Thoughtful Observations About Inflation

08 Aug

Thoughtful Observations About Inflation

“Dollar’s Purchasing Power Gets Zapped. And It’s Permanent!”

Wolf Richter from point out that the Fed’s “transitory” inflation claim is a joke”

“Inflation means that the dollar loses its purchasing power. It means that labor loses its purchasing power. In other words, people have to work more the maintain their standard of living. Or people can work the same and cut their standard of living.

“And people who get performance-based pay raises, and think that this greater performance is going to allow them to raise their standard of living, they find out that all or much of that performance pay raise just allowed them to keep up with the loss of the purchasing power of their labor dollar.

“There’s another way, the Federal Reserve’s preferred way. This inflation is not an accident. The Fed was the primary engineer of this inflation with its policies, dominated by the biggest money-printing event in modern times and by 0% interest rates. Now the Fed wants people to make up for the loss of purchasing power of their labor by borrowing more.

“The Fed keeps insisting over and over again that this inflation that it is largely responsible for is “temporary” or “transient.” But there is nothing temporary or transient in the loss of the purchasing power of the dollar, including of the labor dollar.

“These prices of consumer goods and services that have jumped aren’t going back to where they were two years ago.”

“Reliable, meaningful, dependable.”  Sounds like she’s talking about gold!

Economist Judy Shelton is a senior fellow at the Independent Institute and author of “Money Meltdown.”   She has urged a role for gold in our monetary system.  Here are comments from a recent piece in the New York Sun:

“Money is meant to be a reliable measure, a meaningful unit of account, and a dependable store of value. When those qualities are undermined — especially by government — for purposes of redirecting economic outcomes at the risk of global financial instability, the dynamism and productive potential of free-market forces is diminished.”

Freudian slip (or Jungian Lapse)?

Michael Shedlock is among those who caught the Fed chairman in an embarrassing and revealing slip:

“In a news conference following last Wednesday’s FOMC meeting, Fed Chair Jerome Powell inadvertently admitted “Inflation is half our mandate.” 

“He quickly corrected that to ‘Price stability is half our mandate.’  

“The second statement is factually correct but in practice the Fed follows Powell’s first statement.”

Sen. Manchin (D-WV) worries about inflation, writes the Fed chairman! 

“With the recession over and our strong economic recovery well underway, I am increasingly alarmed that the Fed continues to inject record amounts of stimulus into our economy by continuing an emergency level of quantitative easing (QE) with asset purchases of $120 billion per month of Treasury securities and mortgage-backed securities.

“The Fed has sustained $120 billion per month in asset purchases since June 2020, despite increasing vaccination rates to combat the virus and additional fiscal stimulus from Congress in the ARP.

“The record amount of stimulus in the economy has led to the most inflation momentum in 30 years, and our economy has not even fully reopened yet.”

Inflation Invites Danger!

From newsletter writer Bill Bonner:

Describing inflation as ‘just another tax’ is like saying an intentional famine is ‘just another diet program.’ Like other taxes, inflation takes wealth from some and gives it to others. But it is often fatal to the civil society that produces it.

“How can you run a business when your costs change almost daily… and you have no idea what your receipts will be worth? How can you plan for retirement? How can you save money or make wealth-creating, long-term investments?

“You can’t. As it runs its course, inflation staggers and discombobulates an economy. Eventually, though still not understanding how they are being ripped off, people get sick of it… and they welcome scoundrels in uniform who promise stability.”