Inflation Nightmare Keeps Getting Worse: Producer Prices Break Out. Inflationary Mindset Rules

Services PPI and Core PPI spike.

By Wolf Richter for WOLF STREET.

The Producer Price Index for Final Demand spiked by 1.4% in March from February, and by 11.2% from a year ago, both the biggest and worst spikes in the year-over-year data going back to 2010, the Bureau of Labor Statistics said today. After having been stuck at around 10% for four months in a row, producer price inflation has now broken out – to use a stock trading term.

The PPI Final Demand tracks the input prices for consumer-facing industries whose selling prices are picked up in future months by the Consumer Price Index which yesterday, WHOOSH, already hit 8.5%. The PPI Final Demand shows what’s in store for the CPI in future months. And there is no “softening” in store, and it’s the PPI for services that has now started to spike.

For the past 15 months, producer prices have soared relentlessly. Five months in a row of double-digit producer price inflation is quite something. And the breakout today is remarkable.

Without the volatile food and energy costs, the core PPI spiked by 1.0% in March from February and by 9.2% year-over-year, the highest in the data, having relentlessly pushed higher since late 2020:

And services! The Producer Price Index for Final Demand Services spiked by 0.9% in March from February and by 8.7% year-over-year, the highest in the data going back to 2010.

What companies all along the supply chains have figured out is that they can pass on cost increases to the next company and to consumers. And consumers have been playing along eagerly, having switched from being fairly astute buyers and price shoppers to paying whatever. This is the inflationary mindset that has taken over.

This inflationary mindset suddenly bloomed and blossomed because of two huge unprecedented factors:

  • The Fed’s reckless monetary policies of interest rate repression and $4.8 trillion in money printing, triggering enormous asset price inflation and the spending power that it throws off;
  • The government’s spreading $5 trillion of borrowed money across the land in just 24 months.

Under this flood of money, leading to the most grotesquely overstimulated economy ever, price no longer matters, and everyone has figured it out.

Price increases move across the economy in uneven waves, with the costs of some goods and services spiking while others might be stable or might even decline, and a month or two later the prices of other goods and services are spiking in a game of inflation Whac-A-Mole.

And companies have figured out that they can not only pass on the higher costs, but under cover of the now blooming inflationary mindset, they can pass on a lot more than the additional costs, leading to huge fat profit margins.

Companies always charge the maximum price they can, constrained only by their desire to reach their sales goals. When price resistance among their customers sets in, companies weigh whether to back off those price increases to stimulate volume, or keep raising prices further until some sort of ceiling is hit. With online purchases, this equation is now being recalculated in real time and constantly.

What has changed compared to 2019 is that the buyers are now infected with the inflationary mindset and are now able and willing to pay whatever, instead of pushing back. That pushback puts a damper on price increases – and thereby on broader inflation. But that pushback has now been broken from consumers on up all the way up the supply chains. The whole pricing dynamics got knocked loose.

We have seen that a ceiling is now getting hit in used cars where prices spiked by 40% and buyers’ resistance has set in, and sales volume industry-wide is now declining despite plenty of supply. But in other products and services, buyers’ resistance has not been met yet. And even if the price of one product hits resistance, the price of another product breaks loose.

And these double-digit increases in producer prices show that even higher inflation is heading towards consumers, and will continue to do so until consumers start pushing back, either because they’re no longer able to, or because they’re no longer willing to pay whatever. That’s far from happening, and these trillions of dollars are still floating around out there at state and local governments, companies, and consumers, and they’re going to get spent, though that spending might shift to different categories, such as from goods to services.

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  206 comments for “Inflation Nightmare Keeps Getting Worse: Producer Prices Break Out. Inflationary Mindset Rules

  1. Depth Charge says:

    And yet the Jerome Powell FED sits idly by, waiting….waiting….waiting …waiting….

    • Marco says:

      I originally believed there was some hidden method to their madness but now I believe it is just reckless incompetence with a dash of desire for socially engineering. For heavens sake they are not even voted in democratically

      • Poor like you says:

        The agenda is pretty obvious to me. Enrich the rich, no matter the cost.

        • joe2 says:

          Yep. Judge the actions and results, not the BS. If you can’t figure it out after watching for 10 years, please give up.

      • Jay says:

        They can’t raise interest rates through the roof, because it will lead to a spike in the interest on the debt cost which have averaged $545B over the last 4 years. And, it looks like we’re on pace to approach $600B in fiscal 2022.

        While I don’t know the exact figure, much of the $10T in debt issued since Trump took office has been on the short end, 3 or less years, meaning a lot of this debt will be rolled over in the next 2-4 years. The FED knows that higher inflation (i.e., > 4%) is here for at least 3 years. This means all treasury yields will stay near or above 3% for a period of time whereby at least $4.5T in new debt will be issued and we’ll see another $4T rolled over with much higher yields.

        So, our borrowing costs by the time Biden’s 1st term ends will be approaching $700B. Keep in mind that Medicare Plan B will run at least $500-$600B deficits between now and 2024. America’s financial situation worsens month by month. We all know this, and so does the FED. So, they’re going to do everything they can to slow poke the funds rate higher.

        We saw Bullard come out today and say that the funds rate needs to be at 3% before the end of the year, and he knows that’s pie in the sky and wouldn’t be enough to create the needed drag on the economy to lower inflation.

        • sunny129 says:

          Jay

          In late 2018, Mkts couldn’t take it from 2.5 % to 2.75% and Mr Powell chickened out! He thinks Stock market is Economy, just like Trump, Barnake and many policy makers including Lawmakers!

          “Yes, It Is Different This Time,right?

          Most people would be horrified by a 40% decline in their “investments.” When bubbles pop, speculative assets don’t drop 40%, they drop 90% or even 98%.

          “Markets rise on a escalator and fall in an elevator”

          The U.S. stock market was worth $53 trillion at the beginning of 2022. If corporate profits fall to $1 trillion annually, and the price/earnings ratio drops to a historically reasonable 11, U.S. stocks will be worth $11 trillion, a decline of roughly $40 trillion or 80%.

          Recall that U.S. stocks fell to $11 trillion in value in 2002 and again in 2008.
          (h/t – oftwominds)

          Interesting days are ahead! Hope for the best but prepare for the worst. GFC will look like a walk in the park. I hope I am wrong!

    • Old school says:

      Yardeni is out with latest central bank big four balance sheets. Still up at $31.5 T. Looks like China is still expanding at a pretty high rate.

      More talking than doing by central bankers right now. Still an easy policy at the moment.

      • Flea says:

        Seems like free money keeps people in line,stops social unrest but eventually ,will blow up inthere faces

        • KPL says:

          “Seems like free money keeps people in line,stops social unrest but eventually ,will blow up inthere faces”

          Yup! But unfortunately it does not blow up on the face of the perpetrator (in this case the “arsonist& firefighter” Fed). It blows up on the faces of the future generations while in the meanwhile some people with easy access to free money make out better than bandits.

          Also the blow up takes a long time coming! Instant justice would have done the job of the perpetrator being punished.

    • historicus says:

      Procrastination is irresponsible and likely deceit.

      Powell doesnt have to wait for a scheduled meeting to raise rates…..
      the time to do an emergency hike would have been today as Canada just hiked.

      The Fed serves a different master than their duties dictate.

    • RobertM700 says:

      Time to let some air out of the asset bubbles. Stocks, Real Estate, Crypto…

    • Oluwafisayomi says:

      Great idea

    • Julian says:

      The Fed has already raised interest rates you realise – there are plenty of Central banks out there where billions of people love that have not raised interest rates at all.

      China, Japan, the EU, Australia for instance – that’s over 2 billion people for which interest rates remain at record lows.

    • They don’t want to kill off the economy. Jobless claims still at record lows. PPI means corporate profits may shrink, the consumer is still strong. Supply chain issues result from China’s extreme covid lockdowns. For all the money the Fed has printed there is still no infrastructure bill. Inflation will end when GDP falls and the US enters a recession. Not before. If consumers would pull back the problem would resolve itself. Sidebar the price of lumber is well off the highs. I called a contractor and he actually returned my call, so maybe things are getting back to normal.

  2. Marco says:

    The FED needs to get a handle on this VERY soon otherwise what is left of the US middle-class will be gone

    • Depth Charge says:

      When you look at who is benefiting from the lost wealth of the middle class it would appear as if it’s all a big plan, encouraged by the likes of Jay Powell and his buddies.

      • cobo says:

        “…and to consumers. And consumers have been playing along eagerly…” -especially the services are being supported by WFH, PMC wannabees who think they have a future. This future is going to bite down hard. Open your history books, your old ones, and look to what comes next

    • Anthony says:

      If inflation was just a USA thing then maybe he could but because most countries have left it late you realise, that high inflation is everywhere and remember the US is a big importer of real physical goods, which include food……….

    • Brant Lee says:

      I don’t see how the 1% are being hurt in any way by this rising inflation, only benefiting. Isn’t that why the Fed is dragging its feet on this?

      Everyone has talked about an economic crash for years but it’s been more like a controlled crash for the rich, they seem to come out on top no matter what the situation.

      • Flea says:

        Of course they get all the tax breaks ,they paid for to politicians,then whenSHTF they will buy everything for Pennie’s on the dollar .IF they survive social unrest ,best of luck. To them

        • Nate says:

          Yep, that’s been my take on the ‘business cycle’ plan all along.

          Sell to the suckers at a top then crash everything w lots of cash in the bank and buy low. Rinse and repeat.

      • Augustus Frost says:

        The bond mania is the enabler of all inflated asset markets. It appears to have ended in March 2020 and if so, it’s a matter of time before the oxygen is sucked out of other asset classes. There will be no stock market mania or real estate bubble without the bond mania.

        Nothing moves in a straight line. This means that bonds will reach some intermediate term low (wherever that is) and then rally to partially retrace this decline. Maybe six months to a year, even as FFR is raised and QT occurs.

        It’s when the bond market resumes the decline after that when it will be a lot more noticeable. The stock market and real estate may decline or tank earlier or later, no way to know in advance definitively. It’s not a mechanical outcome.

    • Nick says:

      Ummm people throw around the term “middle class”. You need to define it. Id say working class. Middle class to me are household incomes of $140-200k. These people are doing VERY well right now. A couple of teachers bringing in $75k in salaries, very little childcare issues since they all get their summers off, week long breaks during the year and easy retirement. Lots of corporate people making big money with their fancy degrees. You know how many 20 somethings are coming out of college with MBAs these days??? Its the poor sorry saps making $19-$25hr keeping the lights on in this country who actually work during the day that are being destroyed. They are attacked from every direction. Government, Kaizen/Lean/Cont improvement corporate BS, NMT, rich CEOs, etc.

      • VintageVNvet says:

        Good one Nick:
        Lots of folks have lots of different and diverging opinions of what is ”middle class” these days, and have had at least since the very clear class distinctions of 19th century began to break down with the rise of the middle.
        Before that there was very clear delta between the ”lords and ladies – including royals, etc.” who basically owned everything except ”the shared commons,” and they began to fence off those areas and claim them too, sending millions into complete poverty and early death.
        They also owned WE the PEONs, AKA serfs or peasants or effectively so,,, and now appear to be wanting to do so again, though perhaps as ”wage slaves.”
        Various folks have defined middle class by income or assets or social hierarchy or type of work done since then, but what are we to think as ”sales folks” and carpenters and plumbers and other skilled manual laborers begin to make more money than doctors and architects and lawyers, etc.?

      • Jake W says:

        is this a joke? people making $140k-$200k are not making out VERY well, or even well. first, you have to remember that they are income capped out on a lot of “benefits” that the lower incomes receive. they often have very high child care expenses, as their jobs tend to be much longer hours. not to mention that they pay significant income taxes, unlike the de minimis amount people making $60k with children pay.

        further, when it times for their kids to go to college, they get no financial aid or government grants.

        the top 1% are doing very well, but that does not include the group you mentioned.

        • Winston says:

          To all discussing what “middle class” is:

          “Middle-class status isn’t based on income alone. It also depends on your household size, location, and other factors.”

      • hillcountry says:

        Mother Nature may have a few surprises for them.

        40-month lead times just quoted for utility power transformers.

  3. Forrest Grump says:

    Devil’s advocate (for the middle class) here. So we loaded up on low interest home mortgages, home equity, car, RV, boat loans, and now we get to pay them back with cheaper dollars? Bonus!

    • Wolf Richter says:

      The dollars are the same. You only come out ahead if your INCOME in dollars goes up.

      • Depth Charge says:

        Wolf –

        Your salient point is lost on the masses. That’s how dumbed-down the US has become. The destruction of the purchasing power of the dollar does not benefit a debt-junkie when their income fails to keep up.

        • Stephen says:

          It depends on what a borrower used the dollars to purchase.

          If they bought dollars at 3-4% and then converted those dollars into cash-flowing hard assets, then an inflationary environment is perfect.

          If they bought dollars to finance personal consumption, they are probably in trouble.

        • Jake W says:

          stephen, how do you define hard assets? land? gold? crypto? shares of stonks?

        • Stephen says:

          Jake –

          Yes. Farmland, minerals, metals, pipelines, and the like. In short, physical infrastructure and the inputs such infrastructure requires.

          Obviously the average investor has to content themselves with indirect ownership of most – I can’t buy a natgas pipeline, but I can buy units in an MLP like EPD. Farmland is more accessible and is my preferred asset class in this framework.

          Anything that generates real cash flow in excess of inflation rates without demand being dependent upon ZIRP for its long-term viability as an asset class.

        • Jake W says:

          i agree with you fully.

          there’s just a lot of people who consider bloated shares in apple and google to be “hard assets.”

        • Stephen says:

          Jake-

          To be fair, ownership of those firms does by proxy represent ownership in “hard” assets in the form of physical server farms and the buildings in which the servers are housed. That’s the infrastructure of the internet, which is just as vital to modern Western lifestyle as plastic and natgas.

          But their primary enterprise value is derived from the incredible IP they own, the skill and knowldge of their staffs, and the gatekeeping / tollbooth function their products impose.

          Google is valuable because Google operates a tollbooth onto the internet. Their revenue is akin to taxes on smaller digitial firms, who cannot compete within their own markets without paying Google for customer acquisition flow.

          I dont own Google, but I understand why it trades at such a multiple.

        • Jake W says:

          understood, but much of their value is predicated on the bubble economy not imploding. where else will all of their customers (both businesses and consumers) get the money with which to pay them? i also think the markets are underestimating the risks of populist-led regulatory changes against bigtech.

        • Augustus Frost says:

          Stock ownership does not represent hard assets.

          It’s ultimately a piece of paper. It’s not debt but it’s still subject to default through bankruptcy.

        • Winston says:

          “Your salient point is lost on the masses. That’s how dumbed-down the US has become.”

          Agree on the dumbed-down part, but I seriously doubt considering where we’re currently at that the masses have ever paid much attention to or have ever been particularly knowledgeable about economics beyond their immediate purchasing power.

          For example, ask them who in the end actually pays those corporate taxes. I suspect the vast majority have no concept of a business balance sheet.

      • Mike Muller says:

        The whole point of raising rates is to control inflation through demand destruction. In practice this means bankruptcies, ruin, unemployment and misery for many (most?), until enough of their demand has been.. destructed? That’s basically a recession, if we are lucky. We are in the final stage of covering up the economic and financial collapse with money printing. Most people just don’t know it yet.

        • Wolf Richter says:

          A recession is a normal part of the business cycle. It means some decline in GDP for may be a few quarters, and some layoffs. Most people don’t even notice a run-of-the-mill recession. But everyone gets eaten by inflation. And it causes long-term damage to the economy. A recession is brief, and only impacts those who get laid off. But with the current 11 million job openings, over double the previous peaks, a recession might just mean that the job openings go back to normal.

          A recession serves as a cleansing process in the corporate world where zombie companies get restructured, and their debts reduced in bankruptcy court at the expense of investors. Afterwards they emerge in better shape and refreshed, as does the whole economy. That’s how it is supposed to be. The system works if you let it work.

        • ru82 says:

          @Wolf Good explanation.

          Mark Blythe also says you should not have TBTF companies . If you get to the point where a company is TBTF, than they know they will be bailed out and they will therefor be reckless. Just like the banks that got rescued during the HB1. He said the Government should have taken over the TBTF banks. Split a TBTF bank into two. One with good assets and peoples deposits. The bad bank would have all the bad assets that would be privatized.

          That way all the execs get fired. New execs are hired. The bank is smaller. The bad assets are privatized because the bailouts by the FED was basically privatizing the assets anyway.

          By saving the TBTF, the execs kept their jobs and got nice bonuses and no harm to their paychecks.

          He mentions that bailing out TBTF is essentially socialism or communism where the Government picks who gets saved and its not capitalism. Capitalism allows for bankruptcies.

        • Sunny129 says:

          Wolf R

          ‘That’s how it is supposed to be. The system works if you let it work’

          YES! They didn’t let it, since March of ’09. The good old genuine Free Market Capitalism was put to rest by the most ‘reckless’ ever Fed. The Congress, WH and the wall St +banks are complicit in this tragedy. A day light robbery was approved by the policy and regulators at all level! Hardly no objections, b/c TINA!

          What now?

          Mkts went up on CPI of 8.5 yesterday and again today on the release of PMI of 11.2, all on record! Mkts remain disconnected from reality b/c Fed is still in charge!

        • Kurtismayfield says:

          Re :Wolf

          The problem is that our economy doesn’t have a true business cycle. It’s the non connected that get screwed, while the connected/TBTF get saved. So we are not actually going to affect zombie companies, and the little people get @#$&ed the most.

        • Winston says:

          “That’s how it is supposed to be. The system works if you let it work”

          “They didn’t let it, since March of ’09.”

          Since long before that. Moral hazard created prior:

          “The ‘too big to fail’ theory came into play… when the Federal Reserve intervened to rescue the giant hedge fund Long Term Credit Management. The fund, initially a huge success when it was founded in 1994, lost more than $4 billion in 1998. The Federal Reserve put together a bail-out by the major creditors to avoid a wider collapse in the financial markets.”

      • drifterprof says:

        Wolf –
        Thanks for pointing out that fact about debtors not benefiting from inflation if the their income stays the same. I hadn’t been aware that fact.

        A question that occurred to me whether increasing inflation has on the rate at which a debtor would want to pay back a loan. For example, my niece has a $20,000 student loan from getting a Master’s degree. Normally, a saver type person would try to pay off a loan as fast as possible to save on the interest. However, she has started a business and paying off the loan slowly would give her more capital that might help get the business running profitably.

        In general, would increasing inflation be a disincentive to paying off a loan quickly, if one could utilize the money efficiently? For example investing the money (that one does not pay off a debt quickly) in bonds yielding significantly higher interest than one’s debt servicing charges.

        • Stephen says:

          Absolutely yes. If you she bought dollars at an intrest rate below the depreciation rate of those same dollars, she should be in no hurry to pay down the debt. She will be paying the debt with future dollars, which have lower purchasing power than the current dollars she borrowed.

          If i buy a dollar and use it to buy a hamburger. Then 2 years later i only have to pay back the dollar equivilent of half a hamburger…the bank paid me half a hamburgers’ worth of dollars to hold those dollars.

          The corralary is… the dollars must be converted into an asset, not used for consumption. Income and cash flow must rise commiserate with the inflation rate to maintain her personal purchasing power.

      • Shiloh1 says:

        39 years ago 3 month CDs were paying 18%.
        The system isn’t broke; it’s fixed.

        • John H. says:

          Shiloh-

          “it’s fixed”

          ???
          39 years ago Federal gross debt was about 40% 0f GDP. Today 3 times that (or more!)

          Neither fixed nor sustainable

        • VintageVNvet says:

          think he means ”fixed” in the sense of crooked or corrupt, etc., eh

        • John H. says:

          Thanks Vet-

          I’m a little slow!

        • Nathan Dumbrowski says:

          Confucius say
          Dog who gets fixed
          Has no balls

    • thefalcon says:

      Yeah Forrest but the cost to fill up the gas tank in your car, RV and boat has gone way up. The cost to maintain and repair vehicles has gone up. Same with maintenance and repairs to your home. And the price of everything else you are buying has gone way up. Unless your take home pay is outpacing all this inflation, there is no bonus my friend. I’m sorry to say.

      • Augustus Frost says:

        The prior post also assumes that all these people will still have their jobs. No reason to assume that either.

        Rhetorical question, what’s it like to have your expenses increase noticeably with little or no income?

        • NickL says:

          Millenials (and Gen Z) hate white males over the age of 45 unless they are outwardly woke and a member of LGBT+ .. A record number took (more like nicely forced into ) early retirement..
          Millenials now outnumber boomers in the workplace..

          If you are unemployed over 45 and caucasian and not what mentioned above, try finding another job anywhere. I don’t even see anyone over the age of 20 or 25 working in retail anywhere anymore.

          Marketwatch.com has article after article about how ‘The Millenials” have the ‘retirement thing “all figured out”, how their wealth will well surpass that of the boomers etc..

    • 2banana says:

      You are playing the debt game.

      You hope to time debt so perfectly that you can pay back old debt with much, much cheaper new money.

      This assumes your income goes way up.

      This also assumes you can make the debt payment, in the meantime, while paying much, much more for everything else.

      It’s a fools game for all but the 1%ers.

      • Hal says:

        Exactly. The 1% can safely speculate, to a degree, with cheap money.

        People depending on paychecks are playing with fire when they underestimate the element of risk.

      • ru82 says:

        I think Forrest was just pointing out a positive. Your income does not have to go way up. It just needs to stay level or go up some.

        Looking back at history, average middle class income, except for a couple of short recession in 2000 and 2009, has increased YOY.

        People who did take advantage of low mortgage rates will and are benefiting from the current inflation if they have a stable job . Now the RV, boat, or car loans on depreciating assets. So I would not so much include them as a benefit. Better to always pay cash if you have it.

        As always, if you can pay cash for something and not go into debt is the best scenario.

        But if you can borrow at artificially low rates and buy a good asset, why not?

        • Augustus Frost says:

          According to FRED, “real” median household income increased 6% (in total, not annually) between 1999 and 2020 or 2021. That’s assuming the deflator is accurate which many do not. That’s essentially no increase for an entire generation, probably the worst aggregate performance in the entire history of the country.

          This also occurred during the biggest asset bubble and loosest credit conditions in human history and with most or all incremental “growth” since 2009 correlated to increased deficits.

          Face it, the real fundamentals are terrible and have been for years.

      • Stephen says:

        Not at all. Inflation is good for anyone holding low, fixed-rate, long-term debt. Mortgagr holders are the big winner among “regular” Americans.

        It should not be possible to buy dollars at rates below inflation. We are living thriugh a unique and very temporary circumstance.

        Assuming, naturally, the dollars were used to purchase a cash-flowing asset and my personal income rises in line with inflation. For a small biz owner, this assumes you can raise prices in lije with general inflation. For employees, this assumes individual can leverage higher pay.

        Many “regular” people benefit from high inflation. Many other people will be crushed.

  4. John V says:

    I thought Bush/Cheney DISPISED the middle class back when they ruled,
    Bush could’ve appointed David Stockman as President of the FED, instead he chose that egomaniacal idiot Bernanke, who claimed he could reverse his no-interest policy at any time, and look how THAT turned out.
    For many of us late in our retired lives, our financial lives have been ruined.

    • Anthony A. says:

      “For many of us late in our retired lives, our financial lives have been ruined.”

      How true. We are shocked by the increases of everything going up. And our puny SS raise this year won’t cover much, if any, of it. It’s a good thing we have a paid off home, but I have a feeling taxes are going up along with utilities and anything we need to buy to keep the place in good condition.

      • kam says:

        When the Government and the Fed adopted “Too Big To Fail” instead of “too bad you gambled and lost” for the likes of Goldman, etc., at great cost, both personal and financial, we started shrinking our asset and cost base. Now 10 years later, we contribute very little to the economy, have eliminated all debt, reduced necessary expenses to food and property taxes, and are now just watching the world crumble around us.
        Sheer, abject idiocy controls politics and the economy and my services are either priced at 4 times the cost of 10 years ago, or I spend my valuable time reading History of ignorant Princes and the Madding Crowd.

        • historicus says:

          Far from the Madding crowd…and they kept the noiseless tenors

          People just dont know that inflation is theft, and promoted to a degree by a Fed charged with “stable prices.” Get long pitchforks and plywood.

        • phleep says:

          Wolf: “consumers have been playing along eagerly, having switched from being fairly astute buyers and price shoppers to paying whatever.”

          The madness of crowds means my neighbors’ voting (their dollars foolishly) will crush me financially. I have got leaner and harder, and expect to keep doing so ….

          There was a trendy phrase, the genius of crowds. No, it is the madness.

        • Augustus Frost says:

          I avoid wasting money, but at some point under the circumstances you described, I am leaving the country if I wasn’t working.

      • VintageVNvet says:

        Really too bad TX does not have the same fair property tax policies as FL and even CA have AA…
        Was just telling my better half that except for the crazy property taxes in TX, we would be moving there into the ”hill country” to the NW of your location, as I consider it one of the most beautiful places in the USA…
        But, as reported on here, property taxes doubling and triple in one year,,, no thanks.
        Feel quite sure that’s why ”this time is different” may be true with re all the folks moving, in spite of the heat and humidity, to FL to avoid absurd taxes in NY, IL, etc.

        • Gattopardo says:

          TX gotta get its revenue from somewhere. No free lunches…

        • Anthony A. says:

          VVN, our Texas prop tax averages 1.82% of assessed value. In our 2,000 SF brick and Hardiplank ranch house (20 years old), in a HCOL area, my tax bill is about $4,000/yr. But, we have NO STATE INCOME TAX and NO CITY INCOME TAX and it’s pretty reasonable to live here.

          Homes here sell for about $175 SF and in nicer areas, maybe $225 SF.

          I’ve lived in California and Connecticut and taxes and day to day living expenses were way higher.

          Plus, we don’t have Florida Man like you have in FL. (kidding of course).

        • KWHPete says:

          “my tax bill is about $4,000/yr.”

          And you are still being ripped off.

          Our real estate tax bill on a A$1.2 million dollar house is A$1800 a year and that includes the garbage collection fee for a year and the fire levy as well.

          And we are in a high cost area as far as real estate taxes are concerned. Other areas with higher valuations pay even less.

      • TXRancher says:

        Anthony A.
        Being in Texas you have the option for the over-65 tax exemption which reduces appraisal by $xxk (dependent on county) and freezes your current tax rate. Any new increases are limited to any improvements or structures you add after the freeze.

        • Anthony A. says:

          Yes, I have that tax freeze plus the Homestead exemption.

        • RedRaider says:

          We have a thing in Wisconsin where property taxes are reduced a little by the states gambling revenues. My reduction was $2700 to $2500. Not much but every little bit helps.

    • cas127 says:

      Ah, the genius of Zimbabwe Ben Bernanke, soon to be hanging from a helicopter near you.

  5. zr says:

    I once commented here on “google trends”, interest in the word “inflation” was the highest it’s ever been. Now every month the cpi data is released, it hits a new record. Everyone here knows about the “inflation mindset”. We are about to be Weimar thanks to JPOW. BTW Peter schiff saw that comment and tweeted about it but didn’t give me credit. Apparently he reads this blog too.

    • Shells says:

      Never know who reads this blog. A lot of wisdom here.

    • SnotFroth says:

      Speaking of spreading inflation mindsets, Reddit’s infamous r/WallStreetBets was filled with inflation memes yesterday. Most of them mocked the Fed for being incompetent.

      Not the type of wide spread public awareness that JP and crew want…

  6. SoCalBeachDude says:

    Most all companies will find out real fast that people just stop buying goods and services when the prices become unacceptably high and their sales will slow substantially and many will simply go out of business.

    • phleep says:

      The cure for high prices is high prices. If only, with no Fed put!

    • ru82 says:

      When does the U.S. consumer ever stop buying things. That would be first . They would rather charge up credit cards and then not pay. I know too many people who have taken that path.

      The 2009 bailouts of the TBTF banks changed the moral compass for many in the U.S. for the worse.

      I am guess what you might see is substitution. I cannot afford steak so I buy hamburger. I cannot afford a shirt at Nordstrom but I can buy one at Walmart.

      The Dollar stores took off and had great earnings during the 2009 recession while the expensive retailers took a hit.

      But yes. People will change their habits with high prices.

    • Flea says:

      Then government will lose tax revenue,followed by a snowball effect of deflation

  7. Crush the Peasants! says:

    Forget stonks and RE. Canned yams is where it is at now!

    • phleep says:

      Strikes by grocery workers are spreading around here. I am stocking up on high-protein foods with long shelf-lives.

      • rick m says:

        Why are grocery workers striking? Hopefully you and others are well stocked already and just maintenance buying to date-cycle what’s already in storage. Don’t rely on paper labels on canned food in flood zones. Sharpie the date on the end and side.
        It’s easier to read and managing food storage takes some thought. Don’t tell a soul unless you plan to feed them. Weimar Germany was a homogeneous population, conforming and well-behaved, whose economy was destroyed. They came unglued, the mores of civilization that defined them disintegrated. Because they were hungry and cold and the government couldn’t fix it. We’re not homogeneous. Race-baiters and class demagogues make a good living by exploiting our past and present differences. Not really conforming or well-behaved either. And boy howdy do we have some guns. Diplomat’s and journalist’s kids at school told us what the Soviet Union was really like in the early seventies. I read Alexander Solzhenitsyn when his books made it into print.”We didn’t love freedom enough” has stuck in my mind for decades.

  8. SoCalBeachDude says:

    There really isn’t much at all that the Federal Reserve can do other than to cut back significantly on purchasing US Treasuries for its balance sheet and to raise their policy guidance rate to around 10%, neither of which would have much affect at all, other than to create a brick wall for the deficit US federal government spending an a recession / depression for the US economy.

    • Confused says:

      The Fed can sell its inventory of long-term bonds, which will allow long-term interest rates to find their true level.

      People who overeat eventually need to diet to extend their life to something approaching normal. Dieting causes hunger, which is unpleasant. The alternative often is a stroke or coronary. Sadly, a recession is the usual result of going on a financial diet after years of indulging on all that fattening cheap money. The alternative might be a depression.

    • SnotFroth says:

      There’s something important the Fed can do: stop hyper-charging demand in the face of limited supply.

      The big brains at the Fed are supposed to anticipate these issues even if they can’t directly control them. And if our monetary policy is so sensitive to commodity prices maybe they should factor those markets into their thinking a bit more before mashing the easy money button.

      Geopolitics isn’t their forte but Russian tanks were massed on the border for I think about six months. Long enough that it shouldn’t have come as a surprise to 500 PhDs.

      Even a layman could sense that they were playing with fire when Powell said that they would let inflation “run hot” to make up for prices being too stable/low in the past. This is looking more like the result of hubris than black swan exogenous events.

  9. unamused says:

    One must pity the children, knowing they have no future. Wall St. confiscated it.

    Coming up: catabolic capitalism, explained thusly:

    It is always a mistake to feed the rich. It only makes them hungrier. So once they’ve scarfed down the middle class and bled the planet dry they’ll feed on themselves, like Ungoliant, who in a final fit of famine devoured herself.

    You can watch it happen in real time.

    • AK says:

      Profound point about feeding the rich. Very true.

      • phleep says:

        Anything that gets subsidized (that gets a free ride) multiplies, like pigeons. Then comes the inevitable collapse of subsidy, one way or another, and what biologists (and Malthusians like me) call a “die-off.” Alas, it is true for the poor, as mismanagers of their lives, as well. Sort of like Laugh-in, now we can stage a “die-in.”

    • Depth Charge says:

      J. Paul Getty, the world’s richest person for quite some time, installed a pay phone inside his apartment so his guests had to pay to make a call. Rapacious greed is a recurring theme with these types.

      • Harvey Mushman says:

        I visited the J. Paul Getty Museum in Santa Monica about 5 years ago. When I got home I did a little research on him. Holy Cow what a tragedy his life was. Not just him but his kids as well.

        • Depth Charge says:

          His children and grandchildren are a case study in the insidious nature of generational wealth, which promotes idleness and debauchery.

        • phleep says:

          Plenty of new candidates are showing up for the surreal, hallucinogenic self-indulgences and misadventures of the hyper-rich.

        • rick m says:

          Visited the Getty five times last century. It’s the reason to LA, along with the Huntington, MOCA, LACMA, and Fightertown. May have missed some.

    • Bubble Man says:

      Funny thing is that you guys are the rich. Compare your wealth to the rest of the world’s population.

      • Levi C. says:

        Far out, man

      • Jeff says:

        So shall we all endeavor to become the median of the world’s population?

      • RedRaider says:

        Hahaha!

        Sort of like my reaction to watching the movie Who’s Afraid of Virginia Woolf.

        “geez, I thought I had it bad”! It’s very uplifting.

        • SK says:

          I’ve read that most Americans are in the top 10% wealthiest of the world’s population. The 10% wealthiest Americans are probably in the world’s top 1 or 2%. Most of us have a very comfortable life.

          There are still a billion people on the planet who don’t have electricity. I think it’s fantastic to have hot and cold running water, a warm house in the winter, plenty of food in the kitchen, the internet, etc. Such a fortunate life.

          I’m

  10. Maximus Minimus says:

    Every time I read a new article here, I decide to do strategic purchases. I am not sure if this site is not designed to pump sales. /s

    • unamused says:

      I’m going to privatize the atmosphere and charge people to breathe. I should do okay until the competition eats me alive, for I be crunchy and taste good with ketchup.

    • AK says:

      Its quite obvious that this website is not designed to pump anything.

      You need to look (in addition to this one) at other blogs that offer counter-arguments, and make your investment decision based on the totality of opinions.

      • Maximus Minimus says:

        Is your sarcasm detector is off, or you missed the sarc sign?

      • unamused says:

        Sorry, AK, but your approach relies on at least two fallacies:

        1) Every opinion is valid – even when they contradict, which can’t be true.
        2) Averaging every opinion leads to the correct answer, when there is no reason to believe it would.

        Sloppy thinking. You need to do better.

        • VintageVNvet says:

          Agree una, and will add: Even though a commenter may not know the difference between, say, effect and affect, that does not affect the potential truth of the comment, eh?

  11. Kunal says:

    The only question I have is, will they ever go to jail for this crime?

    • KPL says:

      And the answer is No. They will get another term or will be on Job rotation – Like Yellen – Fed Chief then and now Treasury Secretary.

      2009 was the turning point for capitalism and spewing of moral hazard.

  12. SoCalBeachDude says:

    One really good thing about ‘inflation’ is that it quickly sucks up a lot of excess money in economies and results in significantly improved corporate earnings as we are now seeing with the major oil companies which are earning tens of billions of dollars in windfall profits and that makes their stocks much more desirable and investable from a fundamental standpoint.

    • Nate says:

      I don’t see how they’ll continue to do that if their costs rise at the rate of inflation too. The windfall is just that – short term blast off then the expenses will catch up. Comparables may not be so nice then.

    • Cem says:

      Yes thank god oil companies are even more wealthy. They didn’t have enough money to throw at lobbyists before.

      • ru82 says:

        FYI…..don’t invest in oil companies. They underperform oil the asset in the long run.

        They don’t go up as much as oil and they drop more when oil drops.

        Then many go bankrupt.

        But the executives always come out in good shape

  13. 2banana says:

    TRANSATORY…

    PEAK…

    What’s next?

    It’s PATRIOTIC to suffer???

    LENTILS! And let your pets die.

    And I am not making that up.

    • Anthony A. says:

      @B: Years ago, when I was working in Jakarta, Indonesia for a spell, I never saw any dogs or cats among the population (the poor). I was told pets are consumables if one happens to acquire one.

      • Harvey Mushman says:

        That reminds me of the story my Mom used to tell about her cat. My mom was born in Zug Switzerland in 1931. She said that when WW2 was raging, there was a shortage of meat. One day her cat disappeared and never returned. She said they all knew that somebody caught the cat and ate it.

        As a kid I was a pretty “fussy” about food. I would complain that there was nothing good in the house to eat. She would say “You don’t know how good you have it!”
        She was right.

      • Maximus Minimus says:

        I always thought that’s how Flogs must have discovered frogs as delicacy. :)

    • AK says:

      If I recall it correctly, the evolution of prevailing economic opinion went like this:

      – there is no inflation
      – little inflation is a good sign that economy is improving
      – inflation may be elevated now but will be transitory
      – inflation is high now but it has reached the peak

      What hasn’t been used but may be used soon:

      – inflation is high in US but even higher in the rest of the world
      – inflation must be tolerated for the sake of some big cause (variant
      of yours “patriotic”)
      – you bastards consume too much, inflation is needed to set you right, for your own good

      Other commenters can add to this.

      • Shells says:

        Inflation as an impetus to labor efficiency- those who can negotiate for a higher wage, will get it. Others will see their real wages decline, and may find that as an added incentive to pivot/retrain in a field and skill set with where there is substantial and real labor market demand.

        Gotta love that spin! The people
        Gonna have to make their own lemonade.

        • Shells says:

          That said, I already feel poor and this inflation is not helping at all. We are in a dire situation right now.

          Im just trying to be thankful that I am not having to fight for my home in Ukraine right now.

      • SnakeEater says:

        You forgot that whole month long bit about base effects. When it first started kicking off last year at this time, Yellen and Powell were making the rounds on TV saying don’t look any deeper folks, just base effects is what you’re seeing.

        • AK says:

          You are absolutely right, I forgot “inflation is high due to base effect” narrative. Thanks for pointing that out.

    • Wolf Richter says:

      I love lentils. In all their forms. When done properly, they’re delicious. I wish people would quit dissing them as some kind of inferior product.

      • El Katz says:

        Be careful eating lentils in CA. You’ll be arrested for contributing to global warming due to excessive flatulence. :-D

        • Brent says:

          Ahh the riots in the high school canteen with our clique chanting:

          Beans,beans, they’re good for your heart !!!
          The more you eat’em the more you …

          On the other hand our glacial Prom Queen inspired us to write poetry:

          There was a young lady who’s joys
          Were achieved with incomparable poise
          She could have an orgasm
          Without ever a spasm
          She could f… without making a noise.

        • Wolf Richter says:

          El Katz,

          I’ve been eating lentils all my life. My digestive system is used to them. No problem. Same with beans. It’s only when you never eat them, and then suddenly you do, you might have a problem.

        • DR DOOM says:

          Lentils with Texas Pete, corn bread with fresh butter from Bessie and Cole slaw with slices of Vadalia Ga. Onion and Tomato slices. This is a treat when the garden comes in. Can’t wait.

        • rick m says:

          Sporting goods companies in Munich organized weeklong ski trips by bus into Alpine villages throughout Bavaria and Austria in the sixties and seventies. They believed that lentils made you ski better. Or something. Sure served a lot of them. I’ve gotten along without them ever since.

      • Hal says:

        Red beans and rice with andouille sausage (or any smoked sausage for that matter) is a freaking delicacy.

        Cuban style black beans rock too.

        Baked beans with brown sugar and bacon.

        Butter beans with lots and lots of butter.

        And on and on.

        Yes sir! “In all their forms”

        • VintageVNvet says:

          beans beans the magical fruit
          the more you eat the more you toot
          the more you toot the better you feel
          so eat beans for every meal

        • khowdung Flunghi says:

          Yep, legumes – properly prepared and seasoned – are a true joy! I grew up eating lots and till this day, Popeye’s Red Beans & Rice is my go-to comfort food. Lentil or split-pea soup can be amazing.

        • drifterprof says:

          Developing a apicy Indian Red Lentil Dahl recipe as go-to dinner dish is on my list of tasks.

      • Duke says:

        Latest nutrition facts dot org videos highlighted lentils, chickpeas, soy and black beans for anti cancer properties.

        And us Plant based eaters like to point out that it’s much cheaper, healthier, environmentally friendlier, to cut out the middleman (animals) and get your protein from plants, the original clean source.

      • Swamp Creature says:

        I had some lentils with spinach soup the other day at my Irish Pub. Was great. I should have taken an extra portion to go. I’m going to tell the chef to have it served more often.

      • Harry Houndstooth says:

        I’ll second that. I use a pressure cooker and lentils and beans. (Inactivates the lectins.)

    • historicus says:

      If it is patriotic to pay your taxes……
      then how do we depict the systematic depreciation of the nation’s currency by the Fed?

  14. AK says:

    What would it take to break the “inflationary mindset” that Wolf is talking about ? Hard market crash ? Pronounced decline in the housing prices ? A recession ? What could be the least painful way to bring inflation down ?

    • Poor like you says:

      Eventually, prices will simply rise beyond the ability for low income folks to pay, even by going into debt. The entire economy doesn’t have to come unglued for things to go to heck and a hand-basket, either. The bottom 50% of household wealth is millions and millions of people, and we’re all broke as hell.

  15. Miatadon says:

    The wrecked economy and hyperinflation will result in no Democrats winning elections. But the sad thing is, the Republicans will punish the poor and middle class, and reward the rich even more than the Democrats. The major difference between the two parties is that the Democrats are kind enough to use Vaseline.

    • Escierto says:

      Exactly right. The Democrats are going to be annihilated in November but those who replace them will be even more willing to screw us. Literally there is no one who represents the average guy.

  16. Bobber says:

    The markets are laughing at Powell today. Interest rates down. Commodities and gold way up.

    Powell has waffled and folded so many times, nobody believes he’ll actually raise rates in any meaningful fashion.

    You can send 10 Fed officials out to talk hawkish, but history shows they lose conviction quickly when the possibility of a recession arises.

    • SoCalBeachDude says:

      It really doesn’t matter a hoot what the Federal Reserve does with its Federal Funds policy guidance rate which strictly affects overnight interbank lending. What matters are the yields on US Treasuries which are up 10 times what they were a year ago and are now at around 2.75% on the benchmark 10 year US Treasuries and will be headed much higher over the course of this year.

    • SoCalBeachDude says:

      Preposterously overpriced gold has barely even moved today an is up only $3.20 at $1,970,20 and will be rapidly reverting to its mean of $456 and the headed even lower.

      • KWHPete says:

        It that another one of your predictions that is going to fail miserably?

        Tell us how that oil prediction of yours the other day went……..

        Oh yeah, according to you oil was heading down the dumps and never going to go up again.

        Well my dear sir, it is now about US$10 a barrel more than that already.

        Gold should be over US$3000 an ounce and probably would be except for all the corrupt paper trading going on. How many billions in fines have there been for firms engaging in illegal market fixing and activities recently?

        When things don’t go according to the plan, the big boys just change the rules as was done with nickle after it soared

        Sooner or later the same thing is going to happen in the gold market and it is going to soar in price when they can’t hide their actions. Unfortunately for them, the gold market is too big to control after that happens.

  17. Swimmer says:

    The inflation figure that almost always gets quoted is the CPI-U, however the CPI-W is described as what is appropriate for urban wage earners (of which there are lots), and Social Security recipients (of which there are lots)(CPI-W is used to calculate the COLA for Social Security). Because the CPI-W figure applies for so many Americans, I wish that figure was quoted more often, as for March it was 9.4%, and has been higher than the CPI-U figure quite often in recent history.

  18. John Apostolatos says:

    “And companies have figured out that they can not only pass on the higher costs, but under cover of the now blooming inflationary mindset, they can pass on a lot more than the additional costs, leading to huge fat profit margins.”

    I am not sure about this Wolf. I am seeing demand destruction all around me, I am in the upper middle class category. Most of us have had enough are are cutting back on everything we can.

    • Escierto says:

      I agree. I have enough money to buy whatever I want but I refuse to pay some of these prices. Maybe it’s the Scottish in me but enough is enough. Time to hunker down and eat beans and franks.

    • unamused says:

      The evidence supports the statement. You’re relying on the fallacy of composition and have no alternative explanation for high corporate profits besides.
      Sorry.

      If Mr. Richter has ever made an invalid argument or claim, I cannot recall it. He nevers strays far from the data and isn’t given to conjecture.

      • John Apostolatos says:

        “If Mr. Richter has ever made an invalid argument or claim, I cannot recall it.”

        Really? Wolf shorted the market too early by his own admission, and had the decency to admit it.

        I, Who Hates Shorting, Just Shorted the Entire Stock Market. Here’s Why
        by Wolf Richter • Jun 19, 2020 • 429 Comments

        • unamused says:

          John, a bad investment decision does not constitute an invalid argument or claim.

          When someone believes themself to be proving one thing, but succeeds in proving something else instead, they commit ignoratio elenchi. Your conclusion is validly proved. But it’s the wrong one.

          Just because you make a DoorDash delivery on schedule doesn’t mean the delivery was successful. It must also be to the correct address.

    • TXRancher says:

      I think the prudent people are cutting back exactly as you say. But a large majority of others are just adding it on to the credit card debt.

      • Wolf Richter says:

        Have yawl tried to fly some place domestically? All heck has broken lose … a gazillion people are going a gazillion places, mostly leisure travel (business travel and international are still down). And San Francisco is teeming with leisure tourists (conventions/business tourism, the expense account kind, is still down). People are spending lots of money on SERVICES now; before they’d spend money on goods while staying home. And ticket prices are sky-high. And people don’t care. They’re still buying those tickets.

        That shift from buying goods to buying services was expected to happen much sooner after the lockdowns. It was slow in making the transition. But it’s in full bloom now.

        So we’ll see a decline in durable goods spending and a big increase in spending on services. We already saw the signs of it in the last consumer spending data. And we’ll get more of it. Spending on services is the biggie in the US economy.

        • Hal says:

          Y’all, Wolf. Awrighten?
          Or come rat chair and I’ll splain it.

        • Flea says:

          Lots of people like me had airplane tickets bought and paid for ,when Covid hit,used them recently,a lot of older people in same boat .So some of this traffic is fake bewAre

        • Wolf Richter says:

          Flea,

          Not that simple.

          My wife just flew to Japan on United, after her ticket for April 2020 was turned into a “credit.” The credit was for the cost of the ticket at the time = $950, for a direct flight from San Francisco to Tokyo Haneda. When she bought a ticket this time to fly to Tokyo Haneda, the price had jumped to $2,100, and after the prior ticket credit, she had to pay $1,150.

          She would have flown to Tokyo EVERY YEAR had it not been for Covid. This wasn’t a “fake” ticket sale. There was NO additional ticket sold. On the contrary. United missed 2 flights by her (2020 and 2021) out of 3 flights by her (normally 2020, 2021, 2022), and then ripped her off on the one flight she did take in 2022.

          This happened a lot. People would normally fly every year. But then they didn’t fly for two years. And now they’re flying again. But it’s not a make-up flight for the past flights not taken. Instead they’re normal flying patterns are back, meaning they’re taking flights that they would have normally taken this year anyway.

        • VintageVNvet says:

          thanks Hal,,, almost saved me from,
          now lissen up y’all,,, it’s all y’all doing this stuff,,, and y’all better just quit LOL

        • KWHPete says:

          What?

          No huge stash of FF miles on United to use for a ticket?

          I would have though that the high flying Wolf Enterprises and Co had hundreds of thousands of them stashed away from running a successful business and charging everything to increase the balance.

          Just think how much you could have saved!!

          Here in Australia Qantas must have unfunded liabilities in the billions with their FF program as we have had basically no international flights for two years now.

          We have enough saved up for more than six round trip flights to the USA, but who wants to visit there or travel with all the paperwork and bs involved!

    • Greg Penzky says:

      Yep. The more they print, the more I make, the less I spend. Gotta starve the Beast.

  19. thefalcon says:

    The only way to stop the ever resilient, relentless Great American Consumer is to take away the punch bowl, break down the table, shoo everyone out of the ballroom, shut off the lights and chain the door. Even then many will scratch at the door to get back in.

    I was at Ross Dress for Less a few weeks ago to buy some socks. There was a lady in front of me in line. The line weaved through shelves filled with trinkets and such. She was selecting trinkets, in addition to the clothes she was buying, then deciding she really didn’t want that trinket, then seeing a new trinket, putting one she already had back on the shelf and adding the new trinket to her pile, rinse and repeat. It was horrifically comical to watch. This went on for 5-10 minutes of waiting in line. The Great American Consumer.

    • Nunya says:

      In retail lingo, it’s called the impulse section. It used to be up front by the cashier, but someone figured out that if you made them wait in a chain of impulse sections, they will buy more. If we were late or pissed off the boss, we would get impulse section duty when I worked retail back in high school and college.

    • TheRealMRDyno says:

      My wife is at the point where she carries something around a while in a store, then puts it back, having accelerated the buy, don’t use, be disappointed, throw it away process to just a few minutes of walking.

      • phleep says:

        This is the artifact of hunting and gathering, then ruminating behaviors. It’s benign, I think.

  20. nsa says:

    Famous quotes from the high priests of financial alchemy are always entertaining:
    Uncle Miltie Friedman stating the obvious: “Inflation is always and everywhere a monetary phenomenom, in the sense that it can be produced only by a more rapid increase in the quantity of money than in output.”
    Let’s hear from Miltie disciple, Bennie Sikorsky Bernanke: “….the probability of so-called helicopter money being used in the United States in the forseeable future seems extremely low…….however, should worst-case recessions or deflation occur, governments do have the tools to respond.”
    Apparently the dreaded wu-wu germ lockdowns constituted just such a worst case scenario requiring a massive helicopter drop of 6 trillion stimmie dollars down upon the masses of grateful asses.

    • phleep says:

      It was the pre-COVID (needless over stimulating) and post-COVID fiascos that really sealed the deal of incompetence. Mid-COVID in March there was a true market-wide panic requiring big loosening, with a completely unknown future. But not March ’21, etc. , by which time markets were detaching from reality, yet it continued with new, LOOSER Fed inflation guidelines.

    • John H. says:

      Another thoughtful quote from Uncle Millie:

      “Inflation is taxation without legislation.”

  21. SpencerG says:

    It would be bad enough if the Producer Price inflation had leveled out at December’s level. But all three of these charts show inflation at the highest level in years… and still going up!

    Amazing… but as I have said here before… Inflation Doesn’t Fix Itself. That is why all the “transitory” talk from last summer was bonkers. The Fed should have known better.

  22. Michael Engel says:

    1) Drain liquidity from the market is more important than raising rates : RRP = $1.815T.
    2) High labor, commodities, rent, energy, financial cost…are causing margin compression.
    3) Few businesses preempt, sell at peak prices, if they can find a buyer, because u never know what will happen next.
    4) Others are playing defense, partially liquidate, let go people, reduce assets.
    5) Most businesses will raise prices, because US consumers are suckers.
    6) If they survived when US was comatose, they will survive the high inflation. The ceo have been there before. He will lead under pressure, because he knows.
    7) The trend is up. Inflation to a new all time high.
    8) Recession probability is low.
    9) Most ceo will outsmart the inflation by buying low, now, to make a buck.
    10) Their decision is based on experts advise and their interpretation.

  23. John Burton says:

    What would the rate of inflation be in the US if they used the same method of calculation today as back in the early 1980s?

    • jon says:

      I read somewhere… it’d be ~15% plus.

    • AK says:

      Doesn’t shadowstats dot com does exactly that ? Calculates inflation using old government methods ?

      • Wolf Richter says:

        No. He’s using government stats and just ads a multiplier of sorts. He just makes it bigger. It’s a joke, and he said as much some years ago. His numbers are mathematically idiotic, as I’ve shown here several times.

        • AK says:

          Thanks Wolf, I didn’t know that. Appreciate you taking time to clarify this for me (and others like me).

    • Abomb says:

      I can’t vouch for the veracity of the data but Google Shadow Stats CPI. I’d post the link but I think that’s against the rules.

      • Augustus Frost says:

        Been mentioned here before, if ShadowStats inflation rate was even close to accurate, current American consumption levels would not be possible. Income and debt increases have been less or noticeably less.

  24. Brent says:

    =price inflation has now broken out – to use a stock trading term=

    ERUPT is much better word:
    to break out of a pent-up state, usually in a sudden and violent manner.

    Fed is like volcano erupting with $$$TTT’s of glowing QE lava.Resulting in the policy of scorched earth in the end.

    And stocks erupted today, to the tune of Eddie Van Halen guitar solo “Eruption” ! Yay ! What’s not to like ???

  25. DawnsEarlyLight says:

    Hit this with a very high adjustment to the interest rate, and massive reduction of liquidity. Do this, or we better find another yellow brick road. For the next year+, either way, we are totally screwed!

  26. DR DOOM says:

    Fed’s man Bullard got trotted out to tells us he has discovered inflation again. Bullard gave inflation a good tooth-less gumming. Threatend inflation with a big ol’ 3% rate by the end of the year. I wonder if their anti-inflation tool-kit is equipped with a set of industrial grade titanium false teeth . I can’t wait too see those bad boy’s start tearing chunks off inflation’s behind. I bet they are German Engineered with the finest Russian Titanium available.

  27. Tony says:

    For those waiting for a stock market crash, look at Venezuela. When inflation destroyed their currency recently, their stock market soared to new heights. Obviously the gains were phony, when valued in their currency.
    The same could happen here. I think the S&P could hit 6000 next year in an inflationary environment.

  28. ru82 says:

    Nat Gas is over 7 today. It hovered between 2 and 3 for 10 years.

    I don’t see anything that will cause it to go much lower in the next 12 months except the end of the Ukraine war.

    People will see 100% increase in their heating costs next year if they heat with nat gas.

    Like the Germany government told it citizens….wear sweaters. 60 degree thermostat in you house is not going to kill you if you wear a sweater.

    • tom20 says:

      You will have the producers ( East ) who will continue to build their economies with oil, coal, and nuclear.

      The West will build back green. I’m sure we will apply a carbon tax to the
      producers. Sweaters for the peasants…..made in …..

  29. Michael Engel says:

    1) Backwardarion : if u are lost in the Sahara desert u will pay $1000
    for a bottle of water. Next week : a dollar.
    2) Delta backwardation : Delta best booking in history. Will it last.
    3) Despite all the efforts the Dow is still a lower high < Feb 9 high.
    4) Can it change next week : yes. Will the Dow make an all time high : we don't know.
    5) Is it possible that after reaching a lower high, < Jan 4 high, luring investors, SPX will make a quickie to : 3,400 – 3,600 : yes.
    6) Keep your mind open to bullish/ bearish options. The markets can have an instant change of character, because it's extremely overextended.

    • Will V says:

      1) Unlikely the SPX will go under 3850 based on prior resistance at that level. As we all know the FED will continue to drag its feet to some degree on the QT and rate increases. ( cant raise 50 BP as Russia just lost their cruiser in the Black Sea or whatever nonsense they wish to make up). I agree with many that they will let inflation run somewhat hot but lowerat 5% mid/late 2022 stating “see it was just transitory”.
      2) Edge real estate ( Miami & Vegas 500K condos/ski properties and 550K+ midatlantic SFH) will fall before the S&P as they are less liquid and fear / rates will push sellers more than “retail” traders who will sell when they “breakeven” on their “carvana” shares. HODL all the way. Remember Lucid is still worth 36B. haha. Early trading lesson ” fool can take a profit, smart man knows when to take a loss”, not many can truly follow.
      3) Delta- US leisure travel will stay high for quite some time. everyone’s new YOLO is “experiences” (especially post COVID19). The Gen X, Millenials, Get Z like to fly places ( looks good on the “gram”) and drive 3 series BMW’s. They will rent a townhome and forego the 401K contribution to have that. also cant forget the great sushi places.

      P.S. ME: Love to decode you posts and you a great contributor as well as Wolf’s hard work here.

  30. Ben says:

    Oil companies not richer worst performing sector in Spx since 2008 and many have gone bankrupt and right now can not access the capital markets with many global pension funds dumping fossil fuel stocks and bonds.
    I love lentils been eating them for 5 decades.
    If one moves to Texas and buys in an expensive area (Austin;Dallas) then the starting tax rate max be frozen going forward but in some cases is 3 to 4 percent of a recent run up in price.
    65 plus in Texas for a few years are frozen but taxes are 2 to 4 times higher in Texas.
    Whack a mole for inflation I love that analog.

    • Anthony A. says:

      “65 plus in Texas for a few years are frozen but taxes are 2 to 4 times higher in Texas.”

      2 to 4 times higher than what?

      We also have no state income tax in Texas, but most states do have one. And it’s pretty high. Some cities even have an income tax, but none in Texas.

      65 plus taxes are frozen forever in Texas, not just a few years. We also have a Homestead exemption for all homeowners who occupy their residence.

      You need to do some research before posting inaccurate stats.

      • Escierto says:

        True. My taxes are frozen at a ridiculously low level for ever. I am an old coot with plenty of money but I pay a fraction (not even a thousand dollars!) compared to the ginormous property taxes my children pay (tens of thousands!). As in all things Texas is a disaster.

  31. Khowdung Flunghi says:

    Not quite sure how this is related, but have recently heard almost a sense of desperation among some retired Boomer friends. Depending on where they are on the age curve, some of them seem to have realized whatever dream they had for “old age” is disappearing into the mist. They are *desperate* to try to grab a piece NOW – travel, stuff, whatever, before it’s all gone, cost be damned! Many are going to find the ship has sailed…

    Count me among the legume lovers…

    • Flea says:

      Do you guys know that properly stored beans last forever !!!!!!!! Good luck getting water or fuel ,beans suck when not cooked

  32. KGC says:

    We have two GENERATIONS of consumer who have never been trained to save. They have never been told there’s no more credit. They are so deep in the hole they can never climb out.

    The coming depression is going to be world wide and ugly.

  33. Swamp Creature says:

    Jim Cramer said back in February 2022 that inflation had peaked and was transitory, and that JP was doing one “Heck of a job” . I wonder what he is saying now? Who the f$ck still listens to this clown?

    • Anthony A. says:

      Who listens to JC?

      I’m guessing the average Joe who knows very little about finance and markets and buys “stonks” because they will always go up.

      Listen to his call in’s during the session where he takes listener calls. You will get the picture.

      • TheAltonRoute says:

        One of the district sales guys stopped by the other day. He pulled up his portfolio on his phone. He had a bunch of tech stocks. Then he asked us what it means for the DJIA to increase or decrease. There must be a big number of people who are in the stock market but have no business being there…but for zero interest rates.

  34. random guy 62 says:

    Manufacturing truck parts… Our products saw between 20 and 50% price increases since the start of 2021. We have heard solid reports of others in the industry doing the same. Increases of 30-40% for truck equipment over 2020 is the norm.

    It looked like some of this increase was about to be given back as the cost of metals was sliding back to a reasonable level. With the Ukraine invasion, the prices shot back up and all the price hikes implemented in 2021 to stay afloat have hung around. Much like with lumber, these higher prices are staying for a while.

    If hyperinflation is defined as a 50% increase in the course of one year, the price of a few of our products could be seen as hyperinflating last year.

    I’m tired of hearing the silly line that inflation is the business’s fault… that we are being greedy by increasing price above and beyond what is necessary. There are two faults in that thinking. One is that we don’t all have a perfect understanding of costs. We have a REASONABLE understanding of them. We don’t have the personnel or the time to know every input cost down to the penny. When things go wild like this, we try to get close. When in doubt, we aim high. Another factor is that business ALWAYS want to charge as much as possible for their products. It’s the easiest way to increase profits. The problem is that we are usually held back from doing so by competition and consumers who will walk away from crazy increase. The desire to charge out the wazoo is ALWAYS present – nothing new here. The only thing that changed was the demand… and the willingness of customers to tolerate it.

    • Tom15 says:

      We have a generation accustomed to buying on the cheap. That shiny new public company that will make it up on
      “Volume”.

  35. Nathan Dumbrowski says:

    w/o the politics. I imagine the Pentagon saying we need x widgets STAT for the Ukraine support project. Last week you charged US Govt $100 each. Now $899 each. You want it bad you get it bad! But when it has to be there tomorrow there is a price. Inflation is a bitch

  36. KWHPete says:

    “This inflationary mindset suddenly bloomed and blossomed because of two huge unprecedented factors…………..”

    And just wait until the recent increases in the price of energy and commodities starts to work its way into the picture.

    Compound that with actual shortages and the inflation rate will probably hit over 10% in the USA in the coming months.

    And it will be even worse if the current war in the Ukraine expands and affects more markets.

    But remember, you all have to do your part even if it means freezing in winter and going hungry.

  37. Softtail Rider says:

    Enjoyed reading from the very beginning. Thanks Mr. Richter for the hard work and research to write this article.

    Thanks to all who raised the issue of a food shortage in the coming days. Growing up in South East Missouri after the Depression one would be amazed that I was thirteen years old before I saw a live skunk. During the Depression they must have been the last of the meat. Raccoons were another species in short supply. Rabbits of course had increased as coyotes weren’t around back then. My father called them Hoover hogs as he had his fill during that time.

    Another brought up the question of how we get out of this mess. I voiced my opinion about money defaulting to deflation in a prior article but didn’t get a response. So guess no one else thinks the US can default on our debt. Now I hear about government using blockchain for a “bitcoin.”
    Wonders never cease.

  38. CreditGB says:

    Reminds me of the exposed, peaceful beach, filled with pretty shells, just before the Tsunami rolls in.

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