Inflation/stagflation Thread

Please post here anything relating to inflation or stagflation

The head guy at Goldman has spoken with Bloomberg TV regarding inflation:

Goldman Sachs Group Inc. Chief Executive Officer David Solomon said that inflation, particularly in wages, remains top of mind among corporate leaders and shareholders.

“Inflation is a topic that is front and center with every investor that I talk to – and certainly with every CEO that’s running a business of any size or any scope,” Solomon said Friday in an interview with Bloomberg Television. “There is definitely inflation – we haven’t seen it in a while, and the question is what choices do we make from here.”

Solomon’s comments follow similar concerns voiced this week by Bank of America Corp. CEO Brian Moynihan, Morgan Stanley CEO James Gorman and Goldman President John Waldron. Recent inflation, driven in part by worker shortages and rising wages, “is clearly not temporary,” Moynihan said Thursday.

“There’s real wage inflation across all aspects of the economy right now,” Solomon said Friday.

Goldman Sachs CEO Says Wage Inflation Is Spreading Through Economy

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It was almost fifty years ago, but I continue to remember, more in a “general sense” way at a gut level than with regard to specifics, how bad stagflation was for everyone under President Nixon. If you were not around for that experience, trust me, you do not want our economy to fall into stagflation.


News this week that U.S. inflation is running at a 13-year high of 5.4% confirmed what many Americans already know as they juggle their own budgets: food, energy and shelter costs are all rising rapidly, adding to the strain they were already dealing with from high costs of hard-to-find goods such as cars, dishwashers and washing machines.

That is a clip from a Washington Post article only several hours old. Read the entire article here to circumvent the WaPo paywall:

The era of uncomfortable inflation is here and it’s already changing the economy

There’s a lot going on on this front.

  • the Fed has been buying lots of treasuries to suppress rates, but plans to “taper” their buying fairly soon. This means they would not be selling, but no longer buying. Of course eventually the bonds they bought would mature and roll off their balance sheet many years later, but provides an artificial boost to bond prices (and lowers yields) in the meanwhile by driving up demand. They have also doubled their balance sheet from $4T to $8T in the last year or so
  • the $1T and $4T govt spending bills are likely to pass in some form, so that’s another $3T probably after all the pork and payoffs that gets blown “stimulating” the economy in largely leftist ways.

  • there are a LOT of supply chain disruptions going on. Everything from semiconductor chip shortages to power generation /fuel concerns (coal/nat gas some places), to jammed up ports and sky high container ship rates to get goods moved around. Specifically all of this feeds into higher costs to deliver goods here you might want, as well as short term shortages that could drive up prices due to a scarcity effect as well.

  • the ESG virtue signaling craze in investments, driven by woke investment managers like Blackrock and State Street, are voting your mutual fund or ETF shares in favor of questionable policies that make them feel good and likely cost you money. But they aren’t going to stop, and Biden’s encouraging this by encouraging firms to include these environmentally focused investment mandates to be put into everyone’s 401ks. Meanwhile, divesting from fossil fuels and some banks refusing to loan to those industries is driving up the cost of capital for energy production we need now rather than some idealized plan to move to lower carbon and emissions down the road. There just aren’t enough renewables and they’re wildly risky to use in scale because you don’t want your grid to crash just because it wasn’t that sunny or the wind didn’t blow as much as you thought. This almost happened to the UK and power prices are up over 5x from a year ago. Coal, gas and (not enough!) nuclear plants run all the time and provide a core stable power supply that can’t be replicated by transient power generation sources.

Not all of these will persist, but I would bet on too much govt spending and Fed intervention continuing as long as they can get away with it, while some of the supply chain aspects should moderate over a year or so. Commodity prices are high for the same reason rents / real estate and stocks and crypto are high - too many trillions of new money chasing assets to store value in things that the Fed can’t print. Those aren’t going back down.

Remember when the Fed says inflation is “transient”, what they really mean is they’re debasing the dollar via inflation / printing / quantitative easing and stealing your wealth this way, at 5% per year inflation currently vs 0% risk free rates. And they plan to stop, or slow down anyway, over the next year or two. But if inflation goes back down to their target 2% rate and say interest rates rise back to 2% so you’re breakeven (before taxes) on holding cash, you’ll still have lost 10% of your purchasing power in the meanwhile. That’s since this round of “transient inflation” wasn’t matched by an equal amount of deflation to get the dollar’s purchasing power back to where it was before they started printing like mad during the pandemic and the Democrats decided no one cared so they were going to print another couple trillion to give to their friends / cronies / voters preferentially.

On the lighter side,


it looks like California regulations are in large part responsible for the log jam at the ports. The left media will not say anything about it of course.

The trucking issue with California LA ports, ie the Port of Los Angeles (POLA) and the Port of Long Beach (POLB), is that all semi tractors have to be current with new California emissions standards. As a consequence, that mean trucks cannot be older than 3 years if they are to pick up or deliver containers at those ports. This issue wipes out approximately half of the fleet trucks used to move containers in/out of the port. Operating the port 24/7 will not cure the issue, because all it does is pile up more containers that sit idle as they await a limited number of trucks to pick them up. THIS is the central issue.

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Source: Barron’s

‘Sticky’ Consumer Price Index Hits a 13-Year High

As we enter the third-quarter earnings season, there has been a notable shift in the dominant economic narrative. Most clearly, the notion that inflationary pressures will prove to be “transient” is starting to be replaced by a much longer timeframe. September’s CPI [consumer price index] report was notable for the broadening of the inflationary impulse more than its actual level. This can be seen in a chart of the Atlanta Fed’s “Sticky” and “Flexible” CPI measures, which represent a division of the overall CPI basket into a cyclically sensitive and insensitive measure.

“Flexible” CPI has risen to over 13%, a level not seen since the early Volcker years, reflecting a very rapid increase of energy costs, and also some of the more idiosyncratic measures such as used-car prices and airfares. This measure has been elevated for several months, but will probably start to decline as the base effect from the late 2020 surge in prices starts to make year-over-year increases look smaller in percentage terms. However, the baton is now being passed to “Sticky” CPI, which has just broken out to a new 13-year high at 2.8%.

You may read the remainder of this piece here:

‘Sticky’ Consumer Price Index Hits a 13-Year High. What That Means for Inflation

End of Barron’s material.


Source: Forbes

Why Inflation Matters For Social Security, Medicare And Your 401(k)

Despite the Federal Reserve’s assurances that it won’t last, high inflation has become one of the dominant stories of 2021.

Retired Americans living on fixed incomes have been struggling with rising prices, but people who are still working tend to fear inflation more. One reason for this is that retirees get an annual cost-of-living adjustment (COLA) to their Social Security checks. More inflation means a bigger COLA—benefits will increase by 5.9% in 2022, for instance, the biggest boost since 1982.

Still, inflation has plenty of downsides for retirees, like pricier Medicare B premiums. Meanwhile, the Fed is eager to ease off bond purchases before they ultimately raise interest rates in the years to come, which will likely have a negative impact on retirement investments.

“The real question for retirees is will this [COLA] increase be enough to offset the rising costs of goods, or will it just lessen the blow,” said Tim Steffen, director of tax planning at Baird.

This story continues here:

Why Inflation Matters For Social Security, Medicare And Your 401(k)

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Source: Barron’s

The Threat of Stagflation Is Haunting Investors

If given the opportunity, most people would use a time machine to right a wrong or see the future. But Wall Street seems to want to go back to the 1970s, when stagflation reigned.

At one point, stagflation—a combination of economic stagnation and inflation—was considered almost mythical. How could growth stagnate while prices continued rising? Then the 1970s hit. Richard Nixon caused the dollar to tumble by taking the U.S. off the gold standard, oil prices soared thanks to an embargo, and companies responded by charging more and making less. It was only through a painful series of interest-rate hikes and recessions that the U.S. finally shook it off.

Now the specter of stagflation has returned. It’s not just the number of reports hitting my in-box that suggest this. J.P. Morgan released a survey on Oct. 13 showing that 42% of respondents believe that the U.S. is careening toward a stagflationary future. Even Google Trends shows that searches for the term have started climbing again.

“The term ‘stagflation,’ which was widely used in the 1970s and the early 1980s, essentially disappeared from the lexicon over the subsequent few decades,” writes Jay Bryson, chief economist at Wells Fargo Securities. “However, it has become in vogue again recently with the marked rise in inflation that is due, at least in part, to supply constraints.”

You may read the remainder of this article by clicking below. And if you’ve never experienced stagflation, you probably should:

The Threat of Stagflation Is Haunting Investors

Take it from me. Stagflation is bad totem.

Inflation is influenced by the perception of inflation. So the more we talk about inflation, the more likely it will manifest into reality. :sweat_smile:


I did a good bit of food shopping early this morning. The store shelves were absolutely groaning with product. I easily located, and bought, everything on my list.

Yet we are told shortages are one basis for this inflation and we are shown, on TV, rows and rows of empty grocery store shelves.

The above is my experience. I am interested in your experience, limiting your answers here to food shopping only please:

When shopping for food for my family, I am finding:

  • Adequate supply of most grocery store items I want to purchase
  • Lots of nearly empty shelves at my grocery store, exactly as pictured on TV

0 voters

I don’t think there’s any shortage of essentials (food, toilet paper, cleaning supplies, etc). There may be a shortage of non-essentials, i.e. crap that nobody should miss. I just read somewhere about a shortage of pumpkins, but I’ve already been to / seen many pumpkin patches with no problems, and Costco still has their pumpkin pie, so I dunno. Maybe it’s regional and my region has no issues due to the proximity to the ports of LA & LB.

There’s an apparent shortage of restaurant and retail staff – I don’t think I’ve ever seen so many “help wanted” signs before. But I can’t say it has had any noticeable effect on me.

Except when they don’t. Like when all three of those failed and killed 100s (or 1000s) in Texas earlier this year.

Sam’s club was wiped out of toilet paper last week. And online has had sporadic availability, at least of the store brands.

My understanding was that the primary cause behind the TX 2021 winter power failures were due to natural gas transportation and infrastructure freezing in the cold temperatures and this was disrupting the power generation or transport. Coal and nuclear were largely not implicated in the subsequent investigation, although wind power was also disrupted due to freezing conditions but that was not the primary problem.

Yes, they should have winterized their infrastructure, as had been advised previously, and hopefully now they actually will.

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One of the nuclear reactors also went down, along with several coal plants. Wind also went down (but came back up the fastest), but the wind wasn’t allocated/intended to be used anyways at that time of year, so the wind going down wasn’t unexpected and would not have presented any problem.

Yes, we are over-reliant on natural gas. And the “de regulation” and splitting of distribution and retail from production means there is no incentive for the producers to have reliability. Low reliability just means they can price gouge when the shortages they artificially induced inevitably occur.

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When it comes to natural gas I speak from personal involvement in the industry.

The global warming fanatics, over these last years, have done everything in their power to shut us down and hamstring our ability to supply the nation’s natural gas needs.

America has a 200 year supply of natural gas, much of that from shale. And natural gas is the cleanest and least polluting of all fossil fuels. Thus, for a long time we have been targeted by the climate change crazies. It is because natural gas represents by far the most serious challenge to the renewables nirvana they all worship and adore.

Most especially in recent years they have gone after our essential pipelines, doing all in their power to thwart construction of critical infrastructure. There are places in America, easily within reach of our own abundant supply of natural gas, which instead prefer to import their natural gas from abroad. They do this, first, in order to avoid construction of critical pipeline and, second, to screw over their fellow Americans who would benefit from domestic natural gas sales. And they are happy to pay the inflated cost of foreign natural gas in order to achieve their anti-American goals.


Poorly structured poll. We can usually get what we want, and there aren’t “lots of empty shelves at my grocery store” so the first option is the more accurate answer in my case. But I’ve never seen the grocery store frequently out of many unrelated items as I have seen for the past year and half.

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This is the inflation thread. The news media is repeatedly showing us video of empty store shelves today. These “shortages” are being portrayed as one of several excuses for the current, out of control, inflation. Hence the wording of the poll.

As an aside:

I actually find your report of past shortages interesting. Here where I live we have not experienced that. Good to know.

Well the closest one to me closed entirely, so I suspect their shelves are indeed empty as no one has taken over the building yet for another purpose. There are others of course around that are reasonably well supplied. Harder is building materials, furniture, larger appliances. A lot of those are wait listed for months and even then it may be longer.

I am not seeing any impact locally. I am seeing week+ delays from Amazon. Also, fedex seems to be a mess. 2-3 day delivery turning into 5-10 days. UPS and USPS (amazing!!) seem unaffected thus far.

Maybe, this is the trucker shortage.