Inflation/stagflation Thread

Finance
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I didn’t know where else to post this comment and I wanted to avoid starting a new thread. This is more on the topic of financial disruption in my view. Will it contribute to inflation? I dunno. Anyway:

This announcement about Fed Chairman Powell, coming as it does in the wake of the other Fed resignations, is most unfortunate. And I’m not saying Powell is dishonest or underhanded. Am in no position to comment on that. But the appearance of what he did is rather smelly.

Thing is, Powell’s term ends in only a short while, early in 2022. You could hardly blame Biden, in the wake of this disclosure, for deciding to go with a different Fed chair. After all, that’s what Trump did (nearly) four years ago when he put Powell in. Frankly it would not surprise me if Biden elevated his own Treasury Secretary.

But changes at the top of the Fed can cause market queasiness. It’s such a powerful position. Change there gets money folks to thinking, and that can become messy.

I remember back when the country relied on strong hands at the Fed. Both Volcker and Greenspan come to mind. Not saying they got everything right. But they were strong and respected. Given the pandemic, the inflation, and so much else of a financial nature buffeting America now, things would be a lot better if we had a steady and widely respected hand on the Fed tiller . . . . . not a person whose ethics are being called into question. :slightly_frowning_face:

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In his blog post which has just gone up, Ken has opened with comments on inflation:

Ken opens with inflation numbers

It “don’t look good”. Even the core inflation is at 4%!

Ken states inflation is currently at a 30 year high and is expected to persist.

Groan :cry:

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I think it’s a certainty that Powell will be replaced. The only question is whether Manchin and Sinema will allow a proponent of modern monetary theory that Biden’s handlers are certain to nominate to be confirmed. And given the RINO sellouts to Wall Street, it may not even take the vote of these two.

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Tudor Jones says inflation is our largest threat

From CNBC dated today:

Paul Tudor Jones says inflation could be worse than feared, biggest threat to markets and society

Short lift:

Billionaire hedge fund manager Paul Tudor Jones believes that inflation is here to stay, posing a major threat to the U.S. markets and economy.

“I think to me the No. 1 issue facing Main Street investors is inflation, and it’s pretty clear to me that inflation is not transitory,” Jones said Wednesday on CNBC’s “Squawk Box.” “It’s probably the single biggest threat to certainly financial markets and I think to society just in general.”

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I have a question - what exactly is “transitory” inflation? Is it prices increasing, then going back down? Or is it a high rate of increases, that then levels off at a more historical rate?

Store brand single-serve drink mixes at Walmart have recently increased from $1 to $1.60. Does “transitory” mean that the price will soon return to $1, or does “transitory” mean it was a one-time increase and it doesnt increase further (the 60% inflation rate wont persist)?

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It means the inflation rate will subside within a moderate interval of time.

But consider:

I was already well into my years when we had the last significant inflation threat. Maybe that’s why I started this thread . . . because I remember the impact. To be more specific:

1978 . . . 9.0%
1979 . . . 13.3%
1980. . . . 12.5%
1981 . . . . 8.9%

But starting early in 1981 we had one of the finest Presidents in American history. And we also, back then, had the services of a very strong and smart Fed Chairman, Paul Volcker.

Probably more important than both of those things, back then we did NOT face an almost $30T federal debt with a President and Congress anxious to increase that debt even more.

Still, even with those several advantages, I remember how difficult it was to work our way out of that inflation. What will happen now I dunno.

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27

That’s what I thought. But I dont think that’s what most people think (which is why I asked, to make sure I was correct). They equate “transitory” with “temporary” as in the higher prices being temporary, not that the rate of increase will slow.

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One of THREE separate op-eds at WaPo asking people to lower their expectations in Joe Biden’s America. Here they are telling people they’re wrong to expect stores to have their shelves stocked.

https://www.washingtonpost.com/opinions/2021/10/18/dont-rant-about-short-staffed-stores-supply-chain-woes-try-lower-expectations/

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Sounds to me like part 'n parcel of a transition away from capitalism and on to Marxism.

It’s tough to find toilet paper offered for sale in Venezuela.

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This is the finance board and I have a finance post . . . related to inflation:

The way Paul Volcker finally nailed that last inflation was by increasing interest rates, the Fed funds rate, into the stratosphere . . . . . well up into the teens!

I was investing back then, mostly in individual bonds, and I well remember my own hesitation to put money out owing to fear interest rates would go still higher. I did summon up the courage to buy some high quality long term munis paying 10%-11% state and federal tax free, perhaps the most lucrative bonds I ever bought. But that was just luck. Had interest rates continued higher I would have gotten hosed. It’s better to be lucky than smart.

Anyway, I dunno what inflation will do going forward today. I don’t see the availability of Volcker’s option because, unlike back then, today’s deficit is so high. America would go broke paying 15% or 20% interest on $30T. Maybe we’re heading instead for Argentina redux.

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I have to go along with grocery store shelves pretty well stocked today.

But when out doing my grocery shopping yesterday I needed my favorite sausage links and patties. This one brand was missing in the cold counter. I have heard of course about pork and beef shortages. There’s only one store in town that carries that brand and now I don’t see it any longer.

Most or all prices have gone up. But when certain items we are used to just disappear, I think we need to start worrying.

But @scripta mentioned earlier that Costco pumpkin pies are still around, makes me happy. Those pie’s are as good as homemade. :blush:

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Now Cramer!

He is one of Biden’s biggest fans, but:

Joe Biden’s failed policies have caused prices to skyrocket all across the nation, and now “experts” are starting to admit it. Although Fed Chair Jerome Powell and many other Biden loyalists say inflation is “transitory”, the statistics are proving that to be totally false.

Now, one of Biden’s biggest fans Jim Cramer is even admitting that inflation is “much worse than we thought”.

“Let’s talk about the questions that investors are wondering. If you’re worried about inflation, this is a huge issue,” the CNBC host asked Cramer.

“Yeah, I mean look, I think Paul Jones as always is right about inflation. It’s much worse than we thought.

Read more here

33

I know you’re grasping at straws when you start quoting Jim Cramer :laughing:

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34

Executive summary: Don’t worry. Be happy.

Where inflation is concerned, it’s all good for people who graduated from Princeton and Harvard and who worked for Obama. But this is the finance board, not a political forum. Hence, all viewpoints regarding inflation are on topic here. To wit:

The energy-price increases we have seen over the past year will no doubt put strain on some American pocketbooks. But that trend should not be an added reason to worry about the broader wellbeing of the American economy. In fact, the energy inflation we’re now seeing may prove to be less of a lasting concern than history might suggest.

To be sure, increasing energy prices and related inflationary concerns are historically associated with shocks to the price of fuels, particularly oil and the products derived from it such as gasoline and fuel oil. While the relationship between fuel prices and inflation has weakened over the past few decades, it’s understandable that many consumers feel anxious about inflation.

You can find additional thoughts from this author here:

Barrons: Inflation is less a threat than believed by many

35

All right, maybe I should have started a new thread! I’m in a situation here of posting off topic on my own thread . . . or at least only tangentially on topic. No question what happens at the Fed relates to inflation . . . . but still . . . . Anyway, once again:

Things have become worse at the Fed with the disclosure by their ethics office that broad trading warnings were timely issued. We do, as a country, need a strong, ethical Fed when inflation threatens. And we appear to have anything but. So there is at least that much of a tie-in to this topic. Here we go:

On March 23 last year, as the Federal Reserve was taking extraordinary steps to shore up financial markets at the onset of the pandemic, the central bank’s ethics office in Washington sent out a warning.

Officials might want to avoid unnecessary trading for a few months as the Fed dived deeper into markets, the Board of Governors’ ethics unit suggested in an email, a message that was passed along to regional bank presidents by their own ethics officers.

The guidance came just as the Fed was unveiling a sweeping rescue package aimed at backstopping or rescuing markets, including those for corporate bonds and midsize-business debt. It appears to have been heeded: Most regional presidents and governors of the Fed did not engage in active trading in April, based on their disclosures.

But the recommendation, which was confirmed by a person who saw the email, did not go far enough to prevent a trading scandal that is now engulfing the Fed and being leveraged against its chair, Jerome H. Powell, as the White House mulls whether to reappoint him before his leadership term expires early next year.

The Fed is important to the country’s financial welfare even in good times. I cannot recall a Fed scandal of this magnitude in the past. We certainly do not need this now.

Read the rest here if you wish:

Fed Ethics Office Warned Officials to Curb Unnecessary Trading During Rescue

Geez. What next?!

36

Inflation data point

Executive summary: It’s not that bad. At least not yet.

Yesterday made the trip, into another state, to purchase gasoline. Didn’t know what I would find; last such purchase was couple of months ago.

The inflation, while present, was not all that bad. Paid less than $4/gallon for real gasoline (no ethanol, the only kind I use).

OK, there was a modest increase in price, perhaps 30¢/gallon. But still nothing approaching all the hyperbolic carrying on you hear constantly on TV; less than a 10% increase in price. And I have enough gasoline now to last a while. When you burn real, 100%, gasoline everything works better and it lasts a long time. :slightly_smiling_face:

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Gasoline alone is not a data point, since its price fluctuates daily and sometimes wildly.

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“Transient” - 40% higher gas prices under Joe’s energy policies, and he’s not done yet.

image

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How exactly do our president’s energy policies increase the price of a world-wide commodity?

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Also, which policies exactly? The big bills being discussed in the news have not been signed yet and won’t take effect immediately.

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40

economic recovery raising gas prices – “That dirtbag joe is responsible!!!”

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