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THIS WEEK’S EDITORIAL
CPI INFLATION APPEARS TRANSITORY IN THE US: Everyone is fearful of sustained CPI inflation in the United States. If that were to happen, the Federal Reserve would be forced to slow its QE program more significantly (not just a “taper”) and to consider higher overnight interest rates (the Fed Funds Rate). That would be a huge shock to the global finance system. For those who don’t know, the Fed Funds Rate is the interest rate at which banks and other depository institutions lend money to each other on an overnight basis.
The official economic statistics are worthy of close attention in such a situation. In the latest figures, the annual inflation rate in the US edged up to a 13-year high of 5.4% in September from 5.3% in August. That sounds alarming but it is important to note that there has been no significant increase in the last 4 months.
The Consumer Price Index in the United States increased 0.4% in September over the previous month. It compares with 0.3% in August. The CPI for all items less food and energy is called the Core Inflation Rate in the US. It rose 4.0 percent in September from a year earlier, the same pace as in the previous month. Month-on-month (MoM) , the CPI for all items less food and energy rose 0.2 percent in September, after increasing 0.1 percent in August. These are not big increases.
Producer prices for final demand in the US were up 0.5% MoM in September of 2021, the smallest increase so far this year. Prices for US exports edged up 0.1 percent in September over a month earlier. There has been no increase over last 3 months. The price index for US imports increased 0.4 percent in September — again, no increase over the last 4 months.
Cost of food in the United States increased 4.6 percent in September over the same month in the previous year. That is a concerning. Producer prices for final demand in the US (excluding food and energy) increased 0.2 percent in September from a month earlier.
The annual “core core” inflation rate in the United States, which excludes food, shelter, energy, used cars and trucks, picked up to 3.4 percent in September — but there has been no real increase over the last 5 months.
The transportation sub-index of the CPI basket in the United States decreased to 236.37 points in September from 238.33 points in the previous month. This index has now fallen over the last two months from its recent high in July. Year-ahead inflation expectations in the United States increased slightly to 5.3 percent in September from 5.2 the previous month.
So, it is clear that the US economy is suffering from some inflationary pressures but it also appears clear that those pressures have slowed over the last 3 – 4 months.
Let’s look at the Money Supply. Why? Because without increases in commercial bank loans (fresh new money), to the productive sectors of the economy, it is unlikely that any increases in CPI inflation can be sustained.
Loans to the Private Sector in the United States decreased to 2431.71 USD Billion in August from 2461.94 USD Billion in July. The aggregate commercial banks’ balance sheet, measured weekly, has fallen since a peak that occurred 3 weeks ago. What about wages?
Wages growth on an annualized basis is necessary for sustained CPI inflation in an economy that is predominantly services based. There has been some wages growth this year over last year but that growth peaked way back in April and has been declining every month ever since.
Consumer Confidence has fallen dramatically since April. It is now way below the average levels seen in the 7 years prior to the Covid panic in 2020. Retail sales are flat on a month by month basis. Disposable personal income is flat over the last 12 months. Personal spending is flat. Personal income is flat. Personal savings are flat. Consumer credit growth is flat. The IBD/TIPP Economic Optimism Index in the US slipped deeper into pessimistic territory, falling 1.7 points to 46.8, its lowest since September of 2020. The Redbook index of general merchandise retail sales is flat. Gasoline prices have stabilized over the last 3 months after a surge in the first 6 months of this year.
Building Permits and Housing Starts show strength. However, mortgage applications are flat. This is ominous as mortgages are the critical factor in fresh new money supply. Without mortgage growth, CPI inflationary growth cannot be sustained and therefore must be transitory. Americans appear to have grown more pessimistic about the outlook for the US economy.
What about the currency? The US currency is the next piece of the puzzle. The US Dollar Index is around its average level over 5 years. Recently, it has been in a short term uptrend since June. If that uptrend continues, then that will be dis-inflationary inside US borders. A rising Dollar slows CPI inflation inside US borders.
In summary, overall, the latest economic indicators seem to show CPI inflation factors moderating. In other words, the “transitory” argument advanced by the Federal Reserve seems to be supported by what we are seeing in the latter part of 2021. BOOM still agrees with this thesis. Meanwhile, the GDPNow model estimate from the Federal Reserve Bank of Atlanta for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2021 is just 1.2 percent.
PUTIN ON US DOLLAR: Vladimir Putin made an interesting comment on the US Dollar during the week. He said — “It seems to me that the United States is making a very big mistake by using the dollar as a sanctions instrument… by preventing payment in dollars for the sanctioned products,”
Countries facing US sanctions, like Russia, “have no other choice, we are simply forced to switch to settlements in other currencies,” he added. Of course, he didn’t say that this suits Russia and China. And, of course, Russia is still accepting dollars to settle some of their energy trades.
Always pragmatic, Putin has no plans to ditch the US currency entirely but he said “if the policy of the American authorities continues ……then we will not have to do anything, the US will itself undermine confidence in the dollar.” This is called playing politics.
The fact is that the US Dollar is under no real threat of losing its reserve currency status at present. It is clearly dominant in volume in foreign exchange reserves held at central banks around the globe. The Euro comes second in this volume game. Between them, these two currencies make up around 80% of global Fx reserves. This makes them convenient to use in trade settlements.
THE “FALL” OF THE US DOLLAR: The “fall of the US Dollar” and subsequent “hyperinflation” risk so frequently forecast by doomsayers is not something that keeps BOOM awake at night. It sells books and newsletters to the un-informed and the poorly informed. But, beyond that, it is just a sideshow. BOOM has watched that sideshow for 30 years. The articles and the books, which never vary in their central thesis or their style, find all sorts of reasons to predict the “end of the Dollar” and a “catclysmic hyperinflation” inside the United States. Some go on to predict the return of a gold backed currency. Some say that (somehow) the world will switch to crypto so-called “currencies”. But such instruments are not currencies and never can be. They are always expressed in currencies, principally the US Dollar.
Some say that there will be a global, digital currency. Somehow they miss the point that we already have one — it is called the US Dollar. Some say that the IMF’s Special Drawing Rights will somehow (magically) become a global currency, overlooking the fact that an SDR is defined in terms of a basket of current national currencies and is really just a contrived unit of account.
These stories have rarely varied in the last 30 years. But they certainly sell newsletters, books and conferences always promising the special secret to unimaginable wealth in preparing for the “collapse” of the Dollar.
COVID VACCINE INJURIES: In a letter dated September 28th to officials at the U.S. Food and Drug Administration (FDA) and Centers for Disease Control and Prevention (CDC), an experienced ICU physician detailed her concerns about adverse reactions, including deaths, she has witnessed in people who had received a COVID vaccine. Dr. Patricia Lee, a licensed physician in California, described observing “entirely healthy individuals suffering serious, often fatal, injuries,” including transverse myelitis, resulting in quadriplegia, pneumocystis pneumonia, multi-system organ failure, cerebral venous sinus thrombosis, postpartum hemorrhagic shock and septic shock.
Lee, a practicing physician for more than 20 years, said she had “never witnessed so many vaccine-related injuries until this year.”
Total official statistics currently reveal over 45,000 deaths following Covid vaccination in the US, Europe and UK combined. That number is just the reported deaths (principally reported by families). The real number is estimated to be 10 – 100 times worse according to the Harvard Pilgrim Study. If so, the worst case scenario is for over 4 Million post Covid vaccine deaths to date and just in those three regions.
Injuries are even more horrifying. The total is now over 7 Million post Covid vacine injuries reported but the worst case scenario is over 74 Million injuries in 20 Million people. This is not the global total — just the current total in the US, UK and Europe. Read all about it here: https://alethonews.com/2021/10/14/in-20-years-of-practicing-medicine-ive-never-witnessed-so-many-vaccine-related-injuries/
In economics, things work until they don’t. Until next week ………… Make your own conclusions, do your own research. BOOM does not offer investment advice.
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Must be some high quality rose-colored glasses in use there…
Socrates indicated that inflation could rally into 2034, and based on the current solutions, the computer will likely be correct once again. Perhaps we should all view inflation through rose-colored glasses and view the 5.4% YoY spike in September as “kind of a good problem to be having.”
The rose colored glasses seem to have some magnification in them. Nothing to see here, move along.
Who care, all governments are just pretend to be against each other, but look how quick they are to groveling under the feet of Satan, how compliant they are when it comes to following the Covid- hoax. They real enemies are us, their own citizens.
Normalcy bias on full display here if you ask me.
But…currencies are sort of just that. If everyone agrees something is, then it is. And so the US dollar will be the reserve currency until for various reasons, everyone agrees it ain’t.
And with the Two Minute Egg at the helm, there are more and more reasons. The Cackler won’t improve that situation very much. “Doc” Biden may think she has the reins and fancy herself a modern-age Wilson lady but gimme a break.
China is ALREADY communist and so doesn’t NEED to use any ruses to impoverish and subjugate its citizens. So yeah, they don’t have to give a flying rat’s ass about climate change.
The US, however, along with UK et al, need to cripple the people in order to fully choke out liberty. So if you cannot heat your home, keep the lights on, cook food, refrigerate what scant food there is, well then you will either look to the government to do it or take up arms to stop them from ruining what’s left. (Australia anyone?)
Covid-1984 was the first step in global subjugation of anyone and anything worth subjugating. China is already under the yoke of tyranny. No one gives a fuck about Africa. India is still too poor to matter, right now anyway.
Take cars away via sky high gas prices and people will be confined to there towns and small neighborhoods, much easier to monitor and control. No escaping to naughty states like Florida or Texas.
Take away jobs via jab mandates, and then make it impossible to get another because you can’t fly, drive, get on a bus or plane to go to said naughty states, also deny unemployment, and there you have it. Subjugation.
Throw in a total lack of how to do anything other than look at a glowing screen and post glamour shots on social media and you have a nation of morons.
And then we have that megalomaniac Uncle Billy. Uncle Billy has been talking about mass-murdering a whole lot of us for a long time, and has Jack The Ripper’d his way through Africa for a while now. He, with fairly little fanfare, ran an experiment to block out the sun. No one really asked him about it, or talked about it. But how in the hell can we become “green” via solar energy if he blocks out or partially blocks out the sun? No one is asking that very serious question of Uncle Billy.
We have people watching bullshit like the Squid Game on TV and not realizing predictive programming when they see it. I talked about us having a Running Man style game show soon, and it seems I was not off the mark.
Bread and Circus has come home to roost.
Bread and circuses covered for the facist government of Rome so I believe we are now under one of my favorite rules, monkey see, monkey do. From history I have read, half of the population of Rome were slaves. Coming here? White people’s turn? News at 11:00.
Not sure what planet the author resides on. Here in reality regular has jumped for 3.19 to 3.43 and diesel has gone up 35 cents in the last 2 weeks.
I suspect the diesel one will cause more widespread pain since everything is shipped by truck. But, government statistics exclude everything people use and basically measure the cost of a glass of tapwater.
My son is involved in writing many of those multimillion dollar loans. From what he tells me businesses are tapped out. Those that were able to secure loans did it in the 1st and 2nd quarter.
Now, it’s the dregs looking for loans just to stay afloat, often business owners using company funds as a personal account. One he recently rejected has existed for the past 3 years only on loans. For 5 years they have had declining revenues and are maxed out.
Another was seeking a several million dollar interest only loan so that they would have enough cash on hand to qualify for a bigger loan (2.5x) at another bank.
From my perspective all signs point to stagflation.
Steve – I am seeing the same thing with gasoline and diesel around here. From $2.89 to $2.99 to $3.09 to $3.19 in about 10 days. $.10 jumps every other day during the time of year the price of gasoline is usually falling.
Here in my west central Florida area, gas prices jumped 20 cents overnight. $3.09 to $3.29.
My wife just texted. Diesel up another 10 cents overnight! 45 cents in 2 weeks or 12%
Let Go Brandon.
Amazon survived for more than 20 years on loans.
No analysis that takes the CPI seriously can be taken seriously.
Debt and inflation to infinity and beyond! It’s like watching a drunk stumbling down the sidewalk and wondering when he will fall down. You can only live on credit cards for so long, eventually, you have to pay or?
CPI is fake.
When they say inflation is transitory, they mean out of sight out of mind. The debasement of our currency is clearly their goal given that their mandate is a stable currency. So they are doing it on purpose to impoverish the nation and bring us the great reset to a communist country.
A programmable electronic dollar. Add in a social credit score for fun. Visit the doctor. You are overweight. Go to the grocery. No bread, potatoes or snacks for you. Salad for you fatty! And on and on she goes. Velcom comrad, dis is da gnu Newnited startes.
Shouldn’t the head of the Bureau of Statistics and Tony “the Shot” Fraud hold joint press conferences kind of like Pro-wrestling tag team matches and dazzle the Useless Idiot Americans with lies: In this corner Tony the shot with 100% effectiveness and no adverse reactions verses what’s her name no inflation YOY humanetics forked tongue gobbels I never had sex with that woman depending on what is is!
And simply because it hasn’t happened over the last 30 years, that means it won’t happen next year or within the next 5 years?
Good luck with that stance!
I think that we have at least a few months until anything major happens, but who knows. What that means to me is that real estate has to come down through spring in whatever meandering path it chooses.