Price inflation hits 1981 highs
derryb
Posts: 36,777 ✭✭✭✭✭
Today's report of 7% inflation is the product of a Consumer Price Inflation formula that has been altered since 1980 in order to provide more acceptable (lower?) results. If today's CPI were calculated using the 1980 formula, it would match the whopping 15% in 1981 that required double digit interest rates to bring inflation under control.
Gold demand historically has a direct relationship with reported CPI. Does today's under reporting method of CPI by 50% result in half the demand for gold that would normally take place at a CPI of 15%?
More importantly will it take 1981's 16.63% interest rates to bring down to earth a current CPI that is in affect the same as the 1980 15% CPI? Will three or four small proposed FED rate bumps in 2022 do the trick? Most likely not.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Comments
Maybe 😉🙀
🎶 shout shout, let it all out 🎶
Numbers don't mean chit coming off a Black Swan Event.
that's your excuse? lol
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
It's the truth.
numbers mean everything, especially after a black swan.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Inflation highest since 1981, oh my,
But, why the giant disconnect between interest rates and inflation, LMAO .....
Interest rates reached their highest point in modern history in 1981 when the annual average was 16.63%, according to the Freddie Mac data. Fixed rates declined from there, but they finished the decade around 10%. The 1980s were an expensive time to borrow money.
Because the FED worked for the people and not the banks in 1981. Inflation would not be where it is now if it weren't for Wall St. influenced sub zero rates. Unfortunately FED does not have today what it takes to cripple inflation; the guts to push rates to double digits. Stock market is more important. . . until suddenly it isn't.
Keep laughing and pretending the highest inflation rate in 50 years is a nothing burger, it's gonna go higher. It in itself was a predictable black swan; a few here said it was coming while a few others laughed.
The (Broken) Supply Chain Is the Economy
"Supply chains will have to be restructured. The biggest loser will be China because it is the source of many inputs in the broken supply chain that will be abandoned. The biggest winner will be the United States because it has the greatest capacity to onshore broken links and build replacements for lost capacity elsewhere."
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
My stocks are doing just fine, thank you.
Hang on to them, I'll be buying them in the not to distant future.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
the FED pretends a 2.5% interest rate at year's end will solve the inflation problem. The FED continues to do too little too late. By year's end inflation will be >10% using the current watered down formula. Odds are greater that the formula will be watered down further than inflation being under 10%.
Too late to unprint all those dollars? lol
get gold (and silver).
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
The Fed uses PCE now
Since 2012, the FED tracks inflation with the Personal Consumption Expenditures index (issued by the Bureau of Economic Analysis) instead of the Consumer Price Index (issued by the Bureau of Economic Analysis).
The problem with using PCE is that the formula changes when consumers reduce their purchase of an item because of its inflated price, replacing it with a lower priced alternative. This method tends to bump climbing prices out of a formula that is supposed to measure changes in prices. When a consumers can no longer afford the growing price of beef and begins to stock their freezer with cheaper chicken, PCE will adjust lower because it will replace higher priced beef with cheaper chicken in its calculation. If you were the FED would you not want to express inflation at the lowest possible rate?
As the chart shows one provides a lower inflation rate - the one the FED chooses. Optics grasshopper.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Yawn, wake me up when gutter metal starts to inflate. THKS!!!
.> @blitzdude said:
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Just a thought from my personal experience. The 60’s were rough , as I recall cry’s of the mint and currency in general were domed, they took the silver out ( both Kennedy’s and MLK gone , we also put a man on the moon and signed into law the Civil Rights Act). The 70’s Watergate and gas shortages. Lines down the block and alternating days by license plate ( edited, thanks)80’s it’s own problems and on through the 90’s until today. Point is as Americans we cope, adjust, change or what ever it takes because that’s what our ancestors did. I’m certain my grandpa stuffed in a submarine during WW1 had to cope. Fought for our freedom,he did. We are survivors. Bring it on. We have “nothing to fear but fear itself “. Thanks 🙏
🎶 shout shout, let it all out 🎶
It had alternating days to gas up by even-odd license plates.
It was very clever to hold a spare in the trunk.
Does anyone remember the coin shortages in the mid 1960's? Banks were paying a premium if you brought in your change jar or piggy bank. The government and the media blamed coin collectors for the coin shortage. After a study was done it was determined the large proliferation of vending machines at this time were the major cause of the coin shortage because these machines took coins out of circulation for several days until they were collected and deposited at the bank.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
Interest rates do not have to go up in order to reduce inflation.
Knowledge is the enemy of fear
They do if the FED is going to reduce inflation. And even then prices do not get lower, they simply increase at a slower rate. Another option is to burn truckloads of fresh money.
Reducing inflation is simply a reduction of the rate of inflation growth. FED says 2% is Ideal. Derryb says no inflation is ideal.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
The Fed, Congress and Treasury have other tools but may be too spineless to use them.
Derryb wishes we were still in 1022, not 2022.
The reat of us want to incentivize risk and reward.
Knowledge is the enemy of fear
The FED cannot remain your incentive indefinitely. Time to prepare for that reality.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Too much money chasing too few goods. I think the FED drastically reducing their OMO and balance sheet will have a nice impact on the risk reward model and inflation.
calming inflation does not reduce prices. It only slows their rise. Printed money remains in the economy.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Well, they can. But, what is the reality and how would one prepare for it.
I mean, prices of most things---groceries, energy, real estate, stock market--are already up 30% over the last year. We all survived.
Knowledge is the enemy of fear
,,
Gutter was down yet again while everything else in the universe increased and even Derby survived. I'm feeling the inflation pinch. Not as bad as many but it's there like an annoying deerfly on a perfect summer day. RGDS!
Edit: Gramour! Lulz!!
My sales pitch? Lol
4.5 million people quit their jobs in November. That certainly isnt a sign of "worse economic times". This is reality. American workers havent had these sort of opportunities in their lifetimes.
https://www.entrepreneur.com/article/411599
Folk have never had so much money as shown below.
https://fred.stlouisfed.org/series/M2SL
For a forum that is comprised of a lot of libertarians, we sure do like to place blame on others.
Crazy how folk complain about how this country is going down yet in the next breath talk about how much their home or IRA went up or how much they made on doggie or bitcon. Ya just cant make this stuff up. Lol
Knowledge is the enemy of fear
Rich folk have never had so much money. Who those "folk" are is kinda important when it comes to the distribution of "so much money." And which of these groups suffers the most from price inflation? I'm all for capitalism and fully understand the uneven distribution of money in a capitalistic economy. However I'm not all for a central bank creating trillions of dollars simply to enrich the rich. Think of the actual good that could have been done with all that new money. We coulda even built it back better. LOL
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
@cohodk,
An interesting thing about the Fed's M2SL chart is that in 1960 M2SL and total US Government debt were almost identical (~$280B). 60+ years later total US debt is 40% higher than M2SL. The Government should just hand everyone a million bucks to increase M2SL even more, no? And stop collecting federal income taxes from anyone since only 39% of households paid any in 2020. That would also provide a nice boost to M2SL.
Wait until the house of cards fall. Lots of family's are living on a prayer. Tough times ahead for those living paycheck to paycheck.
If inflation stays in the (reported) 6%-7%-8% range in 2022 there will some really interesting decisions to be made by The Fed. Right now it's talk which is really cheap. Wall Street owns them now and that won't change. What will change? Perhaps a new yardstick to measure inflation a la 1980's?
Right now The Feds $9,000,000,000,000 USD balance sheet is still growing and interest rates remain parked at 0%! WTF! The "rapid response" has interest rates penciled in at 1.5% by 2024!
Who's wagging the dog?!
Worker revolution (leaving the work force/demanding higher pay) will contribute to the rise in wholesale cost and retail price of consumer goods. Worker shortage + supply chain breakdown = higher prices.
Supply issues will continue as China locks down its ports/exports with tighter pandemic controls. Eventually there will be little to no ships at US ports. 2022 inflation will laugh at a couple of .25% rate increases. Look for the FED to jawbone more 2022 rate increases as conditions fail to improve. The FED has printed a zillion chickens since 2008 and now they come home to roost. Make no mistake - current economic problems were caused by many years of failed FED policy. The pandemic is simply a great excuse.
The bottom 80% are waking up to the reality of who the FED works for:
,
Labor is simply a cost of goods sold that is passed on to the consumer via higher prices. Note the drastic increase in 2021 alone:
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
>
I hear you and i get it and there will always be family in financial hardship, no matter how great the economy may be.
But today we live in a time when folk pay others to make their food and then pay someone else to bring it to them. I see these delivery drivers everywhere. If society can pay extra to have someone deliver their pork fried rice then we are truly living in a time of excess.
Knowledge is the enemy of fear
Yes derryb, we complained about worker salaries not keeping up. Now they finally get paid and we complain about higher prices.
We, the people, could control a lot of inflation if stopped buying so much junk. Stop living in and demanding excess. We have become a society of spoiled brats.
Knowledge is the enemy of fear
Which may begin in the next few weeks. Last year when people realized they had to pay income tax on their unemployment largess, it hit the fan and Congress quickly made those payments non-taxable. During 2021, tens of millions received monthly checks of $300 per child - which was nothing more than an advanced on their child tax credit and an additional $1500. When they complete this year's return, their usual refund will be significantly smaller - or they may owe.
.> @cohodk said:
Looking at the last posted chart it appears 2021 salaries increased at a rate higher than the 2021 inflation rate. There is more to what is going on than just "keeping up," New (and growing) wages will be an added cost of goods sold and will contribute to even higher inflation. Historically salaries lag inflation. Are we entering an uncharted cycle of wages driving inflation? Wageflation?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Your tennis shoes are made overseas- they cost $50. Made here, $100. Pick your poison.
Everyone wants a flat screen for a couple hundies.
Its not uncharted. Its just that wages tend to be sticky for a time without increase while inflation keeps marching along. Then wages have to run to catch up. This will continue until workers compete against themselves and start accepting a lower wage than others might just to secure that job.
In Florida the state is raising min wage by $1 per year for the next 5 years. And while most companies are already paying more rhan the current $10 rate, all will by 2026. So yes, wage inflation will continue to push price inflation.
My usual DD breakfast went from $7.58 to $8.39 on Jan 1. Was $7.19 at start of last year.
But i now have greater incentive to increase my savings by making breakfast at home. Two cups of coffee, 2 eggs and slice of bread or piece of fruit should run me less than $2.00. Thats a $1000+ annual savings should i choose.
Inflation may wring out a lot of the excesses we take for granted. Im not sure thats a bad thing.
Knowledge is the enemy of fear
unfortunately, most Americans see necessities being wrung out. Consider yourself luckier, not better than most.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
It's been a couple of months since I had stopped at my grocery store deli to pick up a standard two piece chicken dinner/lunch with two sides. Within a year, price went from $4.95 to $5.95 and is now $7.95... don't know if it's temporary or not... but quite a jump. Same trend in other restaurants.
Families are getting creamed, struggling. But this clueless arrogance will yield a massive red wave ...thanks in advance.
"Welcome back
Your dreams were your ticket out
Welcome back
To that same old place that you laughed about
Well, the names have all changed
Since you hung around
But those dreams have remained
And they've turned around
Who'd have thought they'd lead you
(Who'd have thought they'd lead you)
Back here where we need you?
(Back here where we need you?)
Yeah, we tease him a lot
'Cause we got him on the spot
Welcome back"
Loves me some shiny!
This is not how you want your country to run.
Inefficient in just about every way.
You have to look at why isn't it run correctly.
We all know it can be, so why isn't it?
A lot of prices of goods are tied to the cost of fuel. Until it comes down, get used to the current situation.
Higher prices
Shortages
What the heck are you talking about? rte592?
🎶 shout shout, let it all out 🎶
Work smarter not harder. RGDS!
For many, many people if they'd just work period it would help a lot. Our social safety net is so broad it's swallowed up tens of millions of potential working, tax paying Americans.
Two years later....y'all survive?
Knowledge is the enemy of fear
BOOMIN!
RGDS!
And here comes the inflation avalanche. . .
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey