July 14, 2022

Are you ready for more pain?

 The June 2022 Consumer Price Index surged again ("unexpectedly") to 9.1%. To many Keynesian economists and their Democratic party ilk, this was unexpected.  To those of us who understand loose monetary policy and loose fiscal policy, and even those who have common sense, this was no surprise.  A four decade high inflation rate: no surprise. The more leading indicator, of inflation, the Producer Price Index, rose even higher. According to teh BLS (Bureau of Labor Statistics);

The Producer Price Index for final demand increased 1.1 percent in June, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 0.9 percent in May and 0.4 percent in April. (See table A.) On an unadjusted basis, final demand prices moved up 11.3 percent for the 12 months ended in June, the largest increase since a record 11.6-percent jump in March 2022.
...Over half of the June increase in the index for final demand goods is attributable to gasoline prices, which jumped 18.5 percent. The indexes for diesel fuel, electric power, residential natural gas, motor vehicles and equipment, and processed young chickens also moved higher.

This is the result of an entirely preventable series of events.  Loose monetary policy since 2008 has created a massive bubble. This was compounded heavily by Democrat spending and also seriously exacerbated by Let's Go Brandon's effort to demonize and hamstring American oil and gas production.

What's worse, is if you look at the way inflation was calculated back in the 1980's, this is way, way worse than what's being reported as the worst since 1981.  This is the worst since 1947 (when it peaked at 19.7%) and soon potentially since 1920 (when it hit 23.7%).

This is not over.  Inflation will continue to rise, despite an expected 'aggressive' response from the Fed, raising interest rates by 100 bps. The Fed is responding slowly (too little) and too late. The Fed's interest rate hikes will have an effect but they will take time.  The previous rate hikes did nothing to stop the upward March of the inflation. That's because, just like the decisions that caused this, the reaction wiill take time to work it's way through the system.  On the plus side that means rising unemployement could take time to kick in. But be ready for more pain; shortages and on-going price hikes are going to continue for a while.

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