“Defeating inflation is our mantra, our mission, our mandate,” and that’s “why we have to raise interest rates”: ECB’s Lagarde now, after years of money-printing and NIRP.
By Wolf Richter for WOLF STREET.
The overall inflation rate in the 19 countries that use the euro jumped to 10.7% in October, up from 9.9% in September, by far the worst in the history of the Eurozone data going back to 1997, driven by energy, food, non-energy industrial goods, and increasingly services, according to Eurostat today. Compared with the prior month, inflation spiked by 1.5%; on an annualized basis, that’s close to 20%!
In Germany, inflation spiked to 11.6%, based on the harmonized method used by Eurostat. Germany’s own CPI measure, released last week, jumped to 10.4%, the worst since 1951. In the three Baltic countries, inflation remained above 20%.
Inflation began spiking last year well before Russia’s invasion of Ukraine. Early 2021 was when the inflation dam broke globally, with the pandemic money-printing and deficit-spending binge still in full swing. The dam just broke, and inflation washed over the lands. In July 2021 in the Eurozone, inflation shot past the ECB’s target of 2%. It hit 4.9% in November 2021, and 5.1% in January 2022 before the war in Ukraine had begun. Russia’s invasion of Ukraine made the existing trends worse:
The CPI without energy components — so without retail price changes for gasoline, diesel, electricity, natural gas piped to the home, and other energy components in the basket of consumer goods and services — spiked to 6.9% in the Eurozone. This measure began rising in the summer last year, hit 2% in October 2021, and 3.1% in February 2022.
The ECB’s own horror show.
On Friday, to prepare for the public airing of this horror show that inflation in the Eurozone has become, Christine Lagarde, president of the ECB – the very entity that is in charge of this horror show – came out and said in an interview on Irish broadcaster RTE that “defeating inflation is our mantra, our mission, our mandate.”
She then tweeted about that interview, repeated that phrase, and added: “We know that the current situation is tough for many people across the euro area – that is why we have to raise interest rates to tame inflation.”
This statement is a hoot after she and her predecessor, Draghi, and everyone at the ECB, should have thought about that years ago, before repressing interest rates into the negative, which is a total absurdity, and printing nearly €7 trillion over the past seven years to load up the ECB’s balance sheet that now has €8.8 trillion in assets.
But at least, the ECB has gotten started. Last week, it hiked its deposit rate by 75 basis points to 1.5%, having now hiked by 200 basis points in three meetings starting in July, the fastest three-meeting rate increase in its history, and it “expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target,” it said. But this deposit rate of 1.5% is still kind of a hoot, with CPI inflation at 10.7%.
Inflation by Eurozone country.
In Germany, inflation spiked to 11.6%, an unthinkably high rate for Germans. But already in November 2021, well before Russia’s invasion of Ukraine, inflation hit 6.0% in Germany.
This was just after Bundesbank President Jens Weidmann – whose central bank has been helplessly watching and politely lamenting the ECB’s shenanigans – turned in his resignation in October, to become effective on December 31. He’d had it.
And yet, inflation subsidies lowered the inflation numbers. Across Europe, governments have come up with schemes, subsidies, tax cuts, and caps to reduce the bite of this inflation, particularly related to fuel, energy more broadly, and public transportation. Some of those subsidies have now expired, including in Germany.
In the three Baltic countries, there was a slight downtick in October, but CPI rates remained above 21% in all three.
|Annual CPI increase, October 2022|
This chart shows the inflation rate of each of the 19 Eurozone member states:
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RTGDFA before commenting on anything in the article. Commenting guideline #1
Its time to hold our politicians accountable as they clearly have made decisions that were against our interest. The best method is to encourage change is to vote-out the oldest politicians at the top in both parties: McConnell, Schumer, Pelosi, McCarthy.
Encourage newer candidates, parties (libertarians) and independents.
“Its time to hold our politicians accountable as they clearly have made decisions that were against our interest.”
Far too many people pay attention only to their wallets and any politician who “helps” with problems there, regardless of the inevitable, long term consequences of his actions, gets their vote.
On politicians in general, search for the humous, mock political video ad, “Honest Political Ads – Gil Fulbright for Senate.”
“The state — or, to make matters more concrete, the government — consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office. Their principal device to that end is to search out groups who pant and pine for something they can’t get, and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time it is made good by looting ‘A’ to satisfy ‘B’. In other words, government is a broker in pillage, and every election is a sort of advanced auction on stolen goods.” – H.L. Mencken (1880 – 1956)
Libertarians don’t fund anything. They are chronic ‘free loaders,’ and anti-government. You want to know where the inflation came from? Forty years of tax cuts and tax dodge loopholes is where it came from. A flood of inflationary spending right up to the upper class. Every asset class was in hyper inflation drive boosted by the flood of money the tax breaks and dodges unleashed. The pandemic lit the fuse.
@Leo Spot on!
“There is nothing which I dread so much as a division of the republic into two great parties, each arranged under its leader, and concerting measures in opposition to each other. This, in my humble apprehension, is to be dreaded as the greatest political evil under our Constitution.”
— John Adams, Letter to Jonathan Jackson (2 October 1780), “The Works of John Adams”, vol 9, p.511
I wonder how Germans feel about going from a manufacturing economy to a service economy like us?
Get ready for the decay Germany.No more 6 week vacations sine the new service jobs don’t pay like your old job.Plenty of drugs and alcohol will be brought in the ease the pain of the several steps down in living standards.
Is there a point where the people who create this mess actually get fired? That is the problem with government and big business, incompetence is never punished.
This is why I really only believe in entrepreneurship and sweat equity. You simply cant fake it when your butt is on the line in a small company with limited resources. You either figure out how to succeed, or you fail. But you dont get to pretend you are not to blame.
There’s an election next week, that’s how you fire them. Fire anyone who has been in the house for more than four terms and in the senate for two.
When the choice is between dumb and dumber, that’s not much of a choice. Responsible candidates get screened out by the DNC and RNC before the primary elections. All that’s left to choose from are scammy spendthrifts.
“Responsible candidates get screened out by the DNC and RNC…”
I know a couple of people who would make great office-holders, but have zero interest in running for election. So many “responsible” folks have better sense than to run for office, sadly. We’re left with the dregs…
Still waiting to see a documented case of voter fraud or illegal shenanigans that isn’t less than ten votes. Got anything with evidence?
This is actually not a bad tool (“All Out” elections) that I have thought about as well.
Most people don’t have the time to understand the details of every politician’s positions/records (and your average sociopathic politician works very, very hard to obscure both anyway).
Most people work hard just to survive and don’t have time/ability to dice with sociopaths.
They need an objective, easily understood metric by which to evaluate candidates. “Time already in office” ain’t bad.
Sure, “institutional wisdom” and committee tenure generated “power” (for whom? To what end?) would be lost.
But politicians (and all their familiars who populate DC) would soon be forced to stop viewing/treating themselves as an overlord “political class”.
(There is the issue of the permanent bureaucracy – but as politicians are forced to reintegrate back into citizens, they will soon rediscover the wisdom of policing/handcuffing the true political class of DC. As things stand now, our “elected officials” and the bureaucracy essentially operate as a coven).
Incompetence used to be punished, but that was back when credit wasn’t free.
Zero interest rates create the illusion that money is free, instead of coming at someone’s expense.
I would urge the following amendments to the Federal Reserve Act:
* “Price stability” as used in the current Act, means inflation of 0% averaged over the past 5 years.
* The Fed’s policy interest rates shall not be set below 2%.
* Without further Act of Congress, the Fed shall not increase its balance sheet by >5% in any 12-month period.
* FOMC voting members shall receive a quarterly bonus whenever 5-year average inflation is between -0.5 and +0.5%.
Vote out your current Congressperson and vote in someone willing to fix what’s broken at the Fed.
I have simpler amendment proposal – end it.
We have witnessed multiple cycles of bubbles and busts directly orchestrated by the central banks. We have seen the centrals being clueless on subprime loan crisis, inflation and asset bubbles.
Fool us once shame on you, fool us twice, shame on us. Why should we continue to keep these egotistic morons in power where they keep causing so much misery.
Ironic, since the Fed claims its raison d’etre is to stop such boom and busts.
For me, the Fed’s main problems are opaqueness and insufferable hubris (Zimbabwe Ben’s “we have a technology called a printing press…” Well, Ben, we also had an arrogant, incompetent asshole running it).
It is very hard to know what the Fed’s exact stimulation “goals” really were (optimal GDP/full employment are vague phrases) and when enough should have been enough (when years and decades pass, that should be a friggin clue).
Also, the Fed is used by a terminally dysfunctional Congress/Treasury as a narcotic to hide failing organs and necessary operations.
In recent times, the Fed has embraced this role as drug pusher.
Changing the federal reserve act does no good if congress borrows/spends $7 trillion in 2 years. Nor if the gov’t tells people to stay home and not work for a long time, when the economy is based on just-in-time tight inventories. You can end the fed tomorrow, and none of this changes for the better unless politicians stop spending what they don’t have.
You wouldn’t be happy with that either. There’s 100 million people on some form of welfare. They’ve been trained to stay home and watch TV because gov’t will give them everything they need to live. There’s probably another 30 million who have jobs at companies that wouldn’t exist without easy credit.
Imagine trying to flip a switch and go back to a 1950s style work ethic, and no free handouts to anyone not seriously disabled or old. That’s what it would take to get back to a stable currency.
The 50s also had higher wages that rose with productivity gains and higher taxes. You’d need to bring those back too
Craig-true dat. (…of course, that was still the period where the U.S. was reaping the benefit of being the last powerful economy standing in the wake of WWII, as well…).
may we all find a better day.
I don’t consider any of this a hoot at all, I consider it a crime against humanity by the central bankers, driven purely by greed.
I also now believe it was 100% intentional. They want this inflation. They paid lip service to the working class and poor, but I’d bet everything that in their private conversations among themselves their goal is to try to raise asset prices to a higher level, and try to inflate away debts.
Inflation is a tax, especially on the poor. This is nothing but a reverse Robinhood scam to take every last penny from the people who have the least, and force them to pay for the latest yachts these pigmen relax upon.
Couldn’t agree mote Depthcharge. Surely they’re not so incompetent to not see their actions would create inflation. Now it’s running hot, interest rates are so far below inflation, it will stay high for years…deflating huge Eurozone debts, while crushing the poor who didn’t catch the asset inflation.
“Surely they’re not so incompetent to not see their actions would create inflation.”
Right. They’re so stupid – thousands of them globally – that they completely failed at their one job. Nah, they did this on purpose so they could play fast and loose with currencies to make themselves and all their insider buddies fantastically wealthy, juicing every asset known to mankind. These guys and gals should be in prison for what they’ve done.
“Surely they’re not so incompetent to not see their actions would create inflation.”
Actually, they could be that incompetent.
They all come from academia and have zero real world experience.
It doesn’t make a lot of sense to wish to “inflate away debts” when the assets you hold ARE other people’s debts.
They know exactly what it is they do. All planned.
France somehow has become the most fiscally conservative country in the EU?
Said subsidies heavily applied to energy products.
Healthcare is also largely state-controlled and state funded (healthcare inflation is a big issue in the US).
Isn’t Frances favorite past time revolting on the streets with guillotines?
Except that France has also brought us what we might now call the Lagarde Rule: The ECB annual interest rate (currently 1,5%) shall be the same as monthly inflation rate (also currently 1,5%)
Lagarde’s Rule is sort of like the Taylor Rule, or like the rule that interest rates should be greater than inflation… except that Lagarde appears to have missed the point about annual vs. monthly rates.
P.S. The idea that you can subsidize prices in order to suppress inflation is a classic example of first-order thinking, or maybe infant peekaboo thinking – I can’t believe people can convince themselves that they’re “not really paying the full market price” just because they hide some of it behind the hand of “subsidies”! It’s insane. The inflation being hidden will pop out somewhere else.
People aren’t very educated or smart. Most think rich people can easily pay for everything, while they sit at home and smoke pot. To them, it’s not “fair” that they have to work, while some guy flies around on a private jet. They demand gov’t “do something” about it, which comes down to everything they need being subsidized. And they have the votes.
Well, now the waiter is presenting the check for this latest pigout.
How the hell do you get 20% inflation under control in one country without obliterating everyone else in the process??
They should have thought about that before they came up with the euro.
That said, inflation is way too high in ALL Eurozone countries.
“They should have thought about that before they came up with the euro.” That comment deserved to be repeated.
They did, originally. The Germans in particular made sure the Euro would be super-stable, the treaties had very strict language, and the Bundesbank used to stomp on anything the ECB tried that even smelled like future inflation.
Something changed around or soon after the 2011 Eurozone debt crisis. “Whatever it takes” to resolve that crisis somehow became “Whatever We Want”. And “treaty language” was somehow forgotten.
This was the era of “globalization will solve everything.” Break down all barriers, join all markets (and regulations and regulators) seamlessly. But there were holes in the design: no common fiscal and banking union as was somewhat cobbled together in the USA (even with Congress and the Fed, however bizarre these are at times).
And I think the Eurocrats wanted to emulate the USA’s success with its internal market and single currency.
But I think what the USA did long ago could not be repeated anywhere in today’s conditions, even in the USA. Indeed, a country like the USA could not be designed and implemented at this time in history, IMO. Not as if it was instant or easy for us — with little road bumps like that internal dust-up we had. Not as if it is easy now. But it is better than what they have, for present challenges.
The thing is rules have to be enforced.
Every country in the Euro Zone has failed to meet the standards set forth in the original agreements. And then to make it all better they started bringing in countries that in no way could ever meet the target goals they set.
The mindset is that the EU is more important that financial stability.
So, does this do in the Euro concept? Will countries finally start spinning out of it? I’ve been thinking quite a bit about this lately.
Also, have you been talking to friends and relatives back in Germany? It would be good to get a personal boots on the ground perspective on how bad it’s getting over there instead of what we see on TV.
So — with Vlad breathing down their necks, maybe back to WW1 and WW2? That’s why the EU has tried to get together and hold together, to this day.
What other alternative is on the menu?
I think your more likely to speed up fiscal union to save the euro the biggest object to ever closer union has left and there is already common EU debt to deal with covid
Given the recent and fairly steep increase in CPI in Europe, I am wondering about your thoughts on the special QT for northern Europe with simultaneous QE for southern Europe program introduced by the ECB, and how its working. I notice Italy is at the higher end of the CPI spectrum but well below the top for CPI.
Is this because of actions of the ECB to preferentially buy bonds of the most indebted countries? I am having a hard time wrapping my mind around the effects of this program given that all of the European national bonds I assume are denominated in Euros.
Is this program just inflationary across all of Europe, or can it actually spread the inflation pain to those deemed in a better position to handle it?
The more recent data to me implies Europe is heading towards some sort of severe rate event in the near term future. At least in some bond markets.
I am not sure what the BOJ imagines it is going to do, other than blow all of its foreign currency reserves in an attempt to stabilize the Yen while the rate disparity pushes it ever farther downward VS the Dollar, Pound and Euro.
The purpose of the anti-fragmentation scheme by the ECB is to be able to do QT overall, meaning reducing the balance sheet overall, without blowing the Eurozone apart. They want to make sure that when the Germany yield is 4% the Italian yields isn’t suddenly 16%, which would cause Italy to default. So they accept a spread between the two, but not too much of a spread.
Just a thought: Supply Chain Help + Busting Up Monopolies + Anti-Trust Corruption Charges + Major Fines Applied To Taxpayer Debt = Less Inflation.
The Baltic countries are depopulating themselves at an alarming rate. E.g. Lithuania shrank by 33% since the 90’s. 20+% inflation will accelerate this trend.
Wild. Per Wikipedia, they’re down to where they were in 1964.
So, where does a Lithuanian go? Europe? Frying pan into the fire?
“natural gas piped to the home…”
Off topic a wee bit, but it is my understanding that Germany’s natural gas reserves are about full. I find conflicting information on the interwebs. Are these reserves sufficient for the purpose of replacing natural gas piped in from Russia or are they meant to be supplementary, to buffer peak demands during cold snaps? In other words, not a sufficient substitute.
If the latter, then the suffering in Germany even beyond that generated by inflation is going to be, um, noteworthy.
They’re designed to cover only seasonal peak use in the winter, bridging the difference between a constant inflow of natural gas and a peak outflow.
They’re not designed to cover that kind of massive disruption of NG imports. But they will help. A relatively warm October was also helpful.
So Wolf : global “warming” for the WIN?
I figured some jokester would pull that line. And sure enough, here we go. Some things are just really predictable.
Another huge problem for them is they lack enough capacity to offload and re-gasify the LNG which is causing the tankers to sit offshore waiting at hundred thousand dollars a day rates. All that extra cost will be passed on to the consumers one way or another.
They will shut down all their factories before they let people freeze. Probably won’t help their economies.
Wolf – love to hear your thoughts on inflation entrenchment on a global scale. Does high inflation in parts of the world cyclicly influence other parts of the world? Is fighting inflation a connected, worldwide battle – or a battle of local economies?
I’ve come back to the UK after being kind of covid stuck in Japan and prices here are LUDICROUS!!! plus the yen has fcking collapsed so its all gone against me. I can’t believe Japan is doing nothing because let alone against the dollar even UK pounds which are going down themselves.
Also, anecdotally, I hear from people selling houses they are getting interest from American companies and organistations, at least this is true for the London area.
Its like the carpet bagging of the US civil war except on the UK and europe.
How are Euro area citizens not burning down government buildings? Wait, never mind, gas is too expensive to set on fire!
I’ve heard rumors that central bankers are rich in highly flammable fat
Which leads to the classic joke:
How many central bankers does it take to replace a lightbulb with candles?
Yup it was bound to happen . you can’t print money out of thin air
The real solution is to vote out the bastards that cause this
every time you get a fiscal conservative in office they get voted out by the liberals . Hard to understand but fact
It’s actually quite easy to understand. Most people aren’t that sophisticated, and are unable to employee critical reasoning. They think that the people who promise them stuff will get others to pay. Ultimately, it doesn’t work that way.
It works that way until the money runs out……Oh, wait! The money never runs out!
It’s running out, now.
I would wholeheartedly embrace a fiscal conservative if one could be found. Unfortunately many fiscal conservatives are also members of America’s Christian Taliban. If they want to balance the budget, fine, but I don’t want their Guns and Religion agenda crammed down my throat.
I think taxing the ultra-rich and corporate America is fiscally conservative. Heck you can spend lots of money if you take it from those two sources.
Why not churches while we’re at it!
Are you fine folk suggesting we pull a Venezuela or a Cuba here?
Forget all the moral, legal and practical aspects of such a proposal. Let’s just stick to simple arithmetic.
Total net worth of all billionaires in USA is 4 Trillion dollars. Take it all. Government will barely run for a year. What next?
Nacho Bigly Libre,
Trotting out Cuba and Venezuela is a classic red herring. There’s a huge difference between increasing taxes on higher incomes to reduce deficits and the wealth confiscation you suggest.
My question is why do tax brackets stop at the top end of the upper middle class in expensive coastal locations? I don’t think the world will end with a bracket of say 40% over a $1 million in income, 45% at $5 million, and 50% at $10 million. Much less the inability of Congress to get rid of the carried interest rule. The details can be debated, but that’s hardly the stuff of Cuba or Venezuela.
Does your arithmetic suggest whether a smaller deficit might be better than a larger one? Going forward, we’ll still need to do a much better job balancing taxes and spending, by which I mean spending must be reduced too. However, the income side of the equation will also need to be addressed given the scale of the problem.
Taxing the rich cannot work. You’d realize that if you spent 2 minutes thinking about it rather than parroting the media.
You’ve heard rich people have jets and yahts, right? That means they can MOVE. They can move themselves and their corporations. Their favorite places right now are china and mexico for factories. Singapoor and other very low tax countries for themselves.
Lol! I was a tax attorney and helped lots of rich people save lots of money when I still practiced. Rich people have been saying they’ll leave since before the income tax was established in 1913, and aside from a handful, they’re still here. Much of the developed world has tax rates higher than I suggested in my previous comment. If the rich want to go to the developing world, or some city-state somewhere, be my guest.
Frankly, it sounds like you’re parroting media from a specific side of the political spectrum with little understanding of how the world actually works and why that threat is largely hollow. Mexico and China in particular are problematic due to the threat of expropriation. Have you heard from Jack Ma recently?
You should spend 2 minutes thinking about why tax brackets top out well below what most people consider “rich” today. Is it possibly an indication of who’s in charge? The deficits are enormous and we need a balanced approach to resolving them.
The ultra rich already pay most of the taxes while around half of American workers pay no income tax.
It’s not a red herring. Cuba’s descent might be too far back in time to remember. But we have recently seen how the sentiment of socialism/nationalization dragged down Venezuela in less than a decade.
We can raise taxes a bunch, but that’s like treating severed limb with a band-aid. We borrow and spend extraordinary amounts of money on unnecessary things.
How much revenue will that additional tax bracket bring in? And on the flip side, how much growth will that hinder?
P.S.: I wasn’t suggesting wealth confiscation – was just showing with simple math that such tax hikes won’t solve the problem.
Rojo, most of the ultra rich’s “wealth” is tied up in bubble valuations of assets. You can’t tax “wealth” and they don’t have enough “income” that taxing it, even at a much higher rate, would even make a dent.
Taxes collected as a percentage of GDP were roughly the same even with the ridiculous 91% bracket of the 1950s. If taxing the rich is such a panacea, why is that?
Did you read my original comment? I didn’t suggest taxing the wealth of the ultra rich, just having a progressive income tax that reaches above what professional spouses likely earn in major cities. It doesn’t matter if the taxpayer’s wealth is inflated by bubble valuations because it’s a tax on current income, not wealth. From a tax policy perspective, and for administrative purposes, I oppose a wealth tax as proposed by Warren, but that’s a different discussion.
As for tax collections as a percentage of GDP, that’s true but the tax code was very different in the 1950s. Passive loss and at-risk rules limit the generating of tax losses to mitigate high marginal rates. In any event, I’m not suggesting confiscatory tax rates, I just think it’s a curiosity that the upper tax bracket starts lower than what really constitutes “rich” in the private plane sense.
“The ultra rich already pay most of the taxes while around half of American workers pay no income tax.”
You haven’t defined “ultra rich” so it’s impossible to evaluate this statement. If you define it as the top 1%, they paid 38.8% of income taxes in 2019. Realistically, maybe the top .1% are truly ultra rich. I also know that however you define ultra rich they pay the same or lower (carried interest) top marginal rate as salaried professionals.
Ultimately though, most of the taxes are paid by people who earn most of the money. That’s hardly surprising in a progressive tax system.
Nacho Bigly Libre,
The deficit is huge and I’ve already said spending cuts are necessary to have any chance of making a dent in the problem. In my opinion, we have two sides on the political spectrum that refuse to engage constructively to address the deficit problem. On one side people keep saying you can’t possibly raise taxes, and they provide a litany of reasons tax brackets in a progressive system need to stop before you get near very high incomes. On the other side, people refuse to accept the idea we can’t have everything and spending cuts are needed. I’m a proponent of trying a balanced approach that at least attempts to reduce the deficit problem through changes to the tax system and spending cuts. This makes me a pariah to both sides, but as an attorney I’m used to that.
As for growth, there was plenty of it (much more than the recent relatively low tax decades) when tax brackets were far higher in the 1950s and 1960s. Something else might be the key to growth.
Guns agenda meaning you subscribe to the left’s sick gun grabbing ideology?
every time you get a fiscal conservative in office they get voted out
Maybe I misses something, when was there a fiscal conservative in office?
In the UK the last fiscal conservative were a left wing government
Rojogrande the tax bands are low because they haven’t been adjusted for half century of inflation.
I’m trying to think where “a fiscal conservative” exists in politics, outside of temporary posturing when it inconveniences the other team. Each team is hired by its constituents to provide free stuff. Behind every fateful step in this recent sequences of blunders is a big crowd of “something for nothing” voters. Hence no taxes but lots of spending. In the last two admins there was no pretense of fiscal conservatism: just cynically pumped-up asset prices and benefits.
Well said. We do get occasional Ron Pauls – but the media does a good job suppressing their message. Parties then make sure they don’t become the nominees.
Perot and Paul were gifts to fiscal prudent Americans on both sides, the crazy old man meme for both of them is hilarious when viewing current potus
One of the two remaining restaurants near me who had a relatively inexpensive daily special raised their prices. At present they no longer offer one, as it hasn’t been programmed into their computer. Based on the price I paid, the prices have gone up at least 30%.
I visit my nearby coffee shop less often, and buy less when I do.
But soon, likely no eating out at all. I like to support local businesses, but…
The majority of people living locally are wanting to move, as it has become too expensive, unless you are an upper class wage earner, or second home owner.
Middle class workers, including public safety and teachers, can’t afford to live here.
The local government’s and voter’s solutions are to increase the cost of living even further. As someone in a business organization recently said, it appears most people can’t do simple math. Several items on the November ballet will only increase taxes and government spending even more.
I was trapped at my locale like a bear encased in a park. I couldn’t rent half the place I own now. That was the cornerstone for me of hanging onto wealth — and so far, treading water pretty well, despite a low and inflation-ravaged income. I live in an older economy, in a sense, within my city. Being able to lower consumption (of water, energy, etc.) has been a key strategy. The pandemic taught important lessons on this. There was no “relief frenzy” of post-pandemic spending for me, no big feasts or trips. Also now I don’t need to fall into tears or rage. I took the benefits they dispensed, and every dollar coming in the door, and I saved them.
Teachers…middle class workers! I’m dead! I’m a nurse making probably twice what a teacher makes and still the deplorable in my neighborhood. Teachers would be tacking dangerously close to the poverty line in my opinion.
Besides high inflation, is the money supply high in all these EU countries too?
If yes, then they need to reduce that in order to lower inflation.
Eating out was an occasional luxury not too long ago. I don’t know how we got this way, but many of us are too spoiled and lazy to prepare a meal for ourselves. Look how many can’t even make a cup of coffee for themselves.
Maybe this will change again. If high inflation and higher interest rates stick around, a lot of jobs will disappear and gov’t will be forced to cut benefits. Lots of people are living a wealthy lifestyle using a middle income and credit.
That should end well(sarc)
Hell hath no Plymouth Fury like a Christine scorned. Happy HorrorWean(ing)! Or perhaps it’ll play as “Shaun of the Fed, coming to a Central Brain Bank in your inflation bitten neck of the woods.”?
Macron should have sold his nukes to Immelt.
STFU or raise the f$&king rates. Has the average European ( I don’t know if that exists) grown tired of listening to a criminal talking prune?I have.
Yeah I’m not sure lip service or jaw-boning is doing much heavy lifting from here on out.
And all the people celebrating the DOW’s best month since 1976 can thank Chinese capital market outflows for their inexplicable US stock market rally. Pretty soon there will be nowhere to run to baby.
Her words are vomit-inducing.
German producer price inflation in October is above 45%.
This is a leading indicator of consumer price inflation.
I January 2021 on these pages I warned about a crack-up boom:
I believe we are now on the verge of central banks losing control of inflation expectations. The loss of confidence will start in Europe and will spread like wildfire. The speed and severity of inflation in the near future will take most by surprise.
I think you may be right. From everything I see, price increases are gaining steam. Every time I go to the store or look to buy anything, it’s gone up again. Shit, a jar of peanut butter was like $12.99 or something last week.
Hey You should see what its like here in Marmaris Turkey My favorite bread was 20 Lira Took a two week roadtrip and went yesterday 25 Thats 25% in two weeks Dairy products are up nearly every week And I get my income in Dollars Cant imagine how the local people are keeping up Its downright scary
Frederick: How about a little intel about the general view of the grain volumes going through the Bhosphorus to the Med.
Crazy to me that Japan is only at 3% when you look at the Eurozone by comparison. Their energy situation might be better, although I thought they were opposed to nuclear power and that was causing problems, at least a few years ago. Seems to me their demand is lower as well.
There are a bunch of reasons. Here are three:
1. Japan has been an LNG importer for many years, and they locked in prices with long-term contracts before the price spikes hit, so their LNG imports costs have risen a lot less than in Europe.
2. Japan implemented subsidies that push down CPI rates (similar to Europe).
3. Their healthcare system is controlled by the government, and what consumers pay is controlled by the government, so inevitably — three of the four healthcare categories show price declines year-over-year:
Medical care: -0.7%
Medical supplies and appliances: -0.6%
Medical services: -1.7%
Also hard to have inflation your population is declining and when 14% of all homes in Japan are empty and the culture doesn’t assign value to homes more than about 50 years old.
Lots of countries have declining/aging populations and lots of inflation, including most countries in this article here. It’s one of the many inflation myths that you have to have a growing population to get inflation.
It’s the opposite. As the median age shifts older, the needed work per employed person shoots up, and there are more job openings than available employees. Also Known As, inflation.
Seems like the fear of meltdowns has been overridden by the fear of blackouts and higher electric bills The EU was trying to penalize Poland for using coal Now they are encouraging it
A few comments from Europe
1. One of the main price drivers in GER for realestate is that one requires (under certain stipulations) no downpayment for a house. The interest rate is variable and attached to the Euribor. It is a fairly common practice. Quite a few defaults are expected in the near future.
2. Banks do not allow, or do so at a very high penalty, switching from a variable to a fixed interest rate. A bank CEO has declined this option to the board members of a bank I am associated to. “Too expensive”, he said. One can apply for a fixed interest rate loan but in recent times it is not uncommon to get denied.
3. The CPI is just like in the USA, desinged to show little to no inflation. Food inflation is a ridiculous >50%, energy inflation cannot be calculated due to the secretive process of price formation and subsidies…I mean, you can but to no avail.
4. Energy prices are subsidised by governments directly at the refinery or with a one time financial support given to the citizens. I expect a debt bonanza in a few years in Europe…If you recall the Greece fiasco, in comparison to this, that would have been a minor inconvenience.
5. There are open debates in Europe what to do in the spring. It is expected that Europe will consume all its gas reserves by March. No short term solution can make up for the current energy supply shortage.
6. Steel mills that make construction or other kind of steel across Europe have turned off or put the furnaces in silent mode. The plastics industry is also hot very hard. Any industry whose operation is heavily dependant on gas or oil supplies is under significant pressure. (A supplier of a car manufacturer bankrupted and they are now searching for new ones outside of Europe).
Bernanke was just awarded the Nobel prize for economics!
You will recall he started QE , followed by his followers Yellen and now the hopeless Powell.
In Europe you have Lagarde, the incompetent from the IMF whose last act there was to donate $45bn to the already bust Argentinians.
What do you expect?
I see the Swiss National Bank, having sold much of its gold at low prices, has announced $145bn of losses in the first 9 months of the year…..
Yes , if any of these were in the private sector, they would have been fired long ago….instead they get a Nobel prize
“Bernanke was just awarded the Nobel prize for economics!”
He should be facing life without parole, if you ask me. A more vile, corrupt-to-the-core human being would be hard to find. Remember, he’s with Citadel now, the Robinhood market maker, and he orchestrated that whole Robinhood/Wall St. bets fiasco where they locked them out of trades so that the wealthy hedge funder from coastal Florida could get out of his short squeeze via a Steve Cohen billion+ dollar bridge loan.
“The Bernank”. Hard to decide who’s more vile. Him or “The Greaseball “.
No, Bernake have got the central banks prize for economics. Issued by the Swedish central bank. Check the details, there is no Nobel prize in economics.
You forgot to mention Christine Lagarde stated that “all this inflation came out of nowhere”.
Highlights the childish mindset of the central banker set. It tells you that they believe they can slay inflation with sound bites and messaging.
It is difficult to get a man to understand something when his salary depends upon his not understanding it.
Yeah, and especially when he is thoroughly enjoying his “hard earned” and planet destroying lifestyle difference between himself and those “lazy people” in abject ghetto poverty, or homeless.
BTW, re the above debate about a more progressive tax schedule with MANY more brackets. A 1960 tax schedule, adjusted for inflation, (maybe with adding a lot tougher estate tax) even omitting the current surge, would be an EXCELLENT idea.
I advise those who were against it to look it up….it won’t kill you, most here will not be affected at all.
Look it up!
Sorry…..don’t omit current inflation surge…..reading all these comments has fried my feeble economic loser brain. And yeah, I don’t pay any taxes anymore, but I have cheap shelter and can afford a simple diet, and even have some savings, unlike many here in these 3 story 500 sq ft hotel sale apts….think there are 250 apts in 4 buildings altogether, not sure how many people. It changes as they die off.
not sale….style. Selfish people really get to me….very tough reading them.
…mebbe she’s right-lotsa overprinted (not neglecting digital) ‘money from nowhere’, certainly not backed by any tangible, productive national economic output…
may we all find a better day.
One of the rarely-mentioned causes of inflation was the removal of the “gold cover” requirement for the Fed. On March 19, 1968, President Johnson signed a bill eliminating the gold cover for Federal Reserve
notes. Prior to the removal of the gold cover each Federal Reserve Bank was required to hold a gold certificate reserve of not less than 25% against its Federal Reserve note liability, i.e., each Bank’s Federal Reserve notes outstanding minus those of its own notes held by the issuing Bank.
From there, it was “game on” to cover the cost of Vietnam War and the Great Society Program.
The European real rates are : 2% minus 10% CPI on $30T debt.
$30T x (-) 0.08 = $2.4T. In Europe debt deflate by $2.4T.
Disney in Shanghai was lock down. Thousands inside are tested.
SPX, NDX and the Dow are locked down. Today bars are the smallest
on the charts. Those inside bars smell troubles. They struggle with May 12/17 Anti BB.
Those indexes are fighting against’ the deep’ red, all day, today. May be it will change by 5 mon to 4.00pm.
There is strong hopium crowd ready to front run and melt up if there is a whisper dovish in Mr. Powell’s Q&A tomorrow.
the job of slowing down inflation is already being undertaken be the same people who, arguably, allowed it to develop, so no politicians need to be thrown out of office to achieve that objective.
To be in company of so many who correctly anticipated the damage to supply chains from covid, the second hit on those chains from bizzaro Chinese whole city or state covid shutdowns, the early retirement choice of so many workers and the reluctance of others to return to their miserable minimum wage jobs if they could possibly avoid it, and who also anticipated the Russian invasion of the Ukraine and resulting shutdown of grain shipments from both countries, of natgas from Russia etc etc…to those here who were sufficiently prescient to anticipate all that, and thus obviously saw that inflation was going to soar, followed by interest rates…….for those super clever fellow contributors, well done; if you acted on all that knowledge you should have made multi millions by now and own your own little Caribbean island. Regrettable, I didn’t see all that coming, not I suspect, did the Feds; they were ready, and voiced their anticipation of increased inflation from ‘free’ money, and were prepared to let it run a bit……but reality overwhelmed their plans. Their current response looks good to me.
The problem with being unhealthy is, bad stuff always happens, on top of it. Assuming bad stuff will not happen is a fundamental failure of risk management. It is the recipe for a fool, for failure.
As of 2019, inflation was plenty foreseeable, given the spiked punchbowl of central banking, and the economy set to overheat, when that was the worst option. COVID only delayed the inevitable, and then added a cherry on top: supply shocks.
Monetary Inflation : An abnormal increase in the supply of money and or credit, resulting in a substantial and continuing increase in the general price level.
Rising cost of living and high prices are a symptom of Inflation.
Prices do not inflate. Prices increase or decrease.
Money creation out of thin air and cheap credit is the cause of today’s problem rising cost of living.
Rule of 72 holds that at 18% annual inflation, prices will double in just four years.
The price of a dozen large eggs just doubled in one year at the Walmart near me. What rule is that?
The hyper inflation rule .?
The corporate profits rule.
Ding! Ding! We have a winner here!
How about your Statin cost? Did it go up too?
Supply chain problems are coming back. Worse than during the pandemic. My local grocery store was out of milk and cream. Went to another one and they had the same problem. Meanwhile the shelves were loaded with candy for halloween. I talked to the manager and asked why they are prioritizing junk food and not stocking essential healthy items that families need. He had no answer and blamed the supply chain.
Also, prices are going up so fast that they can’t even keep the posted shelf price lables current. The price at the checkout is in a computer and is often higher than the posted price on the shelves.
The price being different at the checkout is another good example of the labor shortage.
Can’t hire enough people for low paying grocery store jobs to update the signage
Have they not got around to put displays controlled from the inventory management system on the shelfes?
Around here the shelf price sign is digital and the displayed price set from the same computer that the cash register get it from.
No price tags on any item, just codes to read or RF id tags.
It sure is.
My receipt at Safeway even says “now hiring”. Different clerks (& baggers for sure) almost every time I go grocery shopping. Once every 10 days.
During the height of the Covid deaths, I was thanking an old white haired checker for doing a job that put him at much higher risk. He said he was 70 and retiring in a month or so.
I’m not sure but I suspect he was the last of the Union members with good wages and benefits.
They are all young there now.
Europe is in for a world of hurt. The cost of energy effects everything, and unless they can get the cost of energy down, then it is going to drive inflation while also reducing productivity.
There are already demonstrations in several countries, and the civil unrest is bound to increase if economic conditions continue to deteriorate.
Seems to me this is there plan ,all in pit people against each other .Not there problem
One thing I’ve seen starting with the decrease in orange juice containers from 64 oz to 52 oz is the shrinkflation. The OJ started a couple of years ago, I believe.
I was making a sammich yesterday and recently bought some sliced cheese. Holy moly, the slices are smaller AND thinner! lol.
Today, I went to visit a place that I worked at before and ordered a couple of large pizzas from a chain here in Sacramento. I usually make a frozen for myself, but this is for my old pals. When I picked them up, my eyeballs sort of popped out. They looked like mediums! Paid 74 bucks. Gave them a 6 dollar tip and there goes 80 bucks.
Went to Safeway yesterday and used some coupons for frozen pizzas (house brand 3.99 apiece, butter 3.99 a package vs 7.99 and OJ 3.00 on sale). Their frozen section from a couple weeks ago all went up. I’m a bachelor and sometimes fighting for time, I cook something frozen while I make rice or potatoes and veggies on side. It’s almost like Costco where things are now hovering above or below 10 bucks a package. Speaking of Costco, they too have gone up and not many discounts on food like before.
Don’t get me started with service inflation which Wolf has done a great job highlighting unlike other financial pundits that I follow.
Food prices are insane. Coffee cake from $5 to over$6 more than 20% increase. A lot of Increases like that. Baby backs went from $7 to $24 a slab but has come back down.
Look at the bright side. Americans eat way too much anyway. Drives their medical inflation even higher.
Abstinence is the core of my lifestyle. Saved my life, and now, my sanity. Such as it is.
A lot of medical inflation is driven by what I consider a massive waste of time by a zombie population. Schedule your “required” annual exam, get prescribed some statin or antidepressant, doctor collects an obscene amount of money, drive over to the pharmacy to get your shiny prescription filled, big pharma collects an obscene amount of money, then go about your zombie life – show me any country that uses pharmaceuticals anywhere near the levels used/abused by Americans. In the background while all that goes on, an army of administrators at the PBM and insurance company shuffle papers and collect an obscene amount of money. Oh and while they are at it, they will even fight with the doctor on which prescriptions the doctor is allowed to prescribe because they have a nice chart of the prescriptions they will cover because they know best (aka the best profit margins for them).
Anyone who is Type 1 Diabetic knows how fun it is to wait for open enrollment each year so you can figure out which insulin they will require you to change to this year based on the kickbacks they negotiated. It’s exhausting.
Yeah, Type 1 is a really rough deal.
Type 2 (or metabolic syndrome as they now call it) are products of insane ad driven American diet and lifestyle….sometimes “food deserts”, which those people can’t do anything about, either.
Or simple overeat or do heroin choices caused by extreme hopelessness….another product of this culture of few haves and many have nots….(I mean “lazy people”)
As Stalin stated when people miss 3 meals CHAOS
JK, you are living like a rich person. Pizza, take out and other non essentials were occasional luxuries not long ago. “There goes 80 bucks” is how you choose to live.
Not trying to pick on you, but this is how I see most people living. They are complaining, but still clinging to old habits. Those high times may be ending. They were based on cheap energy and cheap credit. It was never sustainable. We may be returning to the mean.
Buy pizza on sale add turkey pepperoni and cheese bake at home,better than most chain pizza and save 75%
I’ll pick on him for that ignorant lifestyle, if you won’t. And that won’t be near as mean as when the “health care” biz gets a bigger chunk of him.
He paid $4 for a meal that feeds a family of 4. I don’t see how that is extravagant.
Pretty blatant cherry picking there, Jeff, don’t know what your agenda here is, though.
I have notice companies reducing their bacon packaging from a pound to 12 or 13 oz.
Haha? You think this is funny? SMH
Sooo…are bonds going to 10% too???…PJS
These CPI and Energy-Related Cost Indices are probably going to remain unstable – leaning towards a propensity for Px Hikes – until the €URoZone can secure longer-term sources for themselves.
There are reports that several LNG Carriers are just loitering around European Ports as “Pre-Paid Offshore Storage Facilities” and/or standing by as “PriceSpike Vultures”.
LNG Carriers themselves are going to be tightly booked until they build more Tankers.
From what I’ve read, Habeck-Baerbock wanted the NLD Energy Exchange to handle the Trading of European Supplies instead of Direct Long-Term Contracts with Exporters.
These are driving factors of Habeck-Baerbock nixing NordStream02 Approval and Scholz going on a OPEC Appeal(was it QAT? UAE?) with only One LNG Tanker to show for it.
Murica? The greedy Oligarchs couldn’t even produce enough Crude and LNG to take over the €URoZone Loads…
Chaos and Pandemonium.
“Marching Morons” and the “Camp of the Saints”
The inflation tax on the peasants continues (not just unabated, but ever higher, it seems). Yet, stocks are melting up. Huh?? Seems like anti-gravity. Stock buybacks are ending, earnings are tepid. The cost of capital is going up. What do the elites know that utterly escapes me? Or are they just lemmings marching off?
FOMO still rules!
No politician or central banker will ever be held accountable for the mess they created.
I look at the table, and I just can’t wrap my head around the differing rates of inflation across the European countries. Forget the Eastern European countries because they’ve always been basket cases, but take Netherlands and Germany, What explains the more than 5% difference in their inflation rates? Housing? Food? Energy? 5% is A LOT!!!
Germany’s economy is starting to resemble a Halloween pumpkin.
I think it’s more like a Thanksgiving Day roasted Turkey.
I think core problem is governments tendency to run deficits. If government borrows they are putting additional currency in the system boosting inflation and boosting corporate profits.
A part of government spending pays for people to not be productive yet keep consuming or to fund non bridges to nowhere type projects.
Useless in the real world where you have to move about, and keep from freezing to death.
“The CPI without energy components — so without retail price changes for gasoline, diesel, electricity, natural gas piped to the home, and other energy components in the basket of consumer goods and services — spiked to 6.9% in the Eurozone.”
I feel so reassured that my income has been cut by 6.9% since I don’t drive, use electricity, natural gas or any energy while living.
NIRP = Negative wealth