Inflation

Consider our imaginary friend Arthur. He nets $100 per month. After year of 5% inflation, Arthur’s monthly money buys 5% less. Next year, it turns out the inflation spike really was transitory, so the inflation rate goes to 0%.

Here’s the thing: Arthur’s monthly income STILL buys 5% less.

It’s as if Chairman Powell reached into Arthur’s pocket and stole $5 every month. Forever.

That’s why we called inflation the Federal Reserve’s tax that no one voted for and everyone pays.

Wolf Richter laid out the ugly scenario that plagues our savings right now:
Inflation is a game of Whac-a-Mole. One pops up as another backs off. So it could very well be that CPI inflation may be 4% next May, down from 5% now, and we’ll be celebrating that the 5% was “temporary,” and was replaced by 4%, hahahaha. But the purchasing power of the dollar that is lost every month is lost permanently. [emphasis added]

Of course this is nothing new. The dollar’s buying power has been on a downhill slide overall since June of 1913, with the exception of a notable four-year recovery from September 1929 to May 1933. (Another interesting correlation is the Federal Reserve was also established in December of 1913.)

Wolf also believes the dollar’s descent hasn’t reached the bottom yet, and that it never will. With a Federal Reserve that’s so terrified of deflation they’ll do anything to prevent it, there’s not much of a chance that any of that lost buying power will return.

Remember, even if inflation reaches zero, it will be too late — you will have already been robbed.”

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mullokintyre said:

Pity the poor peasants in Venezuela, After last hitting 300,000% in 2019, inflation has been maintained at a more manageable 2,3339% a year. The government solution was to keep printing ever larger notes, but with a million bolivars down to about 32US cents, a million noter would not buy a cup of coffee. The latest solution is to lop off six digits from the currency. With 200 million denomination as the highest, calculators were blowing fuses and excel spread sheets were gobbling up memory faster than a crappy windows 10 installation.
Not surprisingly, the Central bank no longer publishes monthly inflation figures, but private entities are estimating it has come down to 20% in May after being much higher in April. Moving from a basket case to a handbag case.
Mick

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mullokintyre said:

For me, car registration and insurance went up by various amounts depending on the jurisdiction, as did household insurance (a whopping 29% over the past three years for a rental property in Darwin). My private health insurance has increased every year, as have local government charges. A simple filling at my dntist last week cost $440 bucks, up from the 350 I paid two years ago.
Lucky I mad some money trading.

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Smurf1976 said:

Supermarket prices are slowly but surely creeping up. Not for everything but one item at a time there's a sudden, permanent increase then a while later something else goes up.

I went to Bunnings with quite a list of things needed today. Things I recall being $14 are are now $16 and so on, a few % here and a few % there but prices are going up yes. Some items I've bought previously and they've definitely risen in price, no question.

Diesel's going up slowly too. Was 135.9 a while ago now I see it's 140.9 per litre. Since diesel around here doesn't have a regular price cycle, it only changes quite infrequently, it's a fair indication. Now diesel's the fuel that powers just about all freight transport.

I haven't seen any single item with a truly massive price hike but but by bit it's noticeable, prices are rising across a very wide range of products.

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noirua said:

In the US, inflation is currently at 5%, its highest level since the financial crisis; whilst in the UK, the Bank of England’s 2% target for 2021 has already been surpassed and there are warnings that inflation will exceed 3% by the end of the year. There are also huge global concerns around the 9% spike in production prices in China as it may be a matter of time before these costs are passed on to the consumer.

Australia's annual inflation rate is set to breach the target of 2% - 3% set by the Central Bank. Markets look for the 2nd Quarter figure.

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Value Collector said:

The Million dollar question is how much of this recent surge in price inflation generated by monetary inflation, or from temporary supply demand imbalances caused by Covid19 and the behaviour shifts it has caused.

I mean in 6 months when all consumer products and home renovations loses its appeal because we can now go to Bali, Disneyland or Europe again, will the supply demand imbalances correct themselves and cause inflation to rebalance.

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noirua said:

Some of the inflation working its way through world markets is due to the increase in prices of commodities from Australia. This must be to Australia's benefit unless the Aussie$ starts to get very strong again.

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The White House rolled out President Biden on Monday to take a victory lap on Covid and the economy six months into his tenure. This wasn’t the best timing given that asset prices took a header on fears about Covid’s Delta variant (see nearby). But stocks fluctuate, and more notable for the coming months was Mr. Biden’s discourse on inflation.

Someone in the White House must think inflation is a growing political problem because Mr. Biden spent most of his time on the subject explaining why it’s no problem at all. “Our experts believe and the data shows that most of the price increases we’ve seen are—were expected and expected to be temporary,” Mr. Biden said.

Price increases were expected by whom? By contributors to these pages, sure. But not by the White House budget office, which forecast inflation of 2.1% in 2021 and 2022 in its recent budget proposal. Not by the Federal Reserve, which has underestimated inflation at each of its meetings this year. At its June monetary policy meeting the median forecast among Fed officials for 2021 was 3%. In March their forecast was 2.2%. In June the actual consumer-price increase over a year ago was 5.4%.

Then there was Mr. Biden’s novel analysis that his $4 trillion spending plan will keep inflation in check. “If we increase the availability of quality, affordable child care, elder care, paid leave, more people will enter the workforce,” Mr. Biden said. “These steps will enhance our productivity—raising wages without raising prices. That won’t increase inflation. It will take the pressure off of inflation, give a boost to our workforce, which leads to lower prices in the years ahead.”

So Mr. Biden thinks that cradle-to-grave government subsidies with no obligation to work will somehow cause more people to work. That sure hasn’t worked with his enhanced federal unemployment benefits.

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noirua said:

Australia - $1 in 1966 is worth in 2020 $13.46 increase of 1,246% - before 1966 it was £ - s - d

Inflation Calculator | RBA

www.rba.gov.au

Inflation Calculator | RBA

www.rba.gov.au

UK - £1 in 1966 is worth in 2020 £19.05 increase of 1,805%.

Inflation calculator

Use our inflation calculator to check how prices in the UK have changed over time, from 1209 to now.

www.bankofengland.co.uk

USA - $1 in 1966 is worth in 2020 $7.99 increase of 698.88%

Inflation Calculator | Find US Dollar's Value From 1913-2024

Easily calculate how the buying power of the U.S. dollar has changed from 1913 to 2024. Get inflation rates and U.S. inflation news.

www.usinflationcalculator.com

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For the year, headline inflation hit another record high, increasing 8.3%. The report said that this is “the largest advance since 12-month data were first calculated in November 2010.”

Looking at core producer prices, which strips out volatile food and energy costs, the index rose 0.6% last month, following a 1% rise in July. The core inflation data was also hotter than expected with consensus forecasts calling for a rise of 0.5%.

For the year, core PPI rose 6.7%, in line with expectations.

Gold prices are seeing little reaction to the wholesale inflation data. December gold futures last traded at $1,796.10 an ounce down 0.22% on the day.

Some market analysts have said that gold is struggling to attract any new bullish interest because the higher inflation data could force the Federal Reserve to tighten its monetary policy sooner rather than expected.

Expectations surrounding U.S. monetary policy has been extremely volatile lately. Most of the summer economists expected the Federal Reserve to announce a plan to reduce its monthly bond purchases this month.

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divs4ever said:

most of the 'official data ' is tweaked and manipulated as well , ask the person in your household that does the shopping

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Smurf1976 said:

Two classic examples recently, both affecting not me but the cat.

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frugal.rock said:

I suggest you rectify the situation post haste

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mullokintyre said:

Always puzzles me why a hedge against inflation goes down when the inflationary pressures start to go up.
But thats the market for you.
AUD V USD is also up .45%.
Not sure why, maybe they think the clowns at the RBA will raise rates before the clowns at the US Fed.
Mick

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