Let me ask you this. At your grocery store, have you lately noticed something much welcome? Some prices have stopped rising as fast. Some have stabilized. Some have even fallen. Yes, actual price declines in things like chips, eggs, chicken, cheese, and vegetables. Maybe it is not universal yet, and may never be. But there are some slight indications of something happening, some relief perhaps.
Maybe it is seasonal. Maybe it means nothing. Still it bears noticing.
In other words, it’s been a serious pillaging, outpacing all the ridiculous stimulus payments and increases in most wages and salaries. The government got its chunk out of your purchasing power, and never did you any favors. It snagged nearly a quarter out of every dollar for itself while you weren’t looking, mostly under the excuse of virus control (no one in the future will believe that this actually happened).
People are understandably upset and desperate for relief. That might be coming now but not in every area and maybe not permanently. Indeed it could all come roaring back depending on what the Federal Reserve does in advance of the election this year. It could lower rates again to help Biden and the deep state. Indeed, I would expect that it will, which could only set off another round of even worse inflation in 2025 and 2026.
For now, however, we have some reason to believe there is a temporary respite taking place.
Inflation is a sneaky thing, never rising and falling like the ocean tide. It works more like a roach in the kitchen, running here and there, crawling across the floor only to hide under the refrigerator and then somehow finding a dwelling in the bedroom. You drive it out of one place only to have it appear in another. You run around trying to stamp it out but the roach keeps outsmarting the would-be bug catcher.
What it seems to have abandoned for now are food prices and a few other things. Let’s look at what Truflation has observed. Overall U.S. inflation is running at 2.23 percent, which is still above target but much better than at any time in three years. On specific categories, there are even some falling prices.
Food and beverages is pretty well flat, below a 1 percent annualized rate of increase for the week but actually falling the tiniest bit at restaurants. This of course does not count whatever nutty fees are added to your bill, which might eat up the difference if you look carefully. Still, the downtrend is pretty evident.
Housing is by and large flat. Car prices and gasoline have actually fallen in price, 2.6 and 4.4 percent respectively. Utilities are down 2.4 percent in the last month, if you can believe it. Clothing prices are down 2.8 percent in the last month. Phone services are down 1 percent and recreation services are down the same.
We’ve still got some hotness happening in health care and tobacco and alcohol but the trends are in the right direction.
So if there is still excess liquidity remaining in the system that needs to show itself in price increases, where can we find them? You have to look in the least auspicious place, a spot where people think inflation doesn’t really matter simply because they like them so much. I speak of course about financial markets, which went rip-roaring mad over securities in the last quarter (unless you own Pfizer stocks). That also affected gold and Bitcoin.
We like to believe that these increases reflect underlying value but they might not. It might be an inflationary residual showing itself in new ways. How long will it keep up? It might last through the whole year, especially if the Fed gets back into the rate-cutting business.
Here’s the problem. It could be that this new downward price pressure reflects not a soaked-up monetary residual but recessionary pressures showing themselves in downward spending in retail and investment. Everyone is trying to keep a stiff upper lip about this but the trends are not impressive.
Moreover, he notes the “double counting of multiple job holders in establishment survey, now record high 8.6 million; people can’t make ends meet and having to get a 2nd (or even 3rd) job; note that additional jobs after the 2nd don’t increase this category.”
Infuriatingly, the corporate media once again reported this as all great news. When are they going to stop believing press releases from Biden-controlled data agencies? Never, not so long as this junta is in power.
Regardless, now the Fed can cite possible recessionary pressures and downward price trends to push for rate cuts into the spring and summer this year, with the hope of reducing voter disgruntlement as we head toward November. A Republican victory is the last thing that the Fed wants, given voters’ new-found loathing of the Fed and all its works.
All of this should remind you of the experience of 1972 through 1979. First there was a bad inflation that the Fed tried to stop as we headed into the 1976 election. It was partially but only temporarily successful. The rate cuts actually fired up a much worse inflation from 1977 through 1980 that required massive interventions to stop by 1981 and following. The carnage was unspeakable: the dollar lost half its purchasing power from 1971 to 1980, throwing American family finances into tremendous upheaval.
I hate to say it but right now might be the best of times of the last four terrible years as well the next terrible four years. For reasons lost to me, the people managing our economic lives in Washington cannot seem to think about anything other than surviving another day, no matter how bad they make things later and no matter how much history teaches them that they are on the wrong track.
Enjoy it while it lasts.
