From Peter Reagan at Birch Gold Group
If you can see beyond the mainstream media’s attempted glossing over of President Biden’s failures, then one topic stands out: Historic inflation since June 2021.
Of course, Biden doesn’t deserve all of the blame for inflation heating up. After all, the previous administration spent trillions, and Powell’s Fed practically ignored it until the “inflation train” had already left the station.
Now, it looks as though the price inflation that’s been siphoning our savings could be sticking around for quite a while longer. It could even become “business as usual.”
To illustrate this, we’ll start with some of Powell’s recent remarks on the future of rates for the next 6 months:
Federal Reserve Chairman Jerome Powell on Wednesday affirmed that more interest rate increases are likely ahead as inflation is “well above” where it should be. “Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go,” he said. Powell said the labor market is still tight though there are signs that conditions are loosening.
He noted that the number of open jobs still far exceeds the available labor pool.
Powell even included a deadline with his remarks: “Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year.”
But there’s also some good news. Both food and energy prices are finally cooling off after months of eroding people’s savings. Here’s what that means…
Food price inflation peaked at 11.4% in August of 2022, and has finally eased a bit to 6.7% in May (but still the highest mark in 25 years).
Surges in energy prices, which in June of 2022 peaked at 41.6% for only the second time since 1963, have finally slumped for the second consecutive month.
Unfortunately, that’s where the good news ends.
If it still feels like you’re spending too much of your hard-earned dollars on “the tax that no one voted for,” that’s because you’re right.
Core inflation, which measures prices excluding energy and food, is still running the hottest it’s ever been for at least the last 25 years. You can see this fact for yourself:
“Core inflation” used to be one of the Fed’s preferred measurements. Think about it – not many months ago, when we were staring down the barrel of 50-year-high inflation, what did they say?
“That’s just volatile food and energy prices. Nothing we can do about it – the Federal Reserve can’t make the corn grow or go drilling for more crude oil.”
Fair point – what they could do is get the money supply under control…
But I digress! The point is, the Fed has a track record of blaming “volatile food and energy prices” when inflation comes in above their estimates.
This time, though? That dog won’t hunt.
Which is likely why Powell said:
If you look at core PCE inflation over the last six months, you’re not seeing a lot of progress. It’s running at a level over 4.5%, far above our target and not really moving down. We want to see it moving down decisively, that’s all.
That’s not all he said, though…
We’re two-and-a-quarter years into this, and forecasters, including Fed forecasters, have consistently thought inflation was about to turn down and typically forecasted that it would, and been wrong.
Not all forecasters were wrong, Chairman Powell!
Core inflation “has not really moved down. It has not reacted much to our rate hikes. We’re going to have to keep at it.”
Despite saying all that, the Fed didn’t hike interest rates earlier this month.
What is going on?
Talking the talk, but not walking the walk
My grandma used to tell me, “Actions speak louder than words.”
I submit that, if the Fed were actually sincerely serious about fighting inflation, they would’ve raised interest rates. Skipping even a single opportunity to do so means higher inflation that lasts longer.
Chairman Powell isn’t the only one who thinks it could be a while before tightening monetary policy will impact core inflation in a meaningful way.
Gita Gopinath at the International Monetary Fund (IMF) appears to agree, as her recent remarks suggest:
[Policy-makers] may be too optimistic about the cost and difficulty of taming inflation, which then raises the sort of stability risk central banks might not be equipped to handle.
“Inflation is taking too long to get back to target,” Gopinath told the European Central Bank’s annual get-together in Sintra, Portugal. “While headline inflation has eased significantly, inflation in services has stayed high, and the date by when it is expected to return to target could slip further.”
Such a delay would be costly, so central banks need to keep policy tight, despite an obvious cost to growth, she said.
Wait – “inflation is taking too long to get back to target”? I think she put the cart before the horse…
I think she actually meant to say, “Central banks are taking too long to get money supplies back to target.”
Remember, folks, “inflation” refers to increasing the money supply! Higher prices are a symptom of inflation – but the cause is an increase in the money supply.
Regardless of cause and effect, even Ms. Gopinath suspects that central banks might not be able to bring this inflation under control at all.
Let’s hope she’s wrong!
At that same meeting, Chairman Powell added a final point about inflation that’s uncharacteristically pessimistic:
It’s going to take some time. Inflation has proven to be more persistent than we expected and not less. Of course, if that day comes when that turns around, that’ll be great. But we don’t expect that.
Ouch!
So the battle to get inflation under control will take even longer. And he doesn’t expect that situation to change anytime soon.
Which makes me wonder – combine his tough inflation talk with his actions of not hiking interest rates in June – what’s the real agenda?
The “new normal” of 5% annual inflation
Right now, the Effective Federal Funds Rate (EFFR, what we call “interest rates” in relation to the Federal Reserve) 5.06%.
Inflation is just about exactly the same – 5%.
With both of those rates at about the same level, we could be seeing some sort of stable pricing equilibrium.
Other nations around the world are also doing their own versions of this “stop hiking rates and see whether inflation cools by itself” experiment.
For example, Canada tried pausing rate hikes at one point too, but ended up raising rates again. Australia also tried to pause its rate hiking schedule, but that effort failed spectacularly.
So instead of learning from these examples, the Fed decided to make the same mistake.
Maybe Fed doesn’t actually want to focus on lowering inflation at all? Maybe Powell is starting to think that prices are already somewhat stable according to the Fed’s dual mandate?
After all, 5% inflation is a far cry from hyperinflation. It’s bad but not quite out of control, right?
Could this be our “new normal” for the foreseeable future?
Don’t misunderstand – deliberately deciding 5% inflation is “good enough for government work” and then lying to us about it is not okay. Even if they sincerely believe that’s the best thing for the nation.
If that’s the case, level with us – tell us what’s at stake. Don’t try to tell us you’re serious about fighting inflation while passing up an opportunity to actually fight inflation.
The Fed’s official inflation target is still 2%. That’s a long way off (and may be subject to change without prior notice).
So what can we do?
Are you ready for this “new normal”?
Listen: The Fed have as much as admitted that, no matter what they do, inflation won’t ease for quite some time.
Can your savings withstand the corrosive effects of long-term inflation?
If you’re like most people, you don’t know for sure. Frankly, an awful lot of people working and saving today have never experienced inflation like this.
That means now is a good time to consider diversifying your savings with inflation-resistant assets. Physical precious metals like gold and silver have long set the standard for safe-haven stores of value, especially during periods of high inflation.
High inflation means your 401(k) or IRA will be worth less, potentially much less, when you retire. Personally, I recommend a Gold IRA for the ultimate retirement security. To see why, Click here to get a FREE info kit from Birch Gold Group about Gold IRAs. (This comes with NO obligation or strings attached.)
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Fuck Biden but thanks for that truth. Stats indicate Trump’s administration equaled the spending of Obama’s but in one term rather than two. That makes me feel oh so confident in the so called conservatives.
They all dance to the same fiddler.
Remind us again which body makes and approves the appropriations?
Israel.
Possibly but around here regular unleaded gasoline has shot to $3.60 or more. I don’t recall those kind of prices in this neck of the woods since hurricanes Katrina and Rita.
wow, who’s the dude on far right?
May be a Bud Light transformer?
I don’t see how raising interest rates is going to help if they don’t STOP PRINTING MONEY and spending it like there’s no tomorrow.
What’s more full of shit than the NYC sewer system?
Da Fed. Dey gonna put dat inflation genie back in da bottle. Uh huh, Uh huh……….
They look like the staff at a supermarket in Ohio. Or a school board in Massachusetts.
IOW, a real brain trust! lol! Muh confidence is soaring!
Truth be told, it looks like they are waiting for the orgy down in the basement to begin.
The Fed IS inflation. Inflation won in 1913.
End the Fed. (And end every other central bank, especially the international ones.)
.
https://wtf1971.com/
I read that book and several others written by RP. That was during a time I thought the thing to do was try to bring others into the RP ring perhaps “opening some eyes”. Nope. Many folks simply don’t care to delve into the political dupe. I loaned that book to a co-worker, sort of forgot about it then when I thought to ask if the guy had finished it so as to get it back he could find it.
Nobody cares
UPS drivers set to get $170,000/year.
https://www.freightwaves.com/news/truck-drivers-construction-workers-and-other-manual-workers-are-getting-a-huge-pay-raise-get-used-to-it
Better buy a wheelbarrow now, before the run.
Amazing that old man on the far right hasn’t stroked out or had a heart attack. The veins in those legs are perhaps cause for alarm.
What is it?
What’s next? Hyper-inflationary collapse. That is how it has always played out and that is the way it will turn out again. The question should be : After the war, who will replace the Anglo American Financial system.
My power bill and water bill both increased by 50% this year….
And the Federal Reserve is the root cause of inflation. They don’t fight it, the cause it.
Every time they state that their “target” is 2%, know that they’re telling you they’re robbing you and intend to keep doing so indefinitely.
“Inflation is always and everywhere a monetary phenomenon.” – Milton Friedman
Inflation is an increase in the money supply — FULL STOP
Price increases are a symptom of inflation.
Inflation of the money supply is necessary in a growing economy to allow for an increasing amount of monetary transactions without causing a deflationary restraints on the economic growth. If the appropriate amount of inflation were able to be precisely known in advance, the money supply could be increased by the precisely correct amount and there would be ZERO increase in prices.
Still, they measure “inflation” by its effect on prices and state a “target” of 2%. That is, they intentionally devalue the dollar every single year as a TAX on everyone around the world who transacts in dollars.
On top of this, they have been fudging the numbers on price “inflation” since the 1980s (see Shadowstats).
There is no reason for increasing prices other than siphoning money from nearly everyone to fund government giveaways to a few. The Federal Reserve, and the Federal Government that authorized it is simply a criminal cartel.