. For background, read Constantin Bresciani-Turoni’s The Economics of Inflation written in 1937.

    • The artist formerly know as Marcus says:

      Much to my surprise, I was just presented with my lease renewal offer and it included a 10% reduction in my rent. I know… one anecdote amongst the tsunami of counter-evidence. But it did happen. Maybe Philly is starting to feel the pressure of vacancies since so many people fled to the ‘burbs.

      • Ghassan says:

        I believe Philly is one of few outlier cities that rent are dropping, just check the article wolf posted few days ago. Your landlord ain’t doing you a favorite, they just making sure you sign before it drops even further.

  5. Phoenix_Ikki says:

    Yup, I am waiting for Weimar Powell to unleash those powerful .25 basis interest rate hike at a time to combat 7.5% already conservative inflation rate. At the current trajectory with the rate of QT and % interest rate hike, we’ll be back to “normal” sometime in 2050

    But don’t worry your house will be worth a lot more along the way cause you know Inflation and all..

    • Harrold says:

      I remember an interview with Paul Volcker. He said he was angry when “jawboning” didn’t move markets — they ignored him. So, that was part of the reason for the shock and awe rate increases.

      Powell is jawboning now. It is having little effect on markets and none on inflation. I wouldn’t rule out even a 1% rate hike at some point.

      Funny anecdote, his grandson got a job on Wall Street. He told him, “get an honest job”.

      • NBay says:

        Oh boy….we are building a legend here. Like in Confucianism, maga, garden of Eden, etc, etc, etc….blah blah blee….all we have to do is get back to when things and people were “perfect”.

        It doesn’t work that way…..time is open ended, as far as human perception goes.

        The physics guys may have created some different constructs.

    • Poor like you says:

      What house :(

      • Depth Charge says:

        Right. And people have taken to living in cars, but those are now out of reach. I’ve heard the price of tents has increased dramatically. And when you factor in sleeping backs and all the other equipment needed for tent living, that’s a no-go as well. Maybe they can offer 30 year loans on sidewalk camping/street living provisions? Blackstone loves the idea.

  6. Mike T. says:

    If the Fed raises rates we will have stagflation as the economy is addicted to debt and low rates. I think the Fed would rather have inflation than risk the consequences of a stagnating economy with negative growth.

    • Enlightened Libertarian says:

      I agree. I think as far as the Fed is concerned, in the short run, letting inflation run hot and printing money is the least worst option.
      In the short run.

    • Djreef says:

      There is a distinct rotation away from hi risk (tech) and into value and dividend and interest generators for the foreseeable future.

    • WES says:

      Nothing like a nice little crack-up boom!

      I wonder how long before Wolfe adds crack-up boom to his WTF?

    • Marcus Aurelius says:

      The FED has no choice.

      The #1 Mandate of the FED is to keep the Stock Market up. Our economy, and pension plans and retirement plans, all depend on the Stock Market. It can not be allowed to fall, unless that is planned so the Owners of the FED can sweep in and purchase everything at 20%, like they did in 1930’s.

      We don’t make TVs anymore. Nor micro-waves, nor hardware, or power tools. We make “nothing”, but the Stock Market.

      How can they keep this going? The Major Banks own the FED. They simply loan themselves credit at 0.01% and take these “deposits” to purchase Stocks in the Market. Keep the Market up. At all costs, keep it up.

      As inflation continues, blame it on greedy restaurants, greedy plumbers, greedy lawn care guys…….Keep the Stock Market up.

      Also, keep Gold and Silver prices down as you buy, buy, buy so that when it does blow up, you’ve got the only “money” around.

      How long can this last? Forever? Longer than we can.

      The only price (and it is NOT a price to the Owners of the FED) is the elimination of the middle class, who are trouble makers anyway.

      • RH says:

        That is not one of the stated mandates of the banksters “Fed” but I do concede that it clearly is one of its secret mandates. As to the “troublemakers” in the middle class, as one of them, I really want to raise the taxes on the ultrarich, billionaire and trillionaire crooks who have been evading taxes for decades through their ownership of politicians and the “Fed” to 99.9% of their wealth for a few decades, until the tax bill not paid by them for decades is equal to the tax bills paid for decades by the other classes.

        That would truly stimulate the economy, because the billionaires and trillionaires seldom do much useful with their hundreds of trillions. They are essentially parasites on the rest of us. Read how Apple avoided paying $50,000,000,000.00 in taxes according to Gizmodo.

    • Augustus Frost says:

      The FRB doesn’t live in a bubble world. Look at how sentiment has moved against them just in the last few months and how it’s changing their tone.

      Besides, if it comes to saving the USD to preserve the empire, I’ll take the opposite side of your wager. The economy, markets, and public will be thrown under the bus and discarded to save the empire.

      The key level to watch is DXY (USD index) at 70. It’s about 95 now.

  7. 2banana says:

    The sad part is there is really no place to hide.

    In the 70s, you could get a CD at least matching the inflation rate.

    Today:
    Bank interest rates at 0.5%
    Hyper inflated stock market
    Hyper inflated housing market (we will see what rapidly increasing mortgage rates do to that)
    Wages, nominally, lagging by inflation by 5% after getting a raise
    Bonds pay nothing
    Gold, silver and cryptocurrencies going sideways

    The only thing that comes to mind, not in a bubble, that matches inflation are pipelines, telecom and tobacco stocks with high dividends.

    • Depth Charge says:

      This is why people are gambling in crypto. If I was a reckless gambler, I would be, too. A lot of these people admit that they believe cryptos are worthless, but they do it anyway because there’s nowhere else to get a return. When you can get a 45% return in a day, vs less than half of a percent a YEAR on savings, that’s what happens. This is the sick and twisted system that the FED has created. The FED needs to be abolished.

      • Crypto Serf says:

        I gamble in crypto because at least there I know I have a chance. The dollar is absurdly central controlled and gold is manipulated. Crypto is the last bastion of Freedom.

        • Brian says:

          It is, but if we allow CBDC’s to be established and cash banished then the last true vestiges of freedom will be vanquished. Negative interest rates will crush everyone and there will be no way out.

    • The Real Tony says:

      The fundamentals for tobacco are negative going forward in time as smokers die off and the younger generation doesn’t smoke mostly due to the price of cigarettes that is taxes on tobacco have been raised exponentially. In due time these tobacco stocks will crash, burn and implode. That only leaves telecom and the pipelines.

      • 2banana says:

        Well, you gotta do your homework.

        Quite a few of them are already well diversified into marijuana, beer, wine, spirits, smokeless, food, etc.

        Almost like a mini vice fund.

        Fyi. That stuff does well in recessions.

      • NBay says:

        During the FC CNBC had a piece on the “Sin Fund”….aka the 5 B Fund.

        Broads, Betting, Bullets/Bombs, Booze……and I can’t recall the fifth….probably some b-word for smoking?

    • Djreef says:

      Dividend and value. TINA is alive and well.

  8. Depth Charge says:

    Jerome Weimar Boy Bowel is on the case. He’s polishing his pea shooter, ready to take on nuclear warheads. He’s comin’, just you watch. Any day now, he’s going to do something. Stay tuned, he’s got this. He’s tunin’ up a quarter point rate hike. That’ll do it. Man, he’s ON THE JOB.

    • fred flintstone says:

      But….depth charge…..lets face the facts……whats more important……..playing his round of golf each day or figuring out what to do about inflation…….raise rates……what a quaint thing to consider……but only after another thirty rounds of study by experts like Bernanke, Yellen and Greenspan…..the dynamic trio that have just about destroyed the US economy based on their blood thirsty crazy a.. ideas and lack of understanding that we are more than a dollar bill….we are a cultural people………and they wonder how Germany did what it did in the 20’s and 30’s.

    • historicus says:

      DC
      Recommended reading “The Lords of Easy Money”.
      Telling. Revealing.

      • NBay says:

        Instead of constantly hyping this one book (which is a big part of Wolf’s bag, and this site isn’t static like a book) why don’t you hype his previous book?
        To me they are completely inseparable for someone who wants to know what caused the problems we face.
        I hope he writes one on lobbying next.

        https://en.wikipedia.org/wiki/Kochland

      • Swamp Creature says:

        historicus

        Just ordered the book

      • jm says:

        Very important info from that book: Powell was strongly opposed to Bernanke’s QE, because he foresaw it would have exactly the effects it’s had in creating an asset bubble. So his wish to be gradual in withdrawing it is quite possibly due to his being acutely aware of how fragile it’s made the financial system. That doesn’t mean he’s happy with the idea of the “Fed Put”. There are indications he feels the important parts of the financial system are now strong, and that stock market prices aren’t all that important.

        Also, it’s clear he sees how much inflation is injuring the bulk of the population. The rises in fuel, electricity, food, transportation, rent — and now even car insurance — must be severely hurting the bottom 70% of the income distribution.

        • Depth Charge says:

          Inflation eventually destroys everything. It eats up all disposable income, and those businesses which are dependent upon that fail. A whole lot of business owners are finished, they may just not realize it yet. It is an insidious problem. Playing around, dancing with the devil like they were doing was reckless and criminal.

        • cb says:

          jm said: ” There are indications he feels the important parts of the financial system are now strong,”
          —————————————

          and what are those important parts of the financial system that are now strong?

    • NBay says:

      Yeah, but I’m just joy popping……honest!

    • ivanislav says:

      Man oh man. I remember you and DC going back and forth a few weeks ago. You guys need to get a room … and duke it out!

      • Depth Charge says:

        I certainly don’t mind people disagreeing with me, but these guys are just trolls who level personal attacks, offering nothing to the discourse, so I go ahead and give it right back to them. Fight fire with fire.

        It says a lot about somebody who can’t handle a person criticizing the FED and the establishment, so they attack them. The real question is why are they so triggered? Seems I cut them real deep at some point, and they have never been able to move on, revealing a lack of emotional maturity. Oh well.

      • ivanislav says:

        Fed interns :)

    • OutsideTheBox says:

      DC

      I’m trying to remember you posting ANYTHING that ISN’T mindless vitriol.

      By the way, the Fed is an institution over a century old. You will be gone long before it ends.

    • ivanislav says:

      @OutsideTheBox – Jerome, is that you!?

    • Depth Charge says:

      “DC – I’m trying to remember you posting ANYTHING that ISN’T mindless vitriol.”

      How cute, the other triggered troll pops up. Same person, maybe? You obviously have a reading comprehension deficit as well. Can I get you a, I don’t know, Prozac?

  9. Crush the Peasants! says:

    RUN.
    FASTER.
    HAMSTERS.

  10. Abomb says:

    I can’t believe they haven’t started raising rates already and stopped purchasing MBS and everything else they buy. They must be sitting there shitting their pants hoping it drops….”maybe next month?”

    • seabrook says:

      I thought at the last press conference the Fed had already stopped buying MBS (while still buying Treasuries). Perhaps I misheard…?

      • Wolf Richter says:

        seabrook,

        Yes, you misheard. They didn’t distinguish. They slowed the purchases of both, Treasuries and MBS, and said that they WILL stop buying both in early March.

        • Swamp Creature says:

          They want to buy time so their private equity buddies can unload their long positions and go short just in time for the market crash.

        • jm says:

          People should be aware that the economists of the Fed are not Wall Street types looking to rip some sucker’s face off. My very liberal (and very smart) daughter once worked there as a research assistant, and respected the staff economists she worked with.

          Keep in mind that economists believe that deflation due to a shift to overly tight monetary policy was what caused the Great Depression, something much, much worse than the problems caused by the current Great Asset Bubble.

          Above all they don’t want to repeat that mistake. So they’re cautious. Perhaps too cautious. But not out of malice, or because they’re completely in Wall Street’s pocket.

        • Martok says:

          Swamp Creature,

          I really believe what you said, and when Powell said that inflation was “transitory” he was giving early warning to his buddies and WS biggies buddies.

          He knew damn well there isn’t such a thing as “transitory” inflation, it’s all jawboning.

          And yes the big boys will go extremely short, when they all have unloaded their equities, and a .50 basis point (IMO) is done in March, – because a .25 raise is like trying to stop a full speed freight train with a squirt gun, – even .50 too.

          It’s the biggest intentional pump/dump I have ever saw.

          It could become so bad that people will have to live in Hoovervilles like in the ’30s!

        • cb says:

          @ jm –

          how would you know?

  11. Bubba says:

    No place to hide? Well, either lose 7.5% in purchasing power holding cash or potentially lose 70 or 80% (nominal) holding the broad stock market plus the additional 7.5% in real value on top. Your call.

    There’s no guarantee of gaining purchasing power just by holding some financial asset while doing no actual work. Sorry.

    • Apple says:

      You know the money is going to end up somewhere. It doesn’t just disappear.

      My guess is real estate will cool and the money will into the stock market.

      • 2banana says:

        Money can just “disappear”

        Bankruptcy
        Stock delisting
        Etc.

        But the big one is…

        The FED selling assets or just letting them roll off.

      • TonyT says:

        Nope, money can go POOF! Just look at Zuckerberg.

      • Dana says:

        What “money”? Fake “money” goes POOF!

    • 2banana says:

      Not much of a choice…

      Heck, buying and storing 15 year old scotch would be a better choice as long as you don’t drink your profits.

      • LK says:

        Handy though if you want to drink away losses in other areas. Making things worse via drinking may not be smart, but it is traditional!

      • Elvis' Bass Guitar says:

        Why do that, it doesn’t age anymore when outside of the casks? BTW, Glenlivet archive 21. And the old hibiki Suntory 10yr, not the crap 8yr.

      • DR DOOM says:

        2 banana: I did the scotch thing. Bought 30 cases of 10 yr old single malt Speyburn in 2011. Each bottle is in a really neat tin cylinder with an embossed image of the Speyburn Distillery. It’s a beautiful Distillery. It’s in my basement. Guess what? It’s price has been about the same since 2011. About $30 a bottle in N.C. Where I live. I wonder how it will be impacted? So far not much.

        • VintageVNvet says:

          wrong beverage DD:
          bil bought WINE futures the day his grand daughter was born for $500 (per bottle ) but chickened out and sold them a couple years later when they hit $2500 (per bottle )…
          I have read this is fairly typical these days with the better vintages, and after just a year or so in the bottle.
          Un fortune ate ly,,, i have apparently become allergic to ”sulfites” so have gone to the tequila team…

      • Swamp Creature says:

        I just ran out of my Canadian Club whiskey. Need to stock up before they shut down the US Canadian border.

    • Old school says:

      Fed is behind the curve, but my guess it’s an intentional mistake. They know money supply has a lag as it works it’s way into the real economy. Don’t think they are going to mind government borrowing at -5% real for a couple years to help pay off Pandemic.

      I made the comment during the Pandemic that we were going to pay for all the giveaways for a long time, but I didn’t know how for sure. Now we know at least the early part of the give back.

      Still a lot of help wanted signs near me. Times not tough enough to get people off the couch yet.

  12. Depth Charge says:

    And just think how CONgress keeps trying to spend more and more trillions. These people are the most reckless, dangerous idiots we’ve ever had in charge, and many of them have been there 4 decades+, presiding over the systematic death of the USA. Put ’em on a stretching rack in a public square. Pelt them with rotten fruit. Strip them of their assets and then let them rot in jail.

    • Trailer Trash says:

      Jail is too good for Our Dear Leaders, where they would get three hots and a cot.

      Instead, force them to live on a typical Social Security pension with no savings or assets. And they have to live in an industrial wasteland like Camden NJ.

    • Swamp Creature says:

      DC

      It’s about time we started looking at those scumbags in Congress who are spending us into bankruptcy, as well as the Fed which is monitizing all of this spending.

      We have 3 branches of government that are totally corrupt. The Executive, the Legislature, and the Fed. Nothing good can happen when you have this level of incompetence and corruption.

  13. Swimmer says:

    It seems to me the big question is why the Fed/government partnership caused this situation. The media, in general, chalks it up to incompetence, but well-known economic studies going back centuries clearly reveal what happens when money supplies are increased substantially more than an economy. Our being asked to accept that the current situation is due to mere incompetence is a big ask, its asking us to accept that the Fed/government has learned nothing from history and economic studies. Or is the current, easily-foreseen situation due to some other motive?

    • Depth Charge says:

      Follow the money. It was intentional. The people in control are the ones who made out like bandits. They used a so-called “crisis” to loot the US Treasury for their own personal financial gain. The masses pick up the tab, especially the poor and working class. If you weren’t already an asset holder, you got shafted hard.

      • historicus says:

        DC
        on top of that, if you had stock and real estate, you might have sold in anticipation of the inflation cocktail developing.
        BUT, some seem to have know that the Fed would not fight inflation, would not listen to the warning signs.
        IF….IF a central banker wanted to create hyper inflation, he would have done EXACTLY what Powell and the Fed did…….massive increase in the money supply, peg rates at zero.
        I know he doesnt have an economics degree, but com’ on man!
        It is getting whittled down to a few choices….Stupid or dishonest?

        • Janna says:

          Is it possible that they wanted to promote wage inflation and then lost control of the whole thing? I don’t doubt that they wanted to enrich themselves- in wealth and politically.

      • Swamp Creature says:

        I would like to see a convoy of truckers come here to DC and shut this whole place down. That would be a net plus for the rest of the country.

      • Swimmer says:

        If the stock market goes down as a result of upcoming Fed actions, what will all those who profited from the gains in the stock market in recent years do now to avoid losing those profits?

        • Old School says:

          A stock market crash of 60% plus 7% inflation for a couple of years is going to wipe out a lot of people.

    • historicus says:

      The Federal Govt LOVED the free money…..the party in power LOVED the free money.
      The word TRILLION has lost all meaning, and those who use it have no concept of its magnitude.
      Does anyone remember a TRILLION DOLLAR spending bill in Congress before 2009? (ZIRP )

      I would love to ask Pelosi and some of these others that toss the word TRILLION around…this question..

      IF a billion seconds is 32 years, how long is a Trillion seconds?

      Answer: 320 CENTURIES

    • Flea says:

      Which country spent 10 years in Afghanistan followed by bankruptcy,which other country spent 20 years in Afghanistan probably going bankrupt,history repeats

  14. Fromks says:

    CPI tells me rent increased 3.8%

    Zumper says 12%

    Zillow says 15.2%

    I would understand a slight difference due to methodology, but BLS methodology is not even close to reflecting reality.

    • Wolf Richter says:

      Fromks,

      Your first two measures are “median asking rents” not actual rents that people are paying today. They’re based on rental listings of apartments that are available for rent.

      Actual rents — which is what the BLS is tracking — include rents in rent-controlled apartments; and rents that haven’t been raised, or only very little, because the landlord wants to keep good tenants; and rents that are still on a lease and cannot be raised, etc. So those two data sets were never match.

      But the BLS data has a lag, as I pointed out. That lag is due to how the survey of renters is structured. This is a huge survey, and the renters on the panel get it twice a year, and it rotates around, which contributes to this lag. So the rent CPI will move higher over the next few months, even if median asking rents stopped rising today (which they won’t), as I pointed out in the article.

      • Fromks says:

        Wolf,
        Despite those differences, correlation has been excellent from 2014 to 2020. I understand there is a pandemic since then.

        https://www.whitehouse.gov/wp-content/uploads/2021/09/figure-2.jpg

        If we expect that lag to resolve, and BLS catch up to reality, that would be a significant contribution (~3%!) to overall CPI-U.

      • DR DOOM says:

        Hey, I paid attention to that post from the past about the inflation print time bomb of rent due to the owners eq. rènt. Itssssss…… arrived and as your post pointed out will only gain steam.

      • Swamp Creature says:

        We check rents on a weekly basis to do income approach on our appraisals. They are on MLS. This is actual data not some homeowners assessment of what their home is worth if it were rented out. Right now, rents are going up through the roof. At lease 10% inflation YOY. Look for rent bidding wars. A RE agent sitting in a room eating popcorn and taking 10 or more applications to rent a home, or Condo. Essentially auctioning the property off for rent at the highest bidder.

  15. Wolf Richter says:

    Warning: U-Turn in progress.

    I’m going to do a U-turn here. Over the past couple of months, I pooh-poohed the possibility the Fed might do a 50 basis point hike on March 16. I figured the Fed wouldn’t want to surprise the markets, and would stick to a 25 basis point hike.

    But Fed heads have been mentioning it recently, and now we got this “serious-ass” problem with inflation, and Bullard is out there urging a 50 basis point hike, and the March rate-hike expectations are betting on a 50 basis point hike, and so it wouldn’t be a surprise.

    I now think we might actually get a 50 basis point hike.

    • 2banana says:

      Seriously, does that really matter?

      Rates go from 0 to 0.25 to combat 7.5%+ inflation

      Or

      Rates go from 0 to 0.50 to combat 7.5%+ inflation

      Now, if it was a surprise 2% point hike…

      • Wolf Richter says:

        Well, if you get 10 rate hikes of 50 basis points in a row, it begins to matter.

        But I’m with you. As I said, too little, too late.

      • w.c.l. says:

        I just wonder if the Fed will have stones to hold the course and keep raising rates and doing QT once the markets start to tank. I just feel they’re gonna wet their knickers and back off once the poop hits the blower. I really don’t have any faith in them.

        • Augustus Frost says:

          At some point down the road, it’s going to be a choice between the three largest asset classes crashing (bonds, stock market, and real estate) or the USD losing global (or any) reserve status.

          At that point, there is no way out even for most of the very wealthy.

          724 billionaires purportedly now versus 13 in Forbes back in 1983.

          It didn’t happen because the country is so much wealthier or even mostly due to wealth redistribution.

          It’s overwhelmingly the result of an asset and debt mania.

      • Swamp Creature says:

        I like a 1% rate hike.J Powell was just appointed for another 4 years. WHAT’S HE GOT TO LOSE.

    • Peanut Gallery says:

      I agree Wolf. A 50 bps hike is probably more likely than not.

      I would say that there is even a tail risk / low probability scenario where the March 16 hike is even more than 50bps…

      Personally I think the O/U on a 50 bps hike is greater than 60/40.

      100 bps hike? maybe 10/90?

    • Phoenix_Ikki says:

      I am going to take a wait and see attitude. Not saying you can’t be right Wolf but Powell boy is a master of jawboning and the best feet dragger around.

      Action speaks louder than words, hope you are right and we will actually see 50 basis points. Knowing my bank though they will probably still keep my interest rates same as it is today since I am not a new customer.

      • WES says:

        The Fed is likely jawboning the market hoping the market raises interest rates 0.50% so they don’t have to raise interest rates.

    • Bubba says:

      The 10 year treasury rate is going to continue its march higher towards 3% with the end of QE and start of QT, so you probably need more like a 1% FFR hike to keep the yield curve looking rational.

      • DR DOOM says:

        The long end is where the Fed will lose control. 7.5% inflation with Fed short term rate even at 1% is still -6.5%. That’s nasty.

        • Depth Charge says:

          Not just nasty, but extremely harmful to households, and the pain is RIGHT NOW, not some distant time in the future. Ever notice how the FED shows up on the scene of a stock market wipeout THE NEXT DAY, announcing massive intervention, but when the real killer – inflation – starts to run rampant they disappear from the scene, telling us they will handle it at some nebulous time in the far future? These guys are transparent crooks. It’s no mystery what’s going on. When they got busted frontrunning the stock market, it all became crystal clear for even the dullest of minds.

        • Old School says:

          Check Lacy Hunt out. Bond vigilantes may never show up. Might be that commercial banks just stop lending because they can’t make any money lending when there is no spread. Japanese and European banks are having a tough time making money if I am not mistaken. Most money created by banking system and not Fed.

      • Old school says:

        2/10 spread keeps getting tighter. Not good.

    • Nathan Dumbrowski says:

      Agree. They have now allowed their town criers to telegraph the shock increase. This will certainly buy them time. But in reality the 30 year rates have already begun to creep up above 4% without any actual % change in the Federal Reserve

      Even my 12 year old now now what the dreaded “I” word is. He has had to hear, learn and get a basic understanding of what it means

    • Janna says:

      Whoa, Wolf! That’s big time:) If the Fed does go 50, will they tell us before March 16th? Wouldn’t that negatively impact their already low reputation? They are so careful about their verbiage…

      • Depth Charge says:

        “Subprime is contained” is the only phrase you ever have to remember.

  16. Forget inflation, inflation has no maturity date and its rate is adjustable. So what’s behind the spike in bond yields? Sure the Fed isn’t buying as much. Maybe that’s the problem, maybe tapering has opened up lots of blue sky above and while Treasury sits on the sidelines after the spending bills came up short. Yields seem to be pricing in more aggressive Fed rate hikes but that could be a mirage. Bond owners want to move out the curve, where negative real rates are smaller at the long end and if inflation is transitory they might well be sitting on a positive real interest rate. That buying pressure should put a limit on yields but that isn’t happening? Do we have supply chain disruptions in the bond market?

  17. Mendocino Coast says:

    A 50-basis point hike:
    I am wondering the same thing but moreover that it might backfire. To flood the economy with Free Money and MBS Buying on and on You see what happened, Disaster Yes. Now to pump it back “Fast” could that have also another Disaster? All over Again.
    Point being they are to late Perhaps? or way to late raising the rates (A good thing) but is it Far too late? So, what’s next a meltdown?
    Kind of Back-to-Back total misdirection Trump directing Pumping Powell up Inflation Biden Down Inflation. Who said The Fed is independent? I don’t see that

    • Depth Charge says:

      Have you ever tried to put toothpaste back into the tube? That’s what the FED is trying to do. It won’t work. The genie is out of the bottle. No piddly rate hikes are going to get out in front of this. We have years of pain coming.

  18. Brendan says:

    Government borrowing and spending are inflationary by nature. The Fed has simply been a more than willing, self-serving, opportunistic business partner to The Treasury for decades. Both parties have contributed substantially in their own overt and covert ways. You might even say the two parties conceived this inflation baby forty-odd years ago, and then, like a divorced couple, each has slowly done their part to turn it into the monster it has become on the weekends they’ve each had custody. Stop blaming this on “Sleepy Joe.” If you think this starts and ends with the President, let alone the one that’s had the seat for barely a year, you don’t understand how any of this works. Read a book.

    • Old School says:

      Yes and no. Japanese the king of government spending and not having an inflation problem. Europe too.

      It’s a heroin hit but growth slows because the government spending is poorly done so the debt is worse than nonproductive. Good debt gets a real return and turns a $1.00 into more than a dollar and causes economic growth. Poor debt spending causes the opposite.

  19. Kunal says:

    CPI is rigged. Everything in CPI is far from reality. Rent and housing cost is one such example. Prices are up, rents are up, Cost to maintain repair is up. Construction cost is up. Insurance is up. Lumber and material cost is up. Taxes are up. Cleaning, gardening services are up. Electricity and Gas prices are up. Appliances are up. And these are up between 25% to 100+%. There is no way on earth that rents and housing are only up by what CPI says. CPI is designed to fool and brainwash the middle class sheeps and steal from them to enrich the top 1%.

    And Fed by the way will do nothing except lip service. Fed and US Govt. works only for the rich and elites. They are in their pockets. Asset prices and stocks will keep rising folks and poor and middle class are scre wed. And it will only get worse over the years, more homelessness, falling quality of living, growing wealth gap. And in spite of all this, any kind of insurrection will be impossible due to the brainwashed sheeps and wokes and new advanced spying tools that FBI is now deploying. Even if it happens, and it will be squashed with violent force. So really no going back.

    • Flea says:

      Until underpaid military and police force rebel = they will because there being eaten by inflation also

    • jm says:

      The statement that “Fed and US Govt. works only for the rich and elites.” is simply false. The reality is much more complex. The Fed in particular is oriented towards keeping the wheels from falling off the financial system. Of course this benefits the rich and elites, but it also benefits the poor and middle class. In the Great Depression the poor and middle class suffered much more than the rich and elites.

      Although I, too, believe the Fed went way too far with QE, I see it as a sub-optimal choice made in a situation in which no one could know in advance the most optimal choice.

      • drifterprof says:

        I find your post amusing jm.

        I would change it in this way:

        “The Fed in particular is oriented towards keeping the wheels from falling off *their* financial system … it also benefits the poor and middle class *by sparing most from starving in the streets*.

        The standard of living has flat-lined in the last 40 years, while a graph of the number of billionaires or wealth held by the top 1% looks like its been Viagra dosed.

        • cb says:

          when you consider the debt incurred and the number of workers to maintain a household, and the number of homeless throughout the country, I contend the standard of living has fallen ………..

        • cb says:

          @ Drifterproof –

          Why assume that without the FED most poor and middleclass would be starving in the streets?

          sounds like FED propaganda …………..

          at a ridiculous level ………….

          I bet jm and the FED approve ………..

      • cb says:

        @ jm:

        how about the statement “The FED works primarily for the rich and elites”

        do you contend that also is false?

        you sound like a FED mouthpiece ………..

  20. Jackson Y says:

    The Fraud Reserve’s current monetary policy is a complete dereliction of duty. To this day they are STILL buying treasuries & MBS at a $60B/month pace. Later this month they will reduce to $30B/month, then end QE.

    With the current 40+ year high inflation readings, what they should be doing is calling an emergency meeting to immediately halt QE (Canada did that) and raise the FFR by 0.5%. Instead, they seem to do emergency meetings only when the stock market crashes – they don’t care about anything else.

    Simply trying to pray or jawbone inflation away won’t work. Even now, the full committee refuses to state firmly that every meeting will live for rate increases, or that “full employment” has been attained. They’re trying to move as slowly as Congress & political sentiment allows them to.

    • historicus says:

      We have 7.5% inflation with .05 Fed Funds rates. Never happened before, and all at the hand of the Fed who promotes inflation.

      *Mandate #1 The Fed is supposed to promote maximum employment yet what they do with rates has had the OPPOSITE EFFECT. The free money to promote inflation is borrowed by the federal government and paid out in a fashion that discourages employment. Fail.
      Mandate #2 The Fed is supposed to promote stable prices, yet they promote just the opposite, INFLATION, which is now running circa 7.5%. Fail
      Mandate #3 The Fed is supposed to promote moderate (not extreme) long term rates, but we have near record lows, 30yrs almost 3% below inflation. Those rates are IMMODERATE and EXTREMELY low. Fail.
      *What should be done with J Powell for breach of Fiduciary responsibility in his post as Fed Chairman?
      *What should be done when it becomes clear the Fed is answering to another voice than their mandates/agreements/instructions under which they are allowed to operate?
      *What should be done with Fed Governors front running Fed policy and likely tipping off others (hedge fund managers and friends

      • Old school says:

        It seems a little fishy that Powell hasn’t been voted through for his second term. He serves as chair til there is a vote. Might make a convenient fall guy for Senate to wash their hands of inflation.

  21. breamrod says:

    Bullard seemed panicked today in saying rates needed to be 100 basis points higher by June. They ( the Fed) knows they are way behind but will be dragged kicking and screaming by the market to adjust rates higher. Wall Street will holler and moan and say they are making a policy mistake and all the talking heads on CNBC( Cramer) will cream bloody murder that they are wrecking the economy. What a shit show this is!

    • Kunal says:

      Wishful thinking. Nothing will happen. Fed’s only mandate is to serve the rich and elites and expand their net worth by growing the asset and stock prices. And rampant inflation and money printing is a guaranteed tool to achieve this goal.

      • historicus says:

        In a system of “checks and balances” we curiously have no Check or Balance on the most powerful entity sans military.

        Senate Banking Committee…….they ask questions about racial makeup of the Fed and Climate change. That’s the extent of the oversight.

        • Old school says:

          The check on the Fed is stacking gold instead of treasuries whether you are Russia, Iran or Joe six pack

      • Flea says:

        They make money ,both ways figure it out

        • Depth Charge says:

          Q: How does a banker make money?

          A: Off the top, the bottom, both sides, and down the middle.

    • Depth Charge says:

      Not sure what the significance of “100 basis points by June” is. They should have been 100 basis points two Junes ago – 2020.

  22. GrassRanger says:

    So as a retiree, my income is ~50,000 counting my retirement annuity, social security, and a little rent from a mobile home lot. Last winter my wife and I received $2800 from Congresses Economic Impact payment. Seven percent of 50K is $3500. By my calculations and the evidence from my checkbook, I would have been a lot better off if Biden had kept the 2800 and we still had 1% inflation. Giving stimmies to everyone was over the top when a comparatively small number of citizens really needed help. It’s a perfect example of the government doing bad trying to do good.

    • Depth Charge says:

      They’re trying to buy the votes of idiots who can’t do math, and it works. It’s like the UBER business model – it preys upon a seemingly endless supply of stupid humans who failed math. P.T. Barnum was right – “there’s a sucker born every minute.”

      • Augustus Frost says:

        So was H.L. Mencken.

        If anyone hasn’t read his comments about the public, he was both brutal and 100% accurate.

    • Jake W says:

      they weren’t trying to do good. they knew what they were doing was bad, but didn’t care.

  23. DR DOOM says:

    Well I think if Powell responds by coming out of his lair and gives inflation his standard toothless gumming we are all F$&ked. Twice. Powell and Congress might as well have a joint press conference and just tell the average joe to kiss their collective royal asses.

    • historicus says:

      And now the DYSTOPIA….

      Lose in cash or bonds due to inflation
      Lose in stocks
      and likely lose in CRYPTOS as they now face competition for interest bearing items which they have never faced before.

      Monetary Policies are a lot like Physics….for every action, there is an equal and opposite REACTION….eventually. And here it comes……

      We will learn why STABLE PRICES is a good goal.
      And, why Moderate long term interest rates is good policy, preventing cheap long term debt creation which damages trailing generations by loading debt into their future.
      Many knew this, but apparently no one at the Fed did. And the candidates for vacancies don’t seem to know either.

      • Swamp Creature says:

        historicus

        During the depression 1929 to 1933 every investment lost. There was nowhere to run and nowhere to hide.

        • BuySome says:

          All depends upon what you classify as an investment. Then, new or servicably used Model A parts. They were very tradeable for necessities. Even into the 1970’s, plumbers were finding them still stashed under the houses where they had been hidden for forty some years as protection against that old storm in case it might not be played out. And some of those old folk got their plumbing bills reduced while a few antique autos were restored. Now, what’s the new operating current equivalent of a basic Ford four-banger?

      • Dazed And Confused says:

        30 year TIPS are a riskless investment that currently yields >0.1% above inflation so guaranteed not to lose in real (inflation-adjusted) terms.

        But they need to be held in a tax-free or tax-deferred retirement account.

    • Old school says:

      I like listening to Peter Schiff. I don’t buy his investment products. He has been saying Powell will not fight inflation, because if he does he will lose. Kind of an interesting thought.

      Obviously system can’t do old school inflation fighting by raising short term rates higher than inflation without bankrupting 25 – 50% of corporations and consumers

  24. historicus says:

    Last time inflation like this…….Fed Funds well over 10% (1982)
    Now, .05%…..and the great discussion is should they do a 1/4pt or a 1/2 pt?
    Gimme a break!

    • Wolf Richter says:

      They should do a 5 percentage point hike over the weekend, from 0% to 5.0% by Monday. And Unload $500 billion in securities per week. That would get the market’s attention. After that, the markets will pay attention to Powell’s jawboning maybe. That’s what should happen to mitigate the effects of the huge policy errors since March 2020.

      But that’s never going to happen.

      • Brendan says:

        I’ll see your 5% and $500 bil. Divide that by half and then double it!

      • Depth Charge says:

        They should have ended QE immediately at their last meeting, Wolf. To continue expanding their balance sheet was unconscionable – borderline criminal when you consider their mandate.

      • historicus says:

        BOJ says they will buy all needed to keep their 10 yr below .25

        “The announcement came after the 10-year JGB yield rose to 0.23% on Thursday, the highest since 2016 …..The announcement came after the 10-year JGB yield rose to 0.23% on Thursday, the highest since 2016 and close to the 0.25% cap the BOJ set around its target of 0%”
        Zero Hedge

        Is this something Powell will do at some point?

        • Wolf Richter says:

          historicus,

          Japan for now is in an entirely different situation.

          Inflation in Japan = 0.8%, not 7.5% as in the US. A JGB 10-year yield of .25% = in real terms -0.55%. In the US, the 10-year yield is now -5.5% in real terms.

          The BOJ has had this “yield curve control” in effect since 2016. Since 2016, it has offered to buy unlimited amounts to keep the 10-year yield around 0%.

          But they raised the upper limit of the 10-year yield from “about 0%” until recently, to now “0.25%.” That’s in effect a rate hike.

      • Depth Charge says:

        “They should do a 5 percentage point hike over the weekend, from 0% to 5.0% by Monday.”

        Haha, Wolf, I just noticed your numbers. Can you imagine the stock markets at that point? It’s fun to think about, but alas I expect the FED to uncork a piddly little 1/4 percent hike, then proceed to bullsh!t everybody with more jawboning about what they will do in the future. The FED overpromises and underdelivers every time when it comes to doing the right thing.

      • Today was all about the short end of the curve, and the Fed should be hoovering that stuff up, let the long end go. Raising Fed rates will create more inflation on main street, the cost of money. Govt needs to create jobs, relax immigration, and provide breaks to SB. (PPP redux?) They really need to manage the yield curve but the structural downside to deglobalization is a policy problem. Rather than corporate subsidies, they need business. Conservative columnist Novak told Bush 2, “build an economy for business, not liberal stock pickers..” Same thing applies.

      • Old School says:

        Even though a major rate hike of 5% might be justice, it ain’t gonna happen. Fed has got entire financial economy addicted to Zirp and they own it. They are going to have to ease out of this thing so slowly or they are going to blow up countries and pensions and banks and insurance companies and on and on. They are going to have let the market know what is coming because they opened the casino.

      • Swamp Creature says:

        By the time March 15th rolls around the stock market and bond markets might be in a complete free fall and J Powell will have to put off any rate hikes or risk throwing the economy into a recession/depression in an election year. Not likely, but anything can happen. Throw in a Russian invasion of Ukraine and $120/barrel and you’ve got what the Gipper once said about Carter’s economy

        “High Inflation, rising interest rates, seasoned with gas lines and an energy crisis, ”

        ” An economic stew that is turning the nations stomach”

        • Depth Charge says:

          Through its outrageously reckless policies, the FED has created a no-win situation for the country. It put the entire system on faulty ground, with no way out. If they don’t raise, inflation will lead to a currency collapse. If they raise, asset prices are going DOWN. They’re going to choose to protect the currency. So, BUH-BYE housing bubble!!

        • Dazed And Confused says:

          Russian stocks dropped less than US stocks today and have outperformed US stocks YTD.

          There are some theories that Putin has no intention of invading Ukraine but is simply posturing to spike energy prices worldwide to boost profits for Russia’s huge oil and gas companies, his oligarch buddies and himself.

          If that’s his plan, it seems to be working perfectly so far.

      • jm says:

        Be careful what you wish for.

        While that would collapse the asset bubble, and the bubble is certainly contributing to inflation by enabling people who own stocks to pay inflated prices for homes, cars, and what-not, much of this inflation is due to the supply chain jam-up, which is more due to the various hand-outs and the Covid-induced shift of a some fraction of spending from services to goods (alas, now almost all imported, thanks to China’s hyper-fraud mercantilism).

        That jam-up is in many ways like the rubber-necking jams that occur on crowded highways when there’s an accident. The jam persists for a long time after the accident is cleared from the road.

        It’s a very safe bet that right now there’s a lot of double- and triple-ordering going on in industrial purchasing, and the unwinding effect of redundant orders being cancelled when the supply jam-up clears is going to have interesting effects. We may very well go into a state of massive excess inventories, with price-cutting to clear them — especially if those inventories have to be financed at much higher interest rates.

    • stoneweapon says:

      The Fed has used interest rate hikes into economic weakness in the past, including at the onset of the Great Depression. We have also seen the Fed increase interest rates as high as 12.3% as they did during the inflationary crisis of 1974. These hikes crushed a lot of small and medium businesses.

      An increase of 50% in overall costs would crush a large number of households and make them desperate for aid, perhaps in the form of Universal Basic Income and ultimately a complete sea change over to some form of digital currency requiring full compliance with a bio-security control apparatus.

      Organize with like-minded people in your community. Trade must decentralize and localize to survive stagflation, and each community is going to need networks of producers and marketplaces to facilitate the shift. We can no longer rely on the supply chain and the global economy; as a culture we will have to relearn how to provide for ourselves and our loved ones.

      • Old School says:

        Anybody with financial assets should have known they were screwed when SP500 was paying 1.2% dividend and 10 year Treasury about the same and t-bills paying 0.1% while inflation was taking off.

        Heard US stock market cap is 70% of world stock market cap. If that is true, then better returns are found other places.

        • Dazed And Confused says:

          International stocks are outperforming US stocks so far this year
          And within international stocks, emerging markets are outperforming developed markets.

          This follows more than a decade of underperformance.

        • Dazed And Confused says:

          By most valuation metrics, US stocks are amongst the most overvalued in the world.

          But this seems to be mostly due to sector weighting – with US having the heaviest overweighting of overvalued tech companies.

          So e.g. US banks and drug companies are not more overvalued than their counterparts in Europe or Japan.

  25. Jackson Y says:

    We won’t raise rates until inflation is above 2%.

    We won’t raise rates until inflation is above 2% and is projected to stay there.

    We won’t raise rates until inflation is confirmed to be not transitory.

    We won’t raise rates until inflation expectations move up.

    Then there was the perfect storm of upcoming Federal Reserve vacancies/confirmation hearings, moderate Democrats screaming (and panicking about their midterm prospects), Republicans screaming, businesses screaming, consumers screaming, and the media blasting “40 YEAR HIGH” headlines… and the FOMC suddenly had an epiphany & realized they needed to pivot? 🤔 And yet here they are, still taking their sweet time with taper & promising to be “careful” as they begin the long-overdue tightening cycle…

    • historicus says:

      Jackson
      Pair that up with…
      “We will stop QE and normalize rates when unemployment dips below 6.5%” Ben Bernanke circa 2010

      Never ever happened.

    • Old School says:

      When you are pumping up Mississippi stock certificates you keep lying hoping somebody is going to find the promise land in the swamp before you get found out it is just a swamp.

  26. Putter says:

    Powell is the “Wizard of Oz” in panty hose!

  27. Anon says:

    Don’t worry guys, the most hawkish member of the fed says he’d like to see rates get to 1%… in 5 months.

    I feel like I am living in some sort of alternate universe.

    • Wolf Richter says:

      Anon,

      He didn’t say that. He said +100 basis points over the next three meetings: one 50-basis-point hike and two 25-basis-point hikes.

      • Old school says:

        Isn’t that kind of the same thing. Seems like a 1% raise on about five months.

        • Wolf Richter says:

          Read Anon’s statement again: “…he’d like to see rates get to 1%…” which is not a 100 basis point hike.

          Every 25 basis points counts here :-]

  28. DawnsEarlyLight says:

    We need a 50 basis point increase immediately! BLS stats are swamp stats.

  29. coboarts says:

    That’s funny… every time I read reckless, I think feckless

  30. Escierto says:

    The Plunge Protection Team failed miserably today in propping up the markets. They are going to hit the bars and plan for a big bounce tomorrow. They did manage a nice afternoon takedown of gold however. So all wasn’t lost for the manipulators.

    • Anthony A. says:

      The PPT will be on the scene tomorrow. You can plan on it. Cramer may be there too talking up stonks.

      • Swamp Creature says:

        Hank Paulson from the 2008 PPT is being drafted out of retirement and bird watching and is warming up the bullpin. Bernanake may be drafted as well to act as his sidekick.

    • Old School says:

      Gold still isn’t buying that rates are going to go very high. Miners making good money at $1800. Big miners got a PE of about 16. Risky, but if you think gold is going higher, never been a better time to own miners.

      • sunny129 says:

        Old School

        Mining costs are going up!
        GLD lost -1.52% and GDX lost -6.19% YTD!

        Money will bemade in being in ‘uncorrelated’ assets including (if one has guts) going against the mkts! Staying invested is ‘suicide’. Cashout to preserve the capital!

  31. Bruce Kebbekus says:

    The Bureau of Labor Statistics has said: 2021 Year CPI was 7%

    Today we are at 7.5% Jan to Jan.

    What January 2022 montly CPI is needed to make the 7.5 number?
    Was January CPI 13% annualized?

    Here is my math:
    11 mo x 7% = 77
    1 mo at X brings that 12 months to 90
    Solve for X

    X must be 13%

    Why in the world would the BLS say January was just .6%?

    • Wolf Richter says:

      Bruce,

      The CPI is an index that reached 281.15 in January. That value was up by 7.5% from January 2021, when the index value was 261.58.

      In December 2021, the index value was 278.8, which was up by 7.0% from the value in December 2020 of 260.47.

      I hope this clarified how the year-over-year 7.5% is calculated. Here is the chart of the index itself, not its year-over-year percentage change:

  32. Berlin-Guy says:

    It´s all transitory, folks.

    And Santa Claus does really exist.

  33. Abomb says:

    FOMO in the housing market is getting out of hand. In the last two months houses in my area have gone up about another $100/square feet. Holy cow. This is gonna make the last bubble look like a blip. I imagine this will just keep getting worse as rates go up and the last suckers file in.

    • Hal says:

      Yikes. You can BUY a house for $100/sqft in my area.

    • ivanislav says:

      It’s only a bubble if prices revert. Maybe they won’t and the currency just depreciates further. It’s a gamble and I think many people buying at these “crazy” prices are aware of that and simply placing a bet.

      It’s about time for the aliens to nuke our planet and start over again with a new variation on humanity.

      • Augustus Frost says:

        It’s a bubble because there is never something for nothing.

        Fake economy, an unprecedented asset mania, and per one of Wolf’s recent articles, even fake credit reporting where those who don’t pay their debts supposedly remain “prime” credit risks.

        The majority of Americans are destined to become poorer or a lot poorer over the indefinite future.

      • rick m says:

        As soon as the Vogons pinpoint the Earth as the source of Disco, they’ll dispatch the Destructor fleets as a Galactic public service. Game over, dude.
        got your towel?

    • David Hall says:

      30 yr fixed mortgage rates are 4% today. People have put some homes up for sale in my town. Unsold inventory has risen over the past three weeks in my area. The trend line is still near a low and erratic.

      Oil fracking activity is surging in the Vaca Muerta of Argentina due to a spike in oil prices.

      • Abomb says:

        Inventory has gotten even tighter here. My realtor said our metro is at 0.6 months supply.

        It sure looks tighter to me than it did 2 months ago.

        One way or another things have to hit a wall but I look at Canada and wonder how it got so out of wack there. Fuck it.

  34. Kunal says:

    Forget about prices reverting, inflation is accelerating here in SF Bay Area. Tiny 1500 sq ft old ranch homes here are being overbid by 50+% even at asking prices of 3M. GC, Cleaners, Plumbers, Electricians, are 2x more expensive and so is the material cost. Restaurant menu prices are exploding. Gas is above $5 already. There is no end in sight.

    I just feel bad for the bottom 95% living here and that their quality of living will further decline till it matches 3rd world country. They have grim future. And there will be even more homeless on the streets as if there aren’t plenty already. Thanks to Fed for once in a lifetime grand theft from the ordinary US citizens.

    • historicus says:

      Workers/earners/savers INTENTIONALLY harmed by Fed policy.

      “When central planners make decisions, they intentionally assist one group at the expense of another.” F A Hayek

      For 12 years…. and since the mess they created in 2008, the perpetrators of that train wreck are the big winners (except Lehman), the prudent and self sufficient intentionally punished.

      • ivanislav says:

        The markets weren’t going to save themselves. Just you wait for the wealth to trickle down, you won’t be complaining then!

    • Old school says:

      Unless someone is starving or cold or can’t get medical attention there is no reason to feel sorry for a poor person.

      My friend grew up very, very poor but her Father knew how to enjoy life and always took the kids camping and fishing. She has a lot of happy memories and learned how to be frugal. Money is over rated for happiness otherwise so many upper class people wouldn’t be doing drugs and other stupid stuff.

      • Pea Sea says:

        You’re absolutely right, money is overrated. Please give me as much of yours as is possible without causing you to starve or be homeless. We can exchange ACH numbers, etc., through Wolf if he doesn’t mind.

  35. breamrod says:

    California is in a league of its own. you have to wonder “as California goes so goes the rest of the country”. God help us!

    • Wolf Richter says:

      Well, the data just came out: San Francisco is the city of the cities in the inflation basket with the lowest inflation rate in the US. New York City is second lowest. Sunbelt cities have the highest inflation rates, some over 9%.

      • Hal says:

        Sounds good. But, I wouldn’t move to SF if the sweet Lord Jesus came down and asked me himself.

        I don’t know how you can tolerate living there. But, glad you’re happy, and appreciate what you do.

        • Wolf Richter says:

          I wouldn’t move out of SF if the sweet Lord Jesus came down and asked me himself.

          And I have lived in lots of places. I have spent about half my life in Texas and Oklahoma, back and forth.

        • Swamp Creature says:

          Hal

          SF and Washington DC are the two most beautiful cities in the USA. I’ve been in nearly every city in the USA. at one time in my life. Even Nikta Kruschiev said he thought SF was the most civilized place he ever visited.

        • Wolf Richter says:

          I can attest to DC’s beauty. We used to live in Rosslyn, just across the Potomac from Georgetown. DC is a gorgeous place, as it should be. And lots of things to do.

        • historicus says:

          My wife and I choose, used to choose, cities to visit and walk…extensively. (some no longer safe)
          SF is one of the most, was, beautiful cities in the world. The topography and history is remarkable.
          Can not speak to it now… last visit 15 years ago…
          Walked all over….Embarcadero to Coit Tower to Lombard to Golden Gate….Buena Vista, Presidio, and elsewhere….
          Bullet one of my favorite movies.

  36. Minutes says:

    50 bps intra meeting. Another 25 in March. Write it down.

    • ivanislav says:

      I’ll take the under. So far just talk. QE IS STILL GOING!

    • historicus says:

      so rates will be 6.75 below inflation….
      in 1982, when the Fed answered their duties and calls, Fed Funds over 10% with this inflation….what changed and why?

      The talking heads on cable and the Fedspeak……one giant misdirection play.

  37. Berlin-Guy says:

    Takin´ a look over the Atlantic
    Wallstreet´s dog Jay Pee frowning
    Middle class income drowning
    I believe, all has gone frantic

    Transitory was his mantra
    Giving big money a big hug
    While sipping small people´s mug
    To leave El Erian as Cassandra

    Madame Lagarde on her throne
    Keeps buying as if there´s no tomorrow
    Still giving fuel for more to borrow
    quite quiet starting to shift the tone

    And as smart money is pulling out
    They keep stupid money at the grip
    And whisper “Buy the, buy the dip”
    Giving them a costly kick into the final rout

    Berlin, Germany

  38. Yossi says:

    I don’t see how this ends without a recession over the next 1-4 years with Biden losing the elections.

    In about a year from now, when the Repo account is close to empty, the markets will start tanking for real. Before that, I guess that we will get the prequel.

    I am buying all the stuff we need for the next 3-5 years, as everything goes up 10-30 percent per year now in my country. House prices went up by 10%, rents by 10%-20%. The reported inflation is 3%. My salary went up by 20%, I could get 10-15% more if I go to a different company.

    I live in Israel, stuff are crazy worldwide now.

  39. “It’s all the FED’s fault.”

    Well, that explains everything.

  40. Depth Charge says:

    A collapse in asset prices is forthcoming.

    “This sucker could go down.”

    ~Shrub II

    • VintageVNvet says:

      Don’t think it’s a question of IF this sucker goes down DC…
      After watching markets go up and down since 1950s, especially RE mkt since mid eighties when I realized how little control of stocks owned I actually had, basically none, the real question is WHEN and HOW FAR down each of the asset classes will go.
      I guesstimated, way too early apparently, S&P to 15-1800 and Dow mid teens BEFORE all the stimulus completely distorted the situation.
      Going to be an interesting ride, that’s far shore!!!

  41. All good data but interest rates are definitely going to start next month.

    What will inflation look like in a year?

  42. sunny129 says:

    Mkts have already tanking today after the inflation data and at the same time Bullard’s demand for 50 basis hike. There may be intermeeting rate increase as early as tomorrow or Monday AM!

    Mkts are being manipulated by ‘whispers’ and jawboning by FOMC members. Yeaterday am there was JPM’s whisper claiming that inflation rate will be less than expected and the Mkts took off! It gave ALL back plus some today!

    PPT cannot do anything against inflation or the supply chain squeeze. Staying invested and or adding more $ is just suicide but DIP buyers will jump any way. B/w 60% of loss in S&P 500 will still be ABOVE fair value level, by historical record!

  43. Mendocino Coast says:

    The Weather in San Francisco is great but to pay the huge amounts at a Motel or Hotels sucks
    The Cost of living is Crazy Hi
    Compared toother big cities in the USA I still like it!
    I grew up in the bay area and loved it but left to find what it used to be. New Zealand and Italy is so much better you can’t even compare.
    If they don’t restrict out of the Country Buyers in the USA like they do in New Zealand that well be sad.
    They may as well change the Name to China

  44. Dazed And Confused says:

    Bankrate:

    “For today, Thursday, February 10, 2022, the average rate for the benchmark 30-year fixed mortgage is 3.98%”

    D’oh! – was expecting to see 4+% after today’s CPI number – very disappointed.

    • ru82 says:

      I was watching the local news and it said the 30 year is back to the rate right before the pandemic.

      And people are freaking out. 4% is still a great rate.

  45. Jay says:

    2.03% on the US 10 year and 2.33% on the 30 year US bond yields. This is total crap. It should minimum back to 2000 year levels of 6.25% to 6.75%. Inflation reported by them was also lower at that time but who knows what they were spinning back then.

  46. nuke100 says:

    Wall Street cabal runs the show

  47. ru82 says:

    Bonds have not been looking good lately. But never fear. Central Banks to the rescue.

    ———————————————-

    With most bond traders in Tokyo already well on their way home to start a long weekend, the central bank offered to buy an unlimited amount of bonds at a fixed rate, pushing back against weeks of trader speculation about policy normalization.

    The central bank will buy 10-year bonds at 0.25% on Feb. 14, according to a statement on its website that sparked a weakening of the yen. This is the first such operation since July 2018 as yields creep closer to the limit of tolerated levels under the BOJ’s yield curve control framework.

    Benchmark 10-year yields in Japan rose to 0.225% on Thursday before the operation was announced. That was approaching the BOJ’s ceiling of around 0.25% with a three-day weekend ahead and the possibility of another hot inflation figure out of the U.S. that could fuel the global yield surge.

    With the operation the BOJ is now setting 0.25% as a clearer line in the sand for market participants and doubling down on its commitment to continue with its stimulus program for now.

    —————————————————————–

    So that make me wonder. Can the FED raise interest rates to cool down the consumer but then buy the long term U.S. treasuries at a low rate to keep the government debt in check? Maybe the FED should hire me.

  48. James says:

    Wolf, you wrote early in your article today …..”Not sure what the significance of “100 basis points by June is.”

    “Check the bond market reaction-despite QE. Article forthcoming.”

    Are your referring to the 10 yr going over 2% and the stock market tanking?

    I know you are going to do an article on this….but, I’ve got “skin in the game.” & I’d really like to get a glimpse of what the significance was today, let’s say “sooner rather than later.” Could you elaborate on that?
    Thanks Wolf.

  49. carbpow says:

    The Fed has strayed so far away from their initial purpose as to be criminal. The NY Fed in particular is seriously corrupt. The Fed, which is of course owned by the banksters, knows about the fact that there are more unregulated derivative contracts out there than the GDP of the planet earth. The counter party risk to the banksters, thus the financial stability of the planet must figure largely into every move the Fed makes. The Fed will do what is best to preserve or delay the failure of the banks that own the Fed. Every other concern comes in a very distant 2nd.

  50. RT says:

    Have you seen the website called Shadow Government Statistics? I am not sure how accurate that website is. But it provides an alternative calculation of the CPI based on the methods in the 1990. Based on their calculation, the CPI should be at 15.6%. Which I think sounds about right from what we can gather in the stores in the recent months. Just like to see what you all think about their estimate and stat?

    • Swamp Creature says:

      RT

      I agree. Inflation is more like 13% or 14% for the average person. The government statistics are bogus, designed to keep retirees and pension holders from getting the COLA’s that they should get. A big item, rents are lagging so much that they completely distort the true cost of living. David Stockman, not one of Wolf’s favorites agrees. He has the figure at 13.8%. With this inflation most people are getting robbed right before their eyes and don’t even know it, although some are starting to.

  51. Julian says:

    This latest spike is just due to the Omicron variant causing havoc – it is already passing quickly into the rear-view mirror.

    Inflation is set to fall throughout 2022 and will be a lot lower this time next year – mark my words.

    The palaver about inflation is incredible to watch. It’s a short-term issue soon to be resolved.

    Not sure why anyone is getting excited about it tbh!

    • Wolf Richter says:

      Julian,

      Folks said that very same thing a year ago when I started raising a ruckus about inflation. Inflation would be back at 2% by the end of 2021, they said. Funny, some things never change.

      But surely, the CPI YoY percentage will fluctuate, going up and down quite sharply, as you can see in the charts above, when it did that even back in the late 1970s and early 1980s. And so eventually you’ll get a few months of claiming, “I told you so, see inflation is going down,” and you’ll get to relish in it, before the next spike in CPI will pull the rug out from under you. That’s how CPI works.

      And I have news for you: It’s SERVICES that are now spiking – as I pointed out in the article, including chart. Nothing to do with Covid or supply chains or factories in China.

      • Nathan Dumbrowski says:

        The prices that keep going up are not going to go down. Period. Do you expect Amazon, Disney or Netflix to reduce their monthly/annual costs after recent increases? Can you foresee Chipotle, Starbucks or any other big chain food outlet to roll back price increases? The same can be said about any raises that were awarded. These and many many more are here to stay

      • Dazed And Confused says:

        Wolf wrote:

        “And I have news for you: It’s SERVICES that are now spiking – as I pointed out in the article, including chart. Nothing to do with Covid or supply chains or factories in China.”

        Services in CPI include things like rental cars and primary residence rents that are very much impacted by the (new) supply of available rental units (cars and dwellings respectively) and this supply has very much been impacted by supply chain disruptions for chips, lumber, windows, appliances etc.

        • Wolf Richter says:

          Dazed And Confused,

          Nonsense. Rental cars weigh only 0.15% in the total CPI index. And thereby have almost no impact on overall CPI. People who drag that out don’t understand how the weighing works.

          Housing factors (the shelter components) = 33% in overall CPI, including lodging away from home, which weighs 7 times as much as rental cars in the overall CPI, and prices shot up 20.5%. There is no shortage of hotels and motels and other lodging. There is no shortage of rental homes and apartments either. There are millions on the market for rent right now. But rents are soaring anyway.

          Other expenses for services to run the home – and there are zero supply issues:
          Energy utility services for the home weigh 3.3% in overall CPI, and jumped by 13.6%.
          Water, sewer and trash collection weighs 1.1% in the overall CPI and prices jumped by 4.0%.

          Medical care services, which weigh 7.0% in overall CPI. Prices +2.7%.

          Transportation services weighs 5.6% in CPI, and prices jumped by 5.6%… the biggest component in that is auto insurance, prices +4.1%. Zero supply issues.

          Recreation services weigh 3.2% in CPI, and prices jumped by 5.0%. The biggest component in that is video and audio services. Zero supply issues.

          And on and on.

  52. CreditGB says:

    A year’s internship should be required for every Fed member before being allow at the Fed.

    Each candidate and family should be given a subsistence “wage” to live upon for at least a year. No outside help or donations allowed. Buy food, healthcare, transportation and housing on about $40,000 per year gross. And provide a prorata portion of income for retirement.

    At the end of the year, they would be required to report their experiences, a full financial income statement, and a statement of expenditures. A final requirement would be to fully explain how anyone in that situation can survive in the US under the Fed’s financial controls.

    If they fail to spend wisely, or deplete their provided assets in that year, they are disqualified.

  53. uuid says:

    About 30 years ago, when I was missing school, I bought cheese cookies for 25 cents. Those cookies now cost 9 times as much.

  54. Swamp Creature says:

    Was in my local supermarket today. King crab legs were selling for $49/lb. Wow! That’s some serious inflation.

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