Between the (wholesale) Producer Price Index and the (retail) Consumer Price Index, inflation is the word of the day!
With the Federal Reserve printing trillions of dollars, most of which has long been levitating the stock market and now the housing market once again, it is evitable that it would also spill over into wholesale and retail prices. Here is a sampling of headlines and observations about the surging of price inflation.
REUTERS (Washington, 4/13/21) – U.S. consumer prices rose by the most in more than 8-1/2 years in March…. The consumer price index jumped 0.6% last month, the largest gain since August 2012, after rising 0.4% in February.
REUTERS (Washington, 4/9/21) – U.S. producer prices increased more than expected in March, resulting in the largest annual gain in 9-1/2 years and likely marking the start of higher inflation as the economy reopens amid an improved public health environment and massive government aid…. In the 12 months through March, the PPI surged 4.2%. That was the biggest year-on-year rise since September 2011 and followed a 2.8% advance in February.
WOLF RICHTER (Wolf Street, 4/13/21) – The problem in the CPI is the homeownership component, the “Owners’ equivalent rent of residence,” which accounts for 24% of overall CPI. It is based on surveys of homeowners’ estimates of how much their home would rent for. And this CPI for “Owners’ equivalent rent of residence” in March rose just 2.0% year-over-year….
Had the homeownership component of CPI risen in line with the Case-Shiller index, the overall CPI would have jumped by 5.1% year-over-year – nearly double the published rate of 2.6%!
MICHAEL SHEDLOCK (TheStreet.com, 4/14/21) – U.S. import prices advanced 1.2 percent in March, 1.3 percent in February, and 1.4 percent in January.
The 4.1-percent increase from December to March was the largest 3-month rise for import prices since the index advanced 5.8 percent in May 2011.
The price index for U.S. imports increased 6.9 percent from March 2020 to March 2021…
DAVID STOCKMAN (Contra Corner, 4/12/21) – There is no other way to say it. The Fed chairman and his demented band of money printers are so blindly, mechanistically and monomaniacally committed to the will-o-wisp of 2.00% inflation that they are willing to literally destroy the money and capital markets to achieve it.
ROBERT WENZEL (Economic Policy Journal, 4/9/21) – Rather than being a conservative steward of the U.S. dollar, Powell is like the drunk who wants to take one more drink before hitting the road. He sees no danger ahead only because he doesn’t seem capable of clearly seeing ahead at all.
Current Fed policy is one of the most reckless in the entire history of the Fed and there is not one member of the monetary policy-setting committee, the FOMC, raising any kind of significant concerns.
The Fed is going to be so slow reacting to the developing price inflation that the great danger is it could get way out of hand.
Buckle your seat belts and hug your gold coins.
CLOSING NOTE: We keep reading this week in stories about the death of swindler Bernie Madoff that he ran the biggest Ponzi scheme in history.
If a Ponzi scheme is – as defined – a fraud that requires ever new investments to pay off the promises of prior investments, we think the US Government should top the list. The US is incapable of paying off today’s bondholders without selling new bonds tomorrow. Faking $60 billion in account statements is quite a scam, but it falls far short of $28 trillion.