What’s the Real Inflation Rate, Will the Housing Market Ever Slow Down, and How Long Will the Dollar Remain the Dominant Reserve Currency?

Wolf Richter on This Week in Money by Howestreet.com, recorded April 7, 2022.

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  159 comments for “What’s the Real Inflation Rate, Will the Housing Market Ever Slow Down, and How Long Will the Dollar Remain the Dominant Reserve Currency?

  1. gorbachev says:

    Reserve currency is so much about trust and the
    ability to defend it. The euro is trustworthy but
    they could not defend it. You could go through the list of
    currencies, and easily figure it out. In a pinch, I would want my
    money in the U.S. buck.
    As far as housing goes If cd rates increase to about 5%
    housing will suffer.That is the number that beats rental
    housing returns.

    • Anthony says:

      gorbachev

      Trust??? the USA has just blocked Russia’s ability to spend its dollar reserves. The rest of the world is saying….sod the USA and its money, lets try and find something safer…

      • Old Ghost says:

        Yeah, I don’t think the future is all that bright for the US$ as a reserve currency. Trust is fading. Other countries look at Venezuela and Russia, and are going to be asking themselves if they are next.

        But I would take the US$ any day over the Canadian. I live not too far from the border, and if I were a Canadian traveling here, I would change my money in Canada (or use a credit card here). If you have an account with a local bank, you can exchange money at something close to the official rate (less the fees, fees, fees). Otherwise you might be lucky to find a store that will buy small amounts at 40¢ on the Canadian dollar (they do turn around and sell to the locals at 60¢ on the dollar).

        Regarding inflation. I don’t pay attention to the local Real Estate market —- though local rental housing is tight to almost non-existant. The rent increased over the last two years from $850 to $885 a month for 2 bedrooms.

        Some prices are dropping. Gas at the pump has fallen from over $4 a month or so back, to where I only paid $3.55 today. I pump a half tank every 3 weeks.

        Grocery store prices have really jumped in the last month. A loaf of whole wheat bread went from $1.15 to $1.45 and a can of mushrooms from 38¢ to 85¢. Fresh fruits and veggies have only seen small increases. Cheap cuts of beef went up sharply last year, and then stablized.

        Two years back a lot of people were jumping on planes and casually flying to warmer climes like Florida and Texas. Now they travel by car. A number of “snow birds” maintain two or more year around residences, and have a “cabin” on a lake somewhere.

        It is too early in the season to know how the tourist and hospitality biz is going to be. A lot of retail stores closed last year. But coffee shops (of all things) are going up all over. Also some out of state fast food places have come to town.

        Most of the advertising I see on TV is from lawyers and insurance salespeople. Anyone seeking part time employment has their choice of jobs to pick from.

        • roddy6667 says:

          “The rent increased over the last two years from $850 to $885 a month for 2 bedrooms.” That’s a $35 increase over 2 years. About 4%, or 2% a ytear. Nothing to complain about.

        • harvey lin says:

          For those “lesser” countries that are less developed, their trust in the US dollar isn’t so much in our financial system, it’s because Uncle Sam have 10 really big boats roaming around the world.

        • Thomas says:

          The large jump in the can of mushrooms is because the can is more expensive, not the mushrooms

      • RH says:

        If you are a dictator, Anthony, you may be right. For everyone else, the USD is safer, e.g., in France the election is between the ultra rich banksters’ boy (who only cares for his masters’ interests) and Mussolini Jr. in a wig. It makes the Euro appear unsafe.

        • doug says:

          If they US ‘decides’ you are a dictator, despite being elected. You don’t have to be one. And that is the undoing…
          I agree with Anthony.

        • RH says:

          Sure, Putain got elected. All of his opponents just “coincidentally” died from Polonium tea poisoning, four shots in the back in front of the Kremlin, etc., presumably for the sin of being more popular than Putain. Also, all critics, journalists, and other entities checking into how his “elections” were run were murdered or jailed or forced out of Russia, Doug.

          The “Federal” Reserve should be investigated and dissolved into the government, so the government actually owns it for real, but the USD faces few threats as of now, because the alternatives are much worse. Even Bitcoin or Etherium would be better than the Remimbi or the Rubble… I mean Ruble.

      • LL says:

        USA does not hold Russian reserves. Europe and other countries helped. What do you want to hold? Other countries are even less reliable. Let’s not forget that sovereign nation has been attacked, all international laws were broken. You do not play by the rules you suffer consequences. It is not so different in our daily lives. Biden talked to Putin many times, Macron flu there so often that it was ridiculous. You write about Putin like he were a truckdriver in Canada whose bank account was frozen.

    • Duke says:

      Reserve currency could flip to BTC. What else is there other than oil producers, China, etc. Wouldn’t you trust autonomous BTC network with nobody in control vs a dictatorship or the FED?

      Watch Peter Thiel Bitcoin 2022 conference keynote for this perspective.
      Also, 5% 30y mortgage will impact some buyers. But if investors around the world are looking for safe havens against inflation, plunking down cash for RE doesn’t care about mortgage rates.

      • Hal says:

        Rat poison.

      • Tom Bond says:

        The reason for the demise of the dollar and euro is the their negative real interest rate. This is why the Saudis started selling for yuan – it’s a no brainier, yuan’s real interest is +3%, dollar’s -10%, that is, the yuan gives you 3% profit, the dollar takes away from you 10% as loss.

        BTC will never be a reserve currency, it’s not even possible to meaningfully define interest rate for it. It’s got obvious usability and security problems – slow, expensive transactions, miners can be taken off the internet quite easily, exchanges hacked, etc. Even if we ignore all that, we are left with large whales and miners who can manipulate its value to no end.

        • LK says:

          “You just don’t understand crypto.”

          “Someone will solve that problem with technology.”

          “Better trustless models than trusting the Fed.”

          Take your pick. Cryptovangelists are as saavy as any marketer eith their talking points.

        • Augustus Frost says:

          For BTC to become (global) reserve currency, it would have to be a real functioning currency first which it isn’t, no matter what its proponents claim.

          It has no scale as a payment method, its price fluctuates drastically, and it’s not required for debt payments or taxes which is where a lot of currency demand originates.

          It has first mover advantage with name recognition but nothing more. That’s marketing. Anyone can create any number of cryptos at any time and the potential supply is infinite.

      • roddy6667 says:

        The cryptos are not safe. Every week an exchange gets robbed of many billions. Also, the price is too volatile for trade.

      • Depth Charge says:

        “Reserve currency could flip to BTC. What else is there other than oil producers, China, etc. Wouldn’t you trust autonomous BTC network with nobody in control vs a dictatorship or the FED?”

        No.

        “Watch Peter Thiel Bitcoin 2022 conference keynote for this perspective.”

        No.

      • SoCalBeachDude says:

        ALL CRAPTOCURRENCIES ARE BACKED BY NOTHING AND ARE TOTALLY WORTHLESS AND WILL ALWAYS BE WORTHLESS.

      • Wolf Richter says:

        Duke,

        “Reserve currency could flip to BTC.”

        Hahahahahaha, what kind of pump-and-dump BS for the braindead is this? I mean, what kind of idiot is going to believe this BS?

        BTC is a gambling token that consumes a huge amount of energy and has plunged by 36% since November and by 28% year-over-year, against the hated fiat dollar. Talking about collapse.

        I understand you’re hurting because your BTC has collapsed 36%, but hey, that’s what you get for gambling. Make big money, lose big money.

        Add to that collapse the 8% or so of inflation, and you see how the purchasing power of BTC was totally crushed over the past year.

        I cannot understand why people still spout off this BS. If you bet on BTC to gamble on some kind of gain, sure, fine, but don’t call it a “currency,” and don’t spread pump-and-dump BS about BTC ever becoming a reserve currency. This is the most benighted thing out there. How stupid do you think people are to believe this?

        • Depth Charge says:

          Thank you.

        • Anthony A. says:

          Ditto.

        • Harvey Mushman says:

          Lol!
          That’s why I scroll down the comments until I see the bold outlined box.

        • ram says:

          Exactly!

        • Pea Sea says:

          A whole lot of people believe it. They’re tragically wrong, but that doesn’t make the belief not genuine.

        • Anthony says:

          To me Bitcoin is a clear example of the transfer of wealth from the poor to the rich. The more money that is printed the more bitcoin goes up (with the US stock market, of course) It will be interesting to see if the Fed actually carries on cutting and what happens to bitcoin. We will see…

        • Brian says:

          I love how you cherry pick the data on bitcoin yet don’t acknowledge that the US dollar has and can only do one thing, go down in value. Sure it hasn’t been a great year for bitcoin but the last 10 years have been amazing while the last 100 years for fiat have been abysmal.

      • AK says:

        While number of Bitcoins is limited by the protocol, Bitcoin is not unique among cryptocurrencies – there is Etherium, there are other ones, and there is a ever-present possibility that new ones will get introduced, and that they will have technical superiority over Bitcoin (fast calculations with less energy, better security, etc). So IMHO Bitcoin faced very uncertain long-term future, due to competitive threat from other cryptos that are yet to come.

        • Crunchy says:

          Your point is well taken, but a tiny bit behind the times…

          Cryptos yet to come?
          Possibility that new ones will get introduced?

          Try any of the 10,000 or so cryptos that have already come into existence!

        • AK says:

          Bitcoin and all other existing cryptos are reflection of the current state of computing technology (semiconductor technology, cryptography, networking etc.). Should computing technology experience another “quantum leap”, this quantum leap may very well make Bitcoin and its fellow modern cryptos technologically inferior or even obsolete. In other words, cryptos have a risk that fiat and other types of money don’t have – a possibility of technological disruption.

      • naive98 says:

        Hmmmmm . BTC rather than the US $? madness… the dollar might lose 5-10% over a couple of years …. BTC loses 30-50& in under a year. and peo[le say its a store of value…

      • Billybob says:

        BTC?!?

        :-)))))))))))))))

  2. Beardawg says:

    Nice summary of hot topics Wolf !!

    I agree with your closing comments RE gas prices will not be a catalyst to a recession. At this point, there are too many positive aspects of growth in the economy that a recession does not appear likely this year.

    • Jake W says:

      what positive aspects would that be?

      • Beardawg says:

        Low unemployment, strong consumer spending (despite inflation), strong GDP.

        • AD says:

          I live in Panama City Beach, FL. Tourism has not slowed down at all even with Ukraine war, inflation, etc.

          From what I can tell also when shopping at Walmart on Front Beach Road, there is no let up in buying snorkel gear, fishing rods, inflatable kayaks, etc. And Publix parking lot is packed with out of state cars.

          Most of our tourists come from Atlanta, Nashville, Indianapolis, Columbus, Louisville, and Chicago.

          It’s a day drive from Chicago to here, and most drive down, whereas it would be at least an additional 10 hours drive if they went to Miami.

        • Jake W says:

          and how much of the strong consumer spending is coming from the “wealth effect,” in other words, upper middle class people feeling emboldened by their paper stock portfolio?

          how much of the employment is based on the asset mania?

          how much of the “strong” gdp is based on inflation?

        • VintageVNvet says:

          What AD is referring to in PCB is part of what is fondly known by many folks as the ”Redneck Riviera” …
          That term is for the general area from east of Biloxi all the way to Carrabelle with maybe a bit more each direction.
          It WAS one of the last areas where there were still some wide open spaces, including very beautiful and frequently completely deserted beaches, etc., for many decades after the beaches of south parts of both coasts of FL were almost completely blocked off by high rises, etc.
          Since ”developers” have pretty much owned the FL GUV MINT for many years now, we can expect to see the Redneck Riviera become one more over priced and likely over polluted area too, if not already…
          CA has done a much much better job of protecting the coastal areas, though there too, the Coastal Commission is under constant threats, etc.

        • Old School says:

          In my opinion economy has been weak since GFC as it has been fueled by debt expansion at negative real short term rates and blowing out of asset price wealth affect. Now we have the one two punch of Pandemic and supply chain screw ups.

        • Michael says:

          Which always precedes a recession. Spending is distorted by inflation. If the consumer is so good why is The Michigan consumer sentiment index plunging?

      • Augustus Frost says:

        Everything he mentioned is a lagging indicator, whether the US economy enters a technical recession this year or not.

    • Anthony says:

      Beardawg

      Recessions never seem likely, that’s the problem….

  3. Flea says:

    High gas food natural gas cars . Sarcasm

  4. phleep says:

    Wolf points out “high-income households” not badly impacted, and the “low-income households” that are getting crushed.

    My profile is slightly different. It is nice to have the assets in place to be inflation resistant. I am not high-income (I’m literally in Wolf’s “lower half of income”) but I have the strategic assets (house and car) on a good balance sheet. It makes all the difference. Like a “high-income household,” I am not experiencing high inflation impact. My savings and investment portfolios are holding up well.

    • phleep says:

      Another key is being able to reduce consumption and outlays. Not being on a treadmill of stupid demand is incredible freedom and lightness.

    • Fromks says:

      phleep,
      How old are you? Less than half of Millenials (largest generation) have houses, and are getting crushed by rents before we can even build an investment portfolio. If you own your house, then you are likely in the upper half of wealth.

      • Lisa says:

        You only own a house if it’s all paid off

        • Will V says:

          You never “own” the house, since in most middle class areas you will always owe 1%-1.5% in taxes per year on such said “home” as well for many a “condo” or townhouse owner there are also HOA fees. As said here before, “you will own nothing and like it.” Haha.

        • SoCalBeachDude says:

          Until that stage anyone with a mortgage is a HOMEOWER.

        • notdeadyet says:

          This past year, Lisa… I have watched these “non-homeowners” you speak of, sell their homes for 3 or 4 times what they paid for them, pay off the mortgage at the closing table and walk away with hundreds of thousands of dollars… Not bad for a non-owner I would say.

        • Gooberville Smack says:

          You can always spot a renter when they bring up how you can never own a home because of taxes. They don’t seem bothered by never ‘owning’ a car because you have to pay registration. The tax argument has got to be even dumber than the bitcoin argument.

        • RedRaider says:

          Home ownership…

          A mortgage is the difference between ownership and control. The house flippers are depending on control to make money. When your mortgage is paid off you become an owner. Ownership isn’t all it’s cracked up to be.

          In the words of John D. Rockefeller, “My goal in life is to own nothing but control everything”. To me that’s the meaning of “you’ll own nothing and be happy”. They’ll be the controllers and we’ll be the controllees. At least that’s their game plan.

      • Augustus Frost says:

        Median net worth according to FRED was about $121K in 2019.

        It varies by location and household size and is somewhat more now, but I mostly wouldn’t call that middle class anymore.

    • John H. says:

      Phleep-

      I appreciate your point about difficulty of pigeon-holing “high income” v. “Low income.” I wonder if a more useful demarcation might be :

      “Saver” vs “Non-saver”.

      Savers, at any income level, figure out how to keep part of what they earn.

      NON-savers, at any income level, spends more than they earn, and eventually wind up with no assets, probably in debt, or possibly in bankruptcy.

      High Income vs Low Income is not that useful, IMHO.

      That said, I totally agree with the opinion that the inflation is disproportionately harmful to lower income folks.

    • Tobias says:

      Wolf brings up a very important point that no one else mentioned. Here’s examples which illustrate his point:

      Wealthy people can go to Costco and drop five hundred bidenflation bucks on relatively inexpensive food which will, even at Costco, cost X% more in a few months. That adds of to a return on the money they spent stocking up.

      Poor people are limited to buying a few expensive now and even more expensive items at 7-11 or a bodega market.

    • Swamp Creature says:

      I’m not materially affected by inflation except with regard to my savings and investments, which have gotten hit hard. I got my quarterly statement from my BNY Mellon short term Treasury Money Market Fund. Even with the fund managers picking up most of the management fees my total return was 1 basis point. I got $1.56 for 3 months investment return on over 50K invested. I won’t be able to even afford a small cup of Duncan Donuts Coffee which is now over $2 with the money I made in a 3 month period. Bring back Paul Volcker and 18% interest rates. I’ll take that any day.

  5. phleep says:

    Maybe the momentum of a hot-running economy holds up. But people living a flashy consumer life without sound financial setups are, in my view, very exposed now. Things could shift in a compressed time. My long game has been working very well given my modest means.

    • unamused says:

      Live below your means, stay out of debt, and Bob’s your uncle.

      That’s a lot easier if costs aren’t rising faster than income. It’s impossible if you’re trying to support a family in NYC on minimum wage jobs, and it’s why teachers in SF have such long commutes.

      It all falls apart when debt becomes unserviceable. The distortions causing the GFC were never actually resolved, but merely papered over with debt to give the appearance of normalcy. The sum of government, business, and household debt is increasing faster than GDP, and the exploitation and degradation of ecological resources is fast approaching absolute limits.

      Only the rich can save you now, and they don’t want to. Give it a couple of years. We’re almost there.

      Tick tick tick tick tick . . .

    • Augustus Frost says:

      The US economy is fake, entirely dependent for any “growth” upon incremental government deficit spending and the asset mania from the loosest credit conditions ever.

      Even with the asset mania in place in March 2020, the economy was mediocre measured by “growth”. The belief that shutting down much of the economy at the time miraculously later leads to self-sustaining prosperity now is utterly ridiculous.

      Rising interest rates alone aren’t enough to cause a recession. It’s credit availability. Tightening monetary policy alone doesn’t mean that credit isn’t available or has to decrease, though the two are correlated. In theory, as long as creditors continue to extend credit to most of the current actually zombie borrowers (most of them), this fake economy can continue.

      • AK says:

        Just want to point out that US government’s ability to run budget and trade deficits is dependent to large degree on the USD being reserve currency of the world. Given the current geopolitical situation (European war, tensions with China, antagonism to US throughout Islamic world) it is highly questionable if USD will be able to retain its reserve currency status for longer than a decade. IMHO geopolitics are now the biggest factor that will be impacting US economic situation, bigger than monetary policy or fiscal policy, and geopolitics dont look good at all for USD and US.

        • Augustus Frost says:

          I agree.

          British imperial era last roughly a century (1815-1914) with a transition between WWI and WWII.

          US era has lasted since 1945 and I doubt it lasts more than century (to 2045) with that being a stretch. Fundamentals supporting US unipolar status have and are deteriorating badly.

          In 2008 when the DXY fell to 70, was bullish on it. Now at 100, a lot less so.

          It’s getting a lot closer to the time to find a long-term alternative to bail out of the USD because when the FX rate dives for good, US living standards are going to take a big hit.

        • elysianfield says:

          “it is highly questionable if USD will be able to retain its reserve currency status for longer than a decade.”

          Decade?

          With the House of Saud accepting other-than-dollar payments for oil, give it less than a year.

        • SoCalBeachDude says:

          The US Dollar has no challengers whatsoever and will remain the reserve and most used currency in the world for the foreseeable future. Obviously.

        • sunny129 says:

          AK

          Which fiat currency is ready to replace US$ in the near future? NONE!
          They may talk of bartering between corresponding/willing nations with their own. Remember Yuan is still pegged to US$ and so are many south American Nations!

          Rubles place is up b/c stupidity of the West but it cannot replace US$. Resource Nations (commodity producing) may have upper hand right now with inflation raging.

          Within a year, inflation will be replaced by dis-inflation b/c of demand destruction and the recession. Inventory is being slowly built up but consumers (bottom 80%) cannot afford, even with modest rise in wage growth. Their cost of living will go up with reduction in the standard of living.

          Of course there will be no reduction in the standard of living for the upper 10-20% of the society. Time frame between inflation into dis-inflation is hard to determine. Major factors will be, demand destruction, de-globalization and the North will have to pay more for resource rich South.

        • AK says:

          I suspect that inflation will not vanish as quickly as you seem to think. Also there is a lost of trust in USD as reserve currency due to it being used as economic weapon by US government. This may not be obvious for US residents but it is quite obvious to folks in other countries (BRICs etc.) So IMHO there is a strong desire to use something else to settle international trade, at least the trade outside western countries. So I am waiting for some proposals from BRICS or other countries on this matter. Because there is no such proposals right now doesn’t mean there is no alternative to USD; it means they (BRICs and other countries) haven’t figured it out yet. But I think they will, and perhaps as soon as this year. Where there is a will there is a way.

      • Depth Charge says:

        “The US economy is fake, entirely dependent for any “growth” upon incremental government deficit spending and the asset mania from the loosest credit conditions ever.”

        Exactly.

        “In theory, as long as creditors continue to extend credit to most of the current actually zombie borrowers (most of them), this fake economy can continue.”

        Yep. They’ve got the entire eCONomy levered to the teeth, and they’re trying to keep it going. That’s why any downturn is immediately met with “oh, you don’t have to pay that mortgage/car loan/student loan/credit card monthly payment right now.” It isn’t to protect the borrowers, it’s to protect the lenders and keep the whole charade going. Central bankers and politicians are the scvm of the earth.

        • drifterprof says:

          The government has long been a tool that provides cover for banksters extracting pounds of flesh from citizens who are not smart, or don’t care about being economically efficient and responsible.

          As Bobber pointed out, even Adam Smith understood this:

          “Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.” – Adam Smith, Wealth of Nations, V, 1, ii

      • notdeadyet says:

        Its not the US economy that’s fake… This whole thing is rooted in the “Service Industry” nonsense we were subjected to during the last 30 years of globalization. While we farmed out real production (and jobs) to other parts of the world, we were told unemployment was the American Workers’ fault and they needed to adjust to the new “Service Economy”. We Americans were kept distracted from the real cause and problems created by Globalization. We all partook in finger pointing games where we blamed the poor, the aliens, political parties… we blamed each other while the rich became richer. The truth is this: while service has its place, so does actual production. We are now in the early stages of bringing production back to America. Linking the Corporate Tax Cuts to this effort would have sped up the process… but that didn’t happen due to corporate power and short sighted politicians.. Hopefully, Americans will get this done before we totally lose our standing in the world.

  6. andy says:

    Russia in Ukraine is a small part of inevitable de-dollarisation

    The US is up to the neck in debt and cant now stop the world changing around it.

    The end of a world reserve currency status, (not the currency itself), is historically accompanied with a shift in world order. Over the past decade, Russian and Chinese statecraft, have been leading in the creation of a multi-polar world order framework.

    • Shawn says:

      It seems it is lost on the western media and most Americans that Russia happens to be the largest country on the planet by area. And if you are not a friend, the only way you can now buy Russian oil, gas, coal, wheat etc is with roubles or gold.

      • SoCalBeachDude says:

        What seems to escape the media and the US government is that RUSSIA IS A TINY LITTLE MOSTLY IRRELEVANT AND INSIGNIFICANT LITTLE COUNTRY with an economy HALF THE SIZE OF CALIFORNIA.

        • Crunchy says:

          As was the United States at one time.

        • Jake W says:

          all gdp dollars are not made equal. russia controls an enormous amount of the world’s food and energy production. that’s way more valuable to human survival than facebook ads.

        • Sherm says:

          Russia is a tiny little country?

          Think again buttercup.

        • Augustus Frost says:

          There is a lot more to being globally relevant than nominal GDP.

          Russia has more nuclear weapons than the US. I’d say that’s quite relevant.

          Other countries such as Iran and Turkey aren’t important to the world economy either, but I have the sneaking suspicion the world is going to find out how relevant both are no later than mid-century.

        • Iona says:

          Talk about delusional. You think putting things in all caps makes it true? Lame handle too, bet you haven’t been in the ocean in decades.

        • Wolf Richter says:

          Iona,

          He’s logging in from a city not too far from the beach in Southern California. So his screen name isn’t all that inappropriate. In terms of Russia’s economy being half the size of CA’s economy, that’s correct.

        • Brian says:

          To be fair, isn’t a very large portion of the California “economy” tech products that have the hardware mainly produced in China with the SW code written in India or offshore? Most of it is not actually produced here, it never touches California. These businesses are facilitated by the VC’s that have close access to the Fed spigot. Once the USD dominance falls, these VC’s and tech companies will lose tremendous sources of cheap and easy funding.

        • Wolf Richter says:

          Brian,

          California’s economy is diversified. Largest agricultural producer in the US with lots of specialty fruits and vegetables, not just commodities, from leafy greens to kumquats. And almonds out the wazoo. Largest producer of wines in the US, largest producer of craft brews in the US. Fourth largest oil producer in the US. Refining is a huge business here, importing crude oil and exporting refined gasoline, diesel, and jet fuel. The manufacturing base includes Tesla’s plant, and part of those vehicles are exported. Tourism is huge, including foreign tourism, and the funds they spend in the US are “exports,” which is what everyone wants. A good part of the US defense and space industry is here. All kinds of high-tech and bio-tech companies are here. Apple, Google, FB, Twitter, Yahoo, and above and beyond all, WOLF STREET. And on and on. I’m just listing stuff off the top of my head. For a better and more complete picture, do some research on the California economy.

  7. historicus says:

    Credit Card Debt and Revolving Credit all time high…St Louis Fed.

    In 2018 Fed Funds were 2%…. there was no recession.
    Are those calling for recession saying things are SO FRAGILE that 1% or even 2% will THIS TIME crush the economy?
    Fragility is NOT a bullish condition.
    Inflation will be rampant…and the April numbers will show it.
    Food will displace energy as the main concern.

    • Wolf Richter says:

      historicus,

      “Credit Card Debt and Revolving Credit all time high…St Louis Fed.”

      That’s incorrect. They’re 3% BELOW the all-time high (which was before the pandemic).

      What’s at an all-time high is overall “consumer credit,” which includes auto loans (spiking due to higher prices) and student loans (rising because no one is making anymore payments).

      • historicus says:

        Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks
        St Louis Fed

        2020-03-18 858.9015

        2022-03-30 854.5133

        Certainly not down 3%. And as we are one third of the way into April, at this point in time and with current reports, extrapolating the trend is reasonable. Perhaps “near all time highs” is a better depiction. These are numbers cut and pasted from the St Louis Fed, and that is the Title of their chart.

        • Wolf Richter says:

          You don’t even know what you’re looking at. You’re looking at ONLY commercial banks. READ THE HEADLINE OF THE CHART that you cited, for crying out loud. You’re not even reading the stuff you cite. This doesn’t include lenders that are not “commercial banks,” such as credit unions and specialized lenders.

          I hate this cherry-picked nonsense.

          Here is the chart that has total credit card balances and other revolving credit: Revolving Consumer Credit Owned and Securitized.

          It’s up only 4.2% from 2008 — 14 years ago — despite massive inflation over those 14 years and despite population growth
          https://fred.stlouisfed.org/series/REVOLSL

      • Publius says:

        Revolving debt increased 20.7% in February, the largest increase on record, per Fed report as reported by CNN on Thursday.

        • historicus says:

          Indeed
          And the April reports will show that right now, half way thru the month, consumer debt will be at recrd levels…in all measurements when finally reported.
          IMO

  8. Spencer Bradley Hall says:

    The only thing preventing a rout in the US$ is the contraction of the E-$. Thank God for Shelia Bair.

    • Rowen says:

      Yes, it’s the most curious mechanism. A rout in treasuries leads to contraction in eurodollars, which leads to a strengthening of DXY. Deflation is the main problem now in most of the world.

  9. ru82 says:

    I am curious why mortgage rates have jumped 1.5% from 3.5% to almost 5% Yet other borrower rates have only increase roughly the same amount as the FED rate increase. According to WSJ article, credit card rate moved up from 16.3 to 16.4%, new car loans are up 3.8% to 4.2%, used car loans are up from 4.4 to 4.65%. Could mortgage rates actually drop some? it appears mortgage rates have already priced in a 1.5% increase. So if the Fed does not follow through like usual, mortgage rates could dip again? It is hard to believe a used car loan rate is cheaper than mortgage. Used cars depreciates and housing appreciates in price.

    • ru82 says:

      I remember Bank of America suggesting people take out a HELOC to buy a used car because home equity loans were cheaper than used car loans. Now I feel they should recommend people to refinance any paid off cars and and increase the down payment to buy a house. Because the car loan is cheaper than the house loan. lol

    • John H. says:

      ru82-

      I’d turn your question around to: Why are used car rates at 4.56%?

      I’ll take a stab at the answer to that question:

      Bank loan policy “experts” are inexperienced, history deficient, and improperly incented.

    • Max Power says:

      Mortgages behave differently because they are a fundamentally different animal than other types of when consumer loans… Nearly all of them come with a government guarantee and are for a waay longer period – 30 years, which vastly increases duration risk for the lender. Moreover, there is a decent potential for the asset backing the loan to go up in value (vs. other loans where the asset almost always goes down in value or gets depleted).

    • SoCalBeachDude says:

      Mortgage rates have nothing whatsoever to do with the Federal Reserve’s Federal Funds Rate but are KEYED OFF THE YIELD (INTEREST RATE) OF THE 10-YEAR US TREASURY.

      • LK says:

        I like this Back to Basics posting.

      • ru82 says:

        I get that. I am making an observation that things are out of whack.

        You loan money out and charge interest based on the risk of loan being paid back.

        That means the 10 treasury and mortgages are over priced right now and should fall.

        Because an auto loan is much more risky than a house loan?

  10. Joshuatrio says:

    Wolf,

    I just checked mortgage rates via Google and I’m seeing the average 30 year fixed at 6.5%.

    Did they just blow up overnight or is that an issue with Google??

    • Wolf Richter says:

      Yes, Google humor.

    • Duke says:

      My lender in CA that I have two 30yr fixed with is showing 4.25% for well qualified borrowers with 20% down.
      6% for investment property.
      So 5% is some average of lots of different factors/regions I’m guessing.

      • Max Power says:

        5% is the average prevailing rate excluding points. That 4.25% rate you see is almost certainly after some points have been applied to the rate.

    • Mike R says:

      I’m at 2.75 on my 30 year. No problem at all paying the loan back with dollars that keep becoming more worthless by the day. Lender specific rates with decent credit scores look to be in the high 4’s to low 5’s right now. Our home has tripled in price since we bought it in late 90’s. And we only live in the Midwest.

      The Fed is so far behind the curve and latent inflation so massively embedded in the financial system, that it won’t take too many rate hikes to implode most ‘assets’ like stocks, bonds, and ultimately real estate. Stocks need to fall at least 80% before we can get back to any sense of fair value. I feel sorry for all those stuck inside that casino, and thinking their net worth is about 3 times higher than it will be in a few short years. Once that implosion happens nobody will be complaining about inflation, as a lot of buying of material stuff will come to a complete halt. The entire American economy is floating on a fake wealth effect. That is why the Fed is loathe to raise rates and inflation will keep raging higher until the fed raises enough to implode the stock market.

  11. Beardawg says:

    Agreed….just won’t happen this year – at least not until the end of the year. Too many positive indicators will have to reverse super quick, and we already have a war out there which did not trigger it (no pun intended).

  12. AK says:

    If one believes that USD will lose its reserve currency status, one would be interested to take some guesstimate of how long this will take. So I will start the ball rolling with this post, and hopefully other members of this forum will add their bits.

    I looked at Wikipedia article about Bitcoin, and I found that Bitcoin went public in 2009. By 2020 Bitcoin market capitalization was above $1T (one trillion dollars). So in 11 years, Bitcoin went from nothing to $1T. It managed this feat almost entirely due to efforts of private individuals, despite efforts of many states to suppress it (China etc.). What drove Bitcoin IMHO is the decline in trust in USD and other fiat money.

    There is similar lack of trust today in USD as reserve currency of the world. This distrust started in recent years with wide-scale money printing by Federal Reserve, further increased in 2020 due to sharply higher inflation in US, and further increased this year with confiscation of all USD reserves of Russia. So IMHO there is now strong and widespread distrust to USD among all countries that are not firmly in United States’s group of captive nations. So IMHO there will be string desire among independent countries to develop the alternative to USD.

    Unlike Bitcoin that didn’t have any large state actors actively backing it, the desire to provide alternative to USD for international trade and reserves will have many large state actors backing it (China, India, Russia and so on).
    So, based on Bitcoin’s 11 year rise, I would guess that it will take about a decade for all these countries to present alternative to USD that would be strong enough to de-throne USD.

    • Aubrey says:

      Is there any reason, there has to be a single reserve currency, other than banks and banksters need instant liquidity to cover their games?

      The one world global thing seems to be unravelin – finally! Deficits matter and sanctions destroy trust.

      As far as coins go! Is there any proof just how many there are?

      As the old saying goes: it is not a crime unless you get caught or it is not a hack until it is discovered.

      Does anyone actually believe any system is so perfect, that it can never be breached?

      Good grief

    • Anthony A. says:

      Bitcoin has no intrinsic value. You can’t buy anything with it. If you don’t believe this, try buying a house or even your prescriptions. Or try paying your doctor bill with it.

      Bitcoin sites have been hacked recently. This appears to be a common event. The only value to anyone who owns Bitcoin, or any of the 9,000+ other digital 1’s and 0’s representing a “coin”, is the ability to sell your digits to a greater fool.

      Someday, a sovereign government may issue digital money to replace their fiat paper, and that will be made to handle transactions by the populous.

      • AK says:

        The main challenge that any proposed replacement for USD as world trade currency, is how quickly it can build so-called “network effect”. So I thought why not use Bitcoin as an example of building this “network effect”. That is the only example that came to my mind. I hope folks on this forum will provide other examples of how quickly new form of money can build large-scale “network effect”, given that there is a bunch of large state actors that would be very interested in this new form of money due to their tension with US.

        • SoCalBeachDude says:

          There are none. All craptocurrencies are totally worthless.

        • Augustus Frost says:

          Bitcoin isn’t a functioning currency. It’s for speculation and “money laundering”.

      • Brent says:

        SDR are around since 1969 (back then Italian lira was the most irresponsible currency).

        Originally SDR was a basket of 16 currencies, its weights corresponding to country’s export volume OR 0.888672 g of Au.What is hardly mentioned lately is that in the past 5 years SDR’s allocation by the IMF increased from 20B to 500B(!).

        It makes much more sense to conduct international trade in SDR.China’s export is $2.6T, US export is $1.6T, so why on Earth use USD as a unit of account to price commodities or conduct trade ?

        At least Vlad the Impaler and his Big Brother Xi started things going.Nobody knows how this will end.But its gonna be different.

        Hopefully they prove our Mothers were right saying:

        “Money does not grow on Trees” (when you asked for a new bike)

        “Dont touch what is not yours” (when you seized Lionel train from the weak local kid thinking what you’re doing is just an innocent “civil assets forfeiture” ☺)

        • AK says:

          I didn’t know that SDR is linked to gold; thanks for pointing this out.
          SDR does have a counter-party risk (similar to USD), doesn’t it ? I mean that IMF (issuer of SDRs) can freeze account of someone it doesn’t like ?

        • AK says:

          Wikipedia article on SDR says that SDR is no longer liked to the gold. So it is just a basket of various fiat currencies of western countries.

        • Brent says:

          IMF froze Afghanistan SDR account 2 years ago because Taliban was bad.Instead of seeing the error of its ways Taliban started to fight even harder and won in the end ☺

          Look up “IMF – SDR general allocation by country”.It is $650B now.More than enough to tie up the loose ends when the trade is BALANCED.

          But never enough to finance multi-$T US trade deficits year after year after year.

          Most likely Vlad & Xi will not try to invent the wheel but modify SDR basket to their advantage.Failing that they will create something similar along those lines.And re-back it with Au.

          But to base international trade on BTC whose 5% DAILY swings are larger than oil companies YEARLY profits is a total madness.

    • SoCalBeachDude says:

      THE ONLY THING ‘DRIVING’ BITCON AND OTHER CRAPTOCURRENCIES IS DERANGED, STUPID, AND HIGHLY IGNORANT MANIC SPECULATION AS THERE IS NO THERE THERE AT ALL IN TERMS OF V VALUE BEYOND WORTHLESSNESS FOR ANY CRAPTOCURRENCY.

    • Augustus Frost says:

      Bitcoin’s price is a side consequence of the asset mania.

      It isn’t a real currency. No currency which fluctuates as radically as it does will ever achieve any scale as a medium of exchange.

      As for a store of value, when the asset mania crashes, most crypto will go to zero (there are thousands now) and Bitcoin will almost certainly lose a (much) larger portion of its value than it has to date. After all, it is literally nothing.

      The USD losing its global reserve currency status will probably occur during or near the end of the future economic depression. Maybe with the creation of an independent economic order (e.g., with international institutions like the IMF and World Bank) led by China. At some point given US belligerence, military defeat in a major power conflict. The end of the asset mania and the start of the long-term major bear market (which will be multi-decade) isn’t even confirmed yet and look at the media and political sentiments to enter a major conflict now.

    • LK says:

      You should watch the YouTube documentary Line Goes Up by FoldingIdeas. The distrust that led to crypto is directly tied into the consequences of the GFC. Cryptovangelism took it to where it is today.

  13. Citizen AllenM says:

    Geez, I guess the dollar is toast again, fellow chicken little hamburger helpers. Eh, no. Not yet, and not for quite a while. You see that gold and silver standing still with this latest hiccup with Russia?

    That is the ultimate canary in the coal mine. And meh. So what, even oil is starting to sputter out at $100 a barrel. Meh.

    As for soaring interest rates, meh.

    So much of America lives with 29.9% and 12% car loans at the you pay every Friday places that all this high faluting fed stuff is irrelevant. I read so many people commenting on this site who are arguably rich that it manages to irk me.

    Boo hooo first world problems. Now, what happens when you really have inflation is going to be another tale, not this slight bump in the road- which is exactly what the markets are telling us is happening. As for real interest rates actually going to matter, not yet folks.

    Please stop with the car price memes- the Covid distortion is going to take years to work itself out, as our host has pointed out repeatedly to the masses here.

    AS for food, well it came off of life support in the mid 2010s, so some juice is inevitable as the General Mills and all the ilk finally start making some real bank on the product.

    Meanwhile the dollar, still going strong in comparison. Now when we see $500 an ounce silver, and $60k gold, then we can talk about the end of the dollar….

    But meanwhile, I just get older, and my attention span for silly billies is waning again.

    Someday this war’s gonna end…

    • Wolf Richter says:

      Citizen AllenM,

      “But meanwhile, I just get older, and my attention span for silly billies is waning again.”

      Yes, you nailed it, your attention span has reached zero. Go back to watching cat videos. They’re so cute.

    • AK says:

      You are right that USD is strong against other fiat currencies, and you are right that gold and silver didn’t appreciated as many pundits were predicting, but what would you make of strong appreciation of commodities across the board ? Doesn’t USD grow weak vs the commodities ? If so, doesn’t it mean that USD isn’t doing very well when compared against real things (as opposed by comparing against other fiats) ?

      • Escierto says:

        It only makes sense to compare the USD to other fiat currencies. Those are the competitors and they are doing terribly. The dollar index is at a two year high crushing all of it’s competitors including precious metals. There is only one champion in the ring – the mighty USD!

  14. DR DOOM says:

    The attack on a large commodity producers Central Bank and its currency was a non-reverseable act. The attack on the currency apparently did not work. Ask yourself why? What is obvious it was done and displayed proudly and gloatingly for The Honest World to see,and they will take notice. The American Empires product and Brand is dollars which were recognized as a standard. The dollar was the Empires Brand called the Reserve Currency. This action was as ignorant as when Cocca-Cola decided to attack its Brand which was 100+ years in the making with New Coke. The word on the street is the predictable echo chamber Corporate MSM repeated by street parrots in condensed form as “who gives a shit about a gas station disguised as a country”? Commodities? Who needs to worry about that shit when you got dollars. You got the f’ing dollars you get what you want. Oh,Really? We might be forced to start digging in the dirt again to get our own. We can do it, we are blessed with natural resources. The problem is digging and refining makes waste and the EPA would have to be dismantled to do that. Not reformed, reform is bull-shit. Dismantled. A large Political Class armed with Congessional grift would also need to be dismantled in the process. Congress would have to be subjected to the RICO Act with FBI perp walks through the hallowed halls of the Peoples House. That ain’t going to happen is it? FBI is to busy setting fires so it can put them out to tangle with its Pay Master.. Better get ready to pony up because this shit may not be transitory in more ways than one.

    • Depth Charge says:

      This completely inept administration made the worst policy error in history. And there’s no going back. Once they decided to weaponize the dollar, it immediately caused all countries to realize “hey, they could just cut us off at any time, too.” Nobody wants to do business with somebody like that.

    • Augustus Frost says:

      The political virtue signalers will take the country down in flames before abandoning their insane policies.

  15. fred flintstone says:

    If the fed allows market interest rates to shoot up without getting its bond sales moving right now……or even if it did but at a snails pace of 90 billion per month……
    How big of a loss is the government taking on its bond portfolio? If market rates are 6% for the 10 year a year from now the losses are going to be enormous.
    Is this adding another 5 trillion in debt?

    • SoCalBeachDude says:

      THERE ARE NO LOSSES WHATSOEVER TO THE US GOVERNMENT ON ITS BOND PORTFOLIO WHICH IT HOLDS TO MATURITY. THE ONLY DEBT BEING ADDED IS BY THE US CONGRESS AUTHORIZING ISSUANCE OF A HUGE AMOUNT OF ADDITIONAL US TREASURIES EACH YEAR.

    • Deadbird says:

      Look at the Fed balance sheet like a home mortgage, or better yet, a HELOC with adjustable rates.

      The Fed is just refinancing it’s portfolio and swapping dollars and interest flows to dump the old obligations. It’s like your mortgage when you refinance, in that you’ll owe less interest. When people refinance they don’t get screwed.

      The other way to look at this is someone going to a grocery store with $200 and asking to swap 2 hundred dollar bills for a mix of other bills, a stack of 5s or whatever. The exchange is equivalent.

  16. JeffD says:

    How does one determine the extent to which refi loans and reverse mortgages are being used as income streams? What is the besst indicator of household distress, aka knowing how many home leasers are holding on by their fingernails by taking cash out refis to stay afloat as home prices rise? There are a subset of people out there who have jingle mail factored in as a life strategy, and I’m wondering how to determine how many of them there are.

    • JeffD says:

      Since 2009, the median loan to value for mortgage originations has been 95%. Pre 2006, the median LTV for originations was 80%.

  17. Deadbird says:

    For anyone thinking crypto can eventually become a reserve currency, look no further than your IRS tax form which asks about crypto exchanges.

    The bottom line is that for crypto to create taxable income, it has to actually engage in real transactions, versus being held in a Ponzi account where it’s used for speculation transferring with other fantasy coins and gimmicky.

    There are more transfer opportunities evolving, but at any point that a real world exchange takes place, your crypto will be taxed as it’s cash, which will take the fun out of the ponzi positions.

    • Wolf Richter says:

      The IRS is taxing you on your crypto gains just like it’s taxing you on your casino gambling gains. Cryptos have as much a chance of becoming a reserve currency as casino tokens have.

      • John H. says:

        Casino coins are more stable, though, at least in dollar terms.

        Casino coins converted into hooker wages would be an interesting thesis paper for some up and coming PhD candidate…

  18. Depth Charge says:

    I have one suggestion for those who bought houses at the peak, fancy diesel trucks pushing $100k, boats, RVs, crypto, meme stocks, NFTs and all the other bubblicious toys and trinkets: Pray.

  19. Thomas says:

    Question for Wolf
    What happens if the March inflation rate is 6%?
    60% of the bond market does not agree with the “Spam of Oligarchs” and their hysterical bond proclamations and their imperious demands for higher interest rates and a side of recession.

    The US government will spend tens of billions on infrastructure this year. Has everyone forgotten that? GROWTH. Dollars flocking to the USA. Strong growth. High wages. Strong demand. Expanding markets. Full employment. Larger pool of entrepreneurs. Innovation. Falling costs. New supply chains.

    USA USA USA
    😄

  20. sunny129 says:

    Thomas

    March inflation rate at 6%??? on what basis?

    “On the economic data front, markets will get the latest gauge of U.S. inflation with Tuesday’s closely-watched Consumer Price Index (CPI) and the Producer Price Index (PPI) set for publication Wednesday.
    The Bureau of Labor Statistics’ (BLS) March read on CPI is expected to come in red hot again, with inflation unlikely to show any signs of abating as supply chain snarls continue to flare up prices, particularly with Russia’s war in Ukraine weighs on flows of global energy and commodities.

    Consensus economists anticipate headline CPI will again accelerate to show an 8.4% year-over-year increase, surging higher from February’s 7.9% rise, according to Bloomberg consensus data. The figure would mark another decades-high rate of inflation, with the index, even excluding volatile food and energy prices, set to climb as much as 6.6%, up from February’s 6.4% increase.

    On a month-over-month basis, economists are looking for a 0.5% rise — a print that would mark 22 consecutive monthly advances on consumer prices across the U.S.

    “The upcoming Consumer Price Index for March will not be pretty,” Bankrate chief financial analyst Greg McBride said in a note. “Inflation has continued to accelerate in recent months and with the higher gasoline and food prices stemming from the war in Ukraine, the worst is likely still to come.”
    Yahoo/finance

    • Thomas says:

      March 2021 marks the very beginning of the recovery. Late in that month, there were spikes in prices for several commodities, mostly construction materials.

      Up until now, we have been comparing current, recovered prices with depressed prices from the pandemic recession.
      Just because prices, and the economy, recovered quickly does not mean we have systemic inflation problem.
      It just means prices on a wide range of things recovered their former level more quickly than we have seen prices move in decades.

      The exceptions are:
      1. The oil industry is taking profits
      2. Big corporations are shrinking supply of affordable housing, and they have been since that tax monstrosity passed in 2017.
      3. The semiconductor shortage which began in 2019: Production has been critically damaged by the pandemic slowdown.
      4. The global supply chain is still really jacked up from the pandemic

      But NONE of these things will result in systemic inflation. Raising interest rates would be a VERY bad idea. It would be a self-fulfilling prophecy, artificially raising the prices of everything.

      What I expect, is that the erroneous comparisons between depressed, recession prices and current, recovery prices will return a lower measure each month this year, beginning in March or April. The “inflation story” is a number in search of anecdotal confirmation bias.

      And they are wrong about the bond market too, in my opinion. Rising yields are a good thing, especially for 47 million retirees, whose ranks are growing by leaps every week. Those high yields that are coming (QT), will lock in stability for future payouts for insurance companies, pensions, 401ks and mutual funds. That’s a value asset that can grow with prudent borrowing against it, if the fed doesn’t screw that up by raising interest rates to fight an inflation phantom.

      Thanks for listening
      No offense, but those Yahoo Finance stories have been fingernails on a blackboard to me.

      • KWHPete says:

        Sounds to me like some kind of economic analysis that one would find in a Bizarro world comic book …………

        • Thomas says:

          Bizarro world.
          Young pups who don’t have a lot of experience with analyzing financial numbers prior to 2008 swim in the bizarro world set up by The Fed and the Federal Government after the financial crash.
          In the current bizzaro world regime, the Fed has been keeping bond prices high, yields low, and it has been flooding big corporations with money by buying tens of billions of dollars of corporate every month. The Fed has also kept interest rates artificially low.
          This is not a capitalist regime. It’s corporate socialism, similar to the economic ideology of the Nazis.

          What is happening now, is that the Fed is transitioning to a more capitalist regime. The classic hedge against inflation is government bonds.

          The Fed is reducing their 8 trillion balance sheet by not rolling over government bonds that they hold. This action will create a larger supply of bonds, and thus the price will go down and yields will go up.

          In terms of investment, this is great news for institutional investors like pension funds, insurance companies. 401ks, and mutual funds. Those investors can lock in those yields to support payouts they will make to the record number of retirees.
          The retirees, in turn, will spend those payouts and put a floor of cash into the economy that ISN’T controlled by corporate oligarchs.
          Meanwhile, big corporations are going to be paying over a trillion dollars to the Fed this year, because the Fed is not rolling over the bonds that they bought from them.
          This shift in wealth from big corporations to individuals is going to allocate all that cash into a capitalist market.

          And the Fed has no incentive to raise interest rates in this scenario. They will be flush with cash to make loans, and the government spending on infrastructure will create a ready growth market to invest.

          Interest rate increases aren’t going to tame inflation because inflation is not being caused by a wage/price spiral or by a currency confidence crisis.

          If there is too much money in the economy, then extremely rich people have too much of it and big corporations have too much of it. Not the general population.

          Raising interest rates and increasing prices on everything and thus pushing companies into layoffs and failures and debt defaults and also throwing millions of people out of work and creating a recession will not tame the causes of inflation that we have.

          Raising interest rates is not a sound economic solution in this scenario. It’s a political argument not an economic one.

          The supply chain problem is having little effect on prices. That is a problem affecting sales and growth, and this year it will become less and less of a problem as businesses diversify supply chains, including new domestic and near abroad supply chains.

          Also, the global fight against the pandemic is not over, but this year we will make significant gains on ending the pandemic worldwide. Also, the infrastructure spending will create the means to finance new supply chains. Another investment opportunity.

          The housing problem can only be addressed by eliminating Trump’s personal, real estate developer tax cuts. Vote for Democrats.

          That’s one third of inflation. Big corporations are buying up properties, demanding huge increases in prices and rents, and they can let those properties sit vacant and use the maintenance of those empty properties as tax shelters for their other income.

          They have no incentive to lower prices to sell or rent. It’s so pervasive that their activities have shrunk the supply of affordable housing for the majority of the population. You can’t solve that problem by raising interest rates and causing a recession.

          The other major part of the inflation number is the cost of automobiles. That’s the semiconductor shortage. That supply chain IS being diversified right now.

          I have a long explanation for the oil issue, too. That problem is correcting right now and we won’t have to wait for the end of the war.

          If it were not for the spike in oil and gas last month, we would be seeing a 6% inflation rate for March.
          Bizarro World

      • AK says:

        Have you tried comparing pre-pandemic prices (say March 2019) with the current ones ?
        Federal Reserve (if one looks at their actions so far, and ignore their recent hawkish talk) seem to be thinking along the same lines as you do – inflation is transitory/rates should stay low/pandemic impact will fade away soon.

  21. Swamp Creature says:

    Another inflation factor that has not been considered is the poor service you get from nearly everyone you have deal with in business today. Example: these clowns that worked on my lawn mower raised their price for a tune up to $120 from $100 a year ago. And when I picked up the lawn mower it ran as rough as it did the week before I dropped it off. They blamed the weather. They said it will only run properly if it is 60 deg or higher outside. Since it was only 50 degrees it wasn’t expected to run properly. What a pile of bull s%it. To top it off they said they had to clean a rats nest out of the lawnmower and should have charged me extra for that.

  22. SocalJimObjects says:

    Just saw the following on Business Insider: “This single mother sold Wall Street a stake in her home for $60,000, joining thousands of Americans who are cashing in on soaring home prices”.

    No wonder people are still buying all sorts of things. They’ve got moolah in the bank!!!

    • Wolf Richter says:

      SocalJimObjects,

      Why are you dragging this braindead clickbait into here? What goes on over there, stays over there. How many single mothers sold homes? And why single mothers? How about married couples? And if you take out a HELOC — single person, single mother, single dad, married couple, whatever — you put up the house as collateral. Cash-out refis are HUGE, and we covered this here. All of these options involve Wall Street.

  23. CreditGB says:

    Lifestyle moves must be a part of this. People are now making conscious choices about where they live and who they want to be neighbors. Politics has a lot to do with the disgust expressed by new comers to rural areas, seeking to get away from cities and their politics.

    Many are giving up affluent urban and suburban settings for a quiet life with neighbors who appreciate a conservative lifestyle.

    • unamused says:

      The grass is always greener over the septic tank but you’ll be wanting to put an RO system on your water well to reduce the risk of liver failure. Most of your neighbors aren’t sober enough to take proper aim, so not to worry.

      • 91B20 1stCav (AUS) says:

        …and note that many of those ‘old locals’ will be b——-g mightily about the influx impact of the new ones in short order, if not on arrival (the perception of ‘crowding’ is where you find it…).

        may we all find a better day.

  24. Kunal says:

    Its all due to Fed, they will find every possible excuse to print and give to wealthy to make them even more wealthy and hurt the ordinary Americans by creating inflation.

    When there was Covid outbreak they acted immediately and reduce rate to 0. Now that we have record inflation and record employment, they are shivering to raise rates because this will hurt wealthy and reduce their wealth. They are jawboning for a year now and still buying assets and printing money and keeping rates at near zero. They are nothing short of criminal.

  25. unamused says:

    “What’s the Real Inflation Rate”

    Higher than reported. They don’t want to startle the livestock and start a stampede, not when there’s a national epidemic of depression and high steep cliffs are so conveniently available.

    A lot depends on where you are, what you want to buy, and how much you’re willing to overpay.

    Life isn’t fair. For most people it is extremely unfair. But so what? Keep playing anyway.

    • Wolf Richter says:

      It would be helpful to listen to the interview :-]

      • unamused says:

        Listening to the interview doesn’t prevent me from wandering off into the weeds.

    • Thomas says:

      I like your attitude
      I will keep trying to find a way to be fair and kind to others, but I don’t have a lot of influence or resources to make that happen on a large scale.
      I’ll keep chiming in with my obesrvations and suggestions, and hopefully more powerful people will choose to make a difference.
      No one should expect equal outcomes, but everyone should expect equitable outcomes.

  26. Thomas says:

    To sum up my above comments, the US has three major sources of inflated prices, and one minor one.
    1. Big corporations creating an artificial housing shortage, because Trump’s tax cuts allowed them to do that.
    2. Profit taking by oil and gas companies, because they are taking us hostage to demand that we elect Republicans, who will allow them to steal more from us
    3. A semiconductor shortage due to pandemic related production shutdowns in Taiwan (automobile prices, mainly)
    4. Global supply chain disruptions, pandemic related, still being resolved.

    The minor source of inflation is price gouging by a meat packing cartel. Canned goods are slightly elevated because CANS have risen in price. There IS NOT a general large increase in any other groceries.

    None of these things will be resolved by raising interest rates. The belief that the general population has “too much money” is a particularly obnoxious political belief that extremely rich people circulate by means of their chorus of paid professional liars.
    Whether the false inflation narrative is passed along by naive and unskilled financial analysts, or by lazy hacks in the media who just repeat the oligarchs spam that they read everywhere, it is a false narrative in search of anecdotal confirmation bias.
    Trying to fight this inflation phantom with interest rate hikes is a fool’s errand for a rich patron.

    • Wolf Richter says:

      Hahahaha, you forgot DEMAND.

      The Fed created a huge amount of DEMAND with its policies. This is the most grotesquely overstimulated economy ever. Look at retail sales, look at durable goods sales. All of which spiked, which I have spent 18 months documenting.

      How could you so willfully ignore the power of DEMAND????

      An economy doesn’t operate on supply only, but on supply and demand.

  27. Mickey Hickey says:

    The US economy is based on speculation in the Wall Street Casino. Wealth is stored in filing cabinets and digital storage
    The Russian economy is based on what the Germans call echte materialien (real materials). Oil, gas, coal, wood, minerals and heavy industry manufacturing such as steel and aluminum. China is going from strength to strength. Where is America going?

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