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Consumer Price Index (CPI) data for April came in much hotter than expected. Year-on-year, inflation is up 4.2%. The big number even prompted Federal Reserve Vice Chairman Richard Clarida to say, “We were surprised by higher than expected inflation data.”

Peter Schiff appeared on Tucker Carlson’s show to talk about the consequences of more printed money chasing fewer goods. Peter said inflation is going to hit the middle class harder than the pandemic.

Peter said this hot CPI print is a cause for concern and ultimately it is a tax.

It is the inflation tax. And if you look at how much the cost of living went up, measured by the CPI in the first four months of this year, it’s 2%. So, if you triple that to annualized it, we have consumer prices rising at 6% annually. But if you look at the monthly numbers, every month it accelerates. So, if you extrapolate the trend of the first four months of this year for the entire year, you’re going to get a 20% increase in consumer prices in 2021.”

VIDEO

Tucker asked a poignant question. If the value of the US dollar is falling as quickly as the CPI suggests, why would any country want to invest in US bonds? Doesn’t this threaten to cause a shake-up?

Peter said they won’t want to invest. They’ll be selling US Treasuries.

Anybody that can connect these dots is going to be selling US Treasuries. And the problem is there’s a lot of US Treasuries to be sold.”

Peter noted that a lot of people are talking about a shortage of goods.

…click on the above link to read the rest of the article…

Spiking Inflation, Rate Hikes, and Debt Defaults in Latin America

May 16, 2021

Spiking Inflation, Rate Hikes, and Debt Defaults in Latin America

Mexico and Brazil, having seen the economic destruction that high inflation can wreak, don’t want to see it again.

Latin America will soon be hit by a wave of business bankruptcies and defaults, according to Jesús Urdangaray López, the CEO of CESCE, Spain’s biggest provider of export finance and insurance. CESCE insures companies, mainly from Spain, against the risk of their customers not paying due to bankruptcy or insolvency. It also manages export credit insurance on behalf of the Spanish State.

CESCE’s biggest clients are large Spanish companies with big operations in Latin America. For many of those companies, including Spain’s two largest banks, Grupo Santander and BBVA, Latin America is its biggest market. CESCE’s three biggest shareholders are the Spanish State and, yes, Spain’s two largest banks, Grupo Santander and BBVA.

BBVA, which is heavily invested in Argentina, warned about the worsening situation in the country. If Argentina’s economy continues its inflationary spiral, it could end up affecting BBVA’s overall performance and financial health, the Spanish bank said.

Argentina’s government is once again trying to restructure its foreign-currency debt with the IMF, having already defaulted on the debt once since the virus crisis began.

Ecuador was first to default on its foreign currency debt, followed by Argentina, then Surinam, Belize, and Surinam twice more — six sovereign defaults so far in 13 months.

Latin America has been hard hit by the virus crisis. But the region’s cash-strapped governments with weak currencies and surging inflation cannot afford to provide the sort of financial support programs being rolled out in more advanced economies. Fiscal response has added just 28 cents of extra deficit spending for every dollar of lost output…

…click on the above link to read the rest of the article…

Karl Marx’s Road to Hell is Paved with Fake Money

May 15, 2021

Karl Marx’s Road to Hell is Paved with Fake Money

“The way to Hell is paved with good intentions,” remarked Karl Marx in Das Kapital.

The devious fellow was bemoaning evil capitalists for having the gall to use their own money for the express purpose of making more money.

Marx, a rambling busybody, was habitually wrong. The road to hell is paved with something much more than good intentions. Grift, graft, larceny, corruption and fake money are what primarily composes the pavement. Good intentions are merely dusted in to better the aesthetic.

If you want to understand what’s going on with exploding price inflation then you must understand this…

Right now in the United States we have a scam currency that’s controlled by central planners. Specifically, we have what Marx envisioned in Plank No. 5 of his Communist Manifesto:

“No. 5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.”

The Federal Reserve System, created by the Federal Reserve Act of Congress in 1913, is indeed a ‘national bank’ and it politically manipulates interest rates and holds a monopoly on legal counterfeiting in the United States.

Without the Fed’s policies of mass credit creation the U.S. government could have never run up a national debt over $28 trillion. Without the Fed’s policies of extreme credit market intervention the U.S. trade deficit for March of $74.4 billion – a new record – would have never been possible. Without the Fed’s printing press money the U.S. government could have never run annual budget deficits over $3 trillion.

The fact is centralized credit in the hands of a central bank always leads to money supply inflation. Asset price inflation and consumer price inflation then follow in strange and unpredictable ways.

…click on the above link to read the rest of the article…

It’s Getting Serious: Dollar’s Purchasing Power Plunges Most since 2007. But it’s a Lot Worse than it Appears

May 13, 2021

It’s Getting Serious: Dollar’s Purchasing Power Plunges Most since 2007. But it’s a Lot Worse than it Appears

Fed officials, economists “surprised” by surge in CPI inflation, but we’ve seen it for months, including “scary-crazy” inflation in some corners.

The Consumer Price Index jumped 0.8% in April from March, after having jumped 0.6% in March from February – both the sharpest month-to-month jumps since 2009 – and after having jumped 0.4% in February, according to the Bureau of Labor Statistics today. For the three months combined, CPI has jumped by 1.7%, or by 7.0% “annualized.” So that’s what we’re looking at: 7% CPI inflation and accelerating.

Consumer price inflation is the politically correct way of saying the consumer dollar – everything denominated in dollars for consumers, such as their labor – is losing purchasing power. And the purchasing power of the “consumer dollar” plunged by 1.1% in April from March, or 12% “annualized,” according to BLS data. From record low to record low. Over the past three months, the purchasing power of the consumer dollars has plunged by 2.1%, the biggest three-month drop since 2007. “Annualized,” over those three months, the purchasing power of the dollar dropped at an annual rate of 8.4%:

Folks in the business of dealing with inflation, such as economists and Fed officials, such as Fed Vice Chairman Richard Clarida, came out this morning in droves and said they were “surprised” by the red-hot CPI inflation.

There was nothing to be surprised about. We have been documenting red-hot inflation boiling beneath the surface for months, with “scary-crazy inflation” in used vehicles and in commodities, such as lumber, and surging factory input costs that are getting passed on because the entire inflation mindset has now changed.

…click on the above link to read the rest of the article…

US Producer Prices Surge Most On Record

May 13, 2021

US Producer Prices Surge Most On Record

After consumer prices exploded higher yesterday – and were immediately rejected by establishment types as ‘transitory’, despite the market’s obvious disagreement – all eyes were on this morning’s producer prices for signs of more pressure. Many were fearful of a repeat of last month’s debacle delay (and there were rumors of a softer PPI print leaked earlier today)

The rumors were wrong as April Producer Prices exploded 6.2% YoY (well ahead of the 5.8% expected) which was clearly impacted by the base effect of last year’s collapse, but even sequentially, the PPI print was shockingly hot, rising 0.6% MoM (double the +0.3% expected). Excluding food and energy, so-called core PPI advanced even more, or 0.7%.

Source: Bloomberg

That was the biggest YoY jump on record:“There is more inflation coming,” Luca Zaramella, chief financial officer at Mondelez International Inc., said on the food and beverage maker’s April 27 earnings call.“The higher inflation will require some additional pricing and some additional productivities to offset the impact.”

jumped 0.7% from the prior month and increased 4.6% from a year earlier.
Michael Hsu, chief executive officer at consumer-product maker Kimberly-Clark Corp., said in April that the maker of Scott toilet paper and Huggies diapers is “moving rapidly especially with selling price increases to offset commodity headwinds.”

Digging below the surface further, ex-food, energy, and trade, producer prices soared 4.6% YoY, the most on record also.

Source: Bloomberg

Some more details at the final demand level:

Final demand services: Prices for final demand services rose 0.6 percent in April, the fourth consecutive advance. Half of the broad-based increase in April is attributable to the index for final demand services less trade, transportation, and warehousing, which moved up 0.5 percent. Margins for final demand trade services also rose 0.5 percent, and the index for final demand transportation and warehousing services jumped 2.1 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.)

…click on the above link to read the rest of the article…

The Inflation Monster Has Been Unleashed

May 10, 2021

The Inflation Monster Has Been Unleashed

The monster known as inflation has been unleashed upon the world and will not easily retreat into the night. This is reflected in soaring commodity and housing prices. Due to the stupid and self-serving policies of the Fed, we are about to experience a massive shift in the way we live. Bubbling up to the surface is also the recognition the Fed has played a major role in pushing inequality higher. This means that inflation is about to devour the purchasing power of our income and the savings of those that have worked hard and saved over the years.

Over the months we have watched Fed Chairman Jerome Powell time and time again cut rates and increase the Fed’s balance sheet. This has hurt savers, forced investors into risky investments in search of yield, damaged the dollar, encouraged politicians to spend like drunken sailors, and increased inequality. The greatest wealth transfer in history has already begun and the next crisis will only accelerate the process. Sadly, the same policies that dump huge money into larger businesses because it is an easier and faster way to bolster the economy give these concerns a huge advantage over their smaller competitors.For decades the American people have watched their incomes lag behind the cost of living. To make matters worse, the official numbers of the so-called Consumer Price Index (CPI) have been rigged to understate inflation and not to reflect the true impact it was having on our lives. Want to know where the real cost of things is going, just look at the replacement cost from recent storms and natural disasters. Currently, the government understates inflation by using a formula based on the concept of a “constant level of satisfaction” that evolved during the first half of the 20th century in academia..

…click on the above link to read the rest of the article…

Relation Between Inflation and Deflation

May 8, 2021

RELATION BETWEEN INFLATION AND DEFLATION

For most commentators inflation is about persistent increases in the prices of goods and services. However, is this the case? For example, the definition of human action is not that people are engaged in all sorts of activities as such, but that they are engaged in purposeful activities–purpose gives rise to an action.

Similarly, the essence of inflation is not a general rise in prices as such but an increase in the supply of money, which in turn sets in motion a general increase in the prices of goods and services in terms of money.

Consider the case of a fixed stock of money. Whenever people increase their demand for some goods and services, money is going to be allocated towards these goods and services. In response, the prices of these goods and services are likely to increase– more money will be spent on them.

Since we have here an unchanged stock of money, less of it can be now allocated towards other goods and services. Given that the price of a good is the amount of money spent on the good this means that the prices of other goods will decline i.e., less money will be spent on them.

In order for there to be a general rise in prices, there must be an increase in the money stock. With more money and no change in the money demand, people can now allocate a greater amount of money for all goods and services.

According to Mises,

Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check…

…click on the above link to read the rest of the article…

Existential Economic Threats: How U.S. States Can Survive Without Federal Money

May 8, 2021

Existential Economic Threats: How U.S. States Can Survive Without Federal Money

We all knew it was coming; the alternative economic media has been warning about it for years. Eventually, monetary intervention and bailout after bailout by central banks always leads to devaluation of the currency and inflation in prices. Helicopter money always ends in disaster and at no point in history has it ever produced positive long-term results for a society.

The federal reserve has generated trillions in fiat dollars over the course of a single year (on top of the tens of trillions created in the past decade), all in the name of offsetting deflation. This deflation was NOT caused by the pandemic, it was caused by the government response to the pandemic. On top of that, the shutdowns of “non-essential businesses” and the lockdowns in general ended up being useless in slowing the spread of COVID-19.

All the information, all the facts and all the science supports the anti-lockdown crowd. Conservative run states that removed lockdowns and mandates months ago are seeing falling infection and death numbers and local businesses are on the mend. The problem is, government authorities don’t seem to care about this. It appears that their intention is to double down and continue demanding restrictions stay in place for the long haul.

In other words, they are going to FIND an excuse to keep the mandates going. If no reason exists, they will create a reason. Consider for a moment the fact that COVID-19 is mutating constantly, and like any other virus there are new strains that pop up every year. Just as we have a seasonal flu, we will probably now have seasonal COVID.

…click on the above link to read the rest of the article…

Social Unrest Fears Mount As World Food Prices Soar In April

May 7, 2021

Social Unrest Fears Mount As World Food Prices Soar In April

Global inflation is headed into overdrive as the leading food price indicator that is the United Nations’ Food and Agriculture Organization’s food price index increased for an 11th consecutive month in April, hitting levels not seen since May 2014, with sugar prices leading the rise in the main index.

The Rome-based FAO released data Thursday showing the food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat, and sugar, surged 2 points from 118.9 points in March to 120.9 in April.

That is a 30.7% YoY jump – the fastest rise since 2011…

The April surge was primarily led by price increases of sugar, oils, meat, dairy, and cereals.

FAO’s cereal price index moved up 1.2% in April M/M and 26% Y/Y. Drought conditions in Argentina, Brazil, and the US increased corn prices by 5.7% last month, while wheat prices were flat. Global rice prices slipped last month.

FAO’s vegetable oil price index rose 1.8% last month because of increasing soy, rapeseed, and palm oil prices, which offset lower sunflower oil prices.

Milk prices increased 1.2%, with surging demand from Asia, while the meat index rose 1.7%. FAO said there was “solid demand” for bovine and ovine meat in East Asia.

The idiots at the Marriner Eccles building seemingly have no interest in reading the extensive literature in connecting higher food prices to periods of social unrest. Indeed, you’ll notice from the chart below that the last big surge from the middle of 2010 to early 2011 coincided with the start of the Arab Spring, for which food inflation is regarded as a contributing factor.

While this is hardly new – we discussed it in “Why Albert Edwards Is Starting To Panic About Soaring Food Prices” and in “We Are Edging Closer To A Biblical Commodity Price Increase Scenario.”

…click on the above link to read the rest of the article…

Three reasons why inflation is rising. Two of them aren’t going away

May 6, 2021

Three reasons why inflation is rising. Two of them aren’t going away

A remarkable thing happened yesterday that tells you everything you need to know about inflation.

In the morning, US Treasury Secretary Janet Yellen stated bluntly that “interest rates will have to rise somewhat to make sure that our economy doesn’t overheat. . .”

For economists, an ‘overheating economy’ means inflation. So she was essentially saying that rates would have to rise to prevent inflation.

Yet hours later, she completely reversed herself, saying that interest rates would NOT have to rise because “I don’t think there’s going to be an inflationary problem.”

You don’t need a PhD in economics to smell the BS.

Inflation is not some potential issue down the road. Inflation is already here.

As Warren Buffett told investors only days ago, “We’re seeing very substantial inflation.”

Plenty of companies have already announced price increases to their consumers–

Proctor & Gamble, for instance, announced price hikes across the board on just about everything from diapers to beauty creams.

Hershey’s announced in February that it would be raising prices.

Food giant General Mills complained in February about a “higher inflationary environment” and “input cost pressures” due to rising commodity prices.

Clorox, Shake Shack, Kimberly-Clark, Whirlpool, Hormel, and Woka Kola Coca Cola are among the many companies that have also announced price increases.

And according to Bank of America Global Research, the number of mentions of “inflation” on corporate earnings calls has increased 800% compared to last year.

Inflation is clearly a concern of the largest companies in the world. Investors are worried. Consumers can see it.

And in a rare moment of truth yesterday morning, a politician almost admitted that she was concerned about inflation too.

This is not some wild conspiracy. Inflation is real. It’s happening. Let’s look at three key drivers:

…click on the above link to read the rest of the article…

The Grocery Price Shock Is Coming to a Store Near You

April 28, 2021

The Grocery Price Shock Is Coming to a Store Near You

(Bloomberg) — Corn, wheat, soybeans, vegetable oils: A small handful of commodities form the backbone of much of the world’s diet and they’re dramatically more expensive, flashing alarm signals for global shopping budgets.

This week, the Bloomberg Agriculture Spot Index — which tracks key farm products — surged the most in almost nine years, driven by a rally in crop futures. With global food prices already at the highest since mid-2014, this latest jump is being closely watched because staple crops are a ubiquitous influence on grocery shelves — from bread and pizza dough to meat and even soda.

Soaring raw material prices have broad repercussions for households and businesses, and threaten a world economy trying to recover from the damage of the coronavirus pandemic. They help fuel food inflation, bringing more pain for families that are already grappling with financial pressure from the loss of jobs or incomes. For central banks, a spike in prices at a time of weak growth creates an unwelcome policy choice and could limit their ability to loosen policy.

“There seems to be sort of a bullish force behind the prices internationally,” Abdolreza Abbassian, senior economist at the United Nations’ Food and Agriculture Organization, said in an interview. “The indications are that there is very little reason to believe prices would remain at these levels. It’s more likely they will rise further. Hardship is still ahead.”

Emerging markets, in some cases already under pressure from weaker currencies, are particularly vulnerable because food costs make up a larger share of their spending. For the poorest and often politically unstable countries, the surge in raw materials threatens to further stoke global hunger.

…click on the above link to read the rest of the article…

Rabo: We Are Edging Closer To A Biblical Commodity Price Increase Scenario

April 28, 2021

Rabo: We Are Edging Closer To A Biblical Commodity Price Increase Scenario

We Need Some Serious Remodelling

Yesterday’s Daily saw me float the model hypothesis that the Fed would like everyone to have all their money in stocks, so they would have a practical mechanism for inflating and deflating the economy above and beyond the need to mess around with interest rates or QE. Of course, this was a huge over-simplification. In particular, it overlooked housing: why bother only inflating stocks when not everyone holds them, when you can do the same to housing, which everyone needs? Lo and behold, yesterday’s S&P/CoreLogic 20-city prices were up 11.9% y/y. (A figure the RBA will look at with smug contempt: “That’s all you got?”)

Presumably the matching rise in US consumer confidence was driven more by stimulus checks in the mail than rent checks going out the door, or chats with realtors about affording a home in a country not exactly famous for its lack of available land. Yet surely the Fed is still missing a trick? Just switch to a digital currency, like China, and assets can be turned on and off at will, and there is no need to go through with the pretense of inflating asset markets in lieu of the general economy.

Yesterday’s Daily was also a vowel-less attempt to emphasize what is missing from the macro-models the Fed uses to form the view it will share with the world later today – in-between pushing up stock and house prices:

Functioning banks and credit are not part of it. Professor Steve Keen’s ‘Minsky’ software is unlikely used in the Eccles Building to spit out hockey-stick recoveries; or, if it is, the users really don’t understand what it implies is going to happen next;

…click on the above link to read the rest of the article…

Producer Prices Surge. Germany, China, other Countries Are Now Exporting Inflation, Adding to US Inflation Pressures

April 26, 2021

Producer Prices Surge. Germany, China, other Countries Are Now Exporting Inflation, Adding to US Inflation Pressures

Central banks still brush it off as just “temporary.”

Producer prices of German industrial products in March rose by 0.9% from February, after having risen by 0.7% in February from January, and after having spiked by 1.4% in January from December, the biggest month-to-month jump since 2008.

Compared to March last year, producer prices jumped by 3.7%, according to the German Federal Statistics Office (Destatis), the biggest year-over-year jump since November 2011. The surge began last fall, after sharp declines earlier in the year:

Part of what caused the 3.7% increase from March last year — but not the surge over the past few months — is the “base effect“, since in February and March last year the producer price index was declining, and the latest year-over-year results are measured from those low points.

But factory prices have been rising on a month by month basis for the seventh straight months — with large increases over the past three months. And that has nothing to do with the base effect.

Prices of intermediate goods jumped by 5.7% year over year in March, the fastest since July 2011, due mainly to sharp rises in the price of secondary raw material (47%) and prepared feed for farm animals (16%). There were also increases in durable consumer goods (1.4%) and energy (8%), which in large part were driven by a sharp increase in electricity prices (9.6%).

Producer prices are now rising fast in the major manufacturing economies.

In China input costs rose 4.4% in March from a year earlier up from a 1.7% increase in February. It was the sharpest rise since July 2018. As the world’s biggest exporter, China’s rising prices stoke inflation around the world.

…click on the above link to read the rest of the article…

Weekly Commentary: Powell on Inflation

March 25, 2021

Weekly Commentary: Powell on Inflation

The Treasury yield spike runs unabated. Ten-year Treasury yields rose another 10 bps this week to 1.72%, the high since January 23, 2020. The Treasury five-year “breakeven” inflation rate rose to 2.65% in Tuesday trading, the high since July 2008. The Philadelphia Fed’s Business Survey Prices Paid Index surged to a 41-year-high. In the New York Fed’s Manufacturing Index, indices of Prices Paid and Received both jumped to highs since 2011.

While crude oil’s notable 6.4% decline for the week spurred a moderate pullback in market inflation expectations (i.e. “breakeven rates”), this did not translate into any relief in the unfolding Treasury bear market.

Chairman Powell was widely lauded for his adept handling of Wednesday’s post-FOMC meeting press conference. He was well-prepared and could not have been more direct: The Federal Reserve will not anytime soon be contemplating a retreat from its ultra-dovish stance. It was music to the equities mania, as the Dow gained 190 points to trade above 33,000 for the first time. Treasury yields added a couple bps, but without any of the feared fireworks. Markets were breathing a sigh of relief.

Labored breathing returned Thursday. Ten-year Treasury yields spiked another 10 bps, trading above 1.75% for the first time since January 2020. And after trading as low as 0.76% during Powell’s press conference, five-year Treasury yields spiked to almost 0.90% in increasingly disorderly Thursday trading. The Nasdaq100 was slammed 3.1%, with the S&P500 sinking 1.5%.

The Treasury market would really like to take comfort from the Fed’s steadfast dovishness. It’s just been fundamental to so much. It’s worked incredibly well for so long. Not now. This raises a critical issue: Paradigm shift? Regime change? What’s driving Treasury yields these days? What is the bond market fearing? If it’s inflation, is Fed dovishness friend or foe?

…click on the above link to read the rest of the article…

credit bubble bulletin, doug noland, inflation, price inflation, fed, us federal reserve, jerome powell

Wrong… Again

March 25, 2021

Wrong… Again

The Federal Reserve met last week and voted to keep interest rates unchanged. What a shock!

The Fed also gave an upbeat forecast of economic growth, predicting that the U.S. economy will grow 6.5% this year, its highest rate in nearly 40 years. Its December 2020 forecast projected 4.2% growth.

The Fed also expects that the economy could return to full employment next year and that inflation could hit 2.4% this year before declining again.

In effect, the central bank said they were willing to let the economy run “hot” and risk higher inflation in order to capture the benefits of stronger growth.

Zero rates are essentially a given as far as the eye can see. What about that growth forecast?

The Fed has one of the worst forecasting records of any financial institution in the world. My expectation is that growth is slowing now and will get worse as the year progresses.

I believe this will be especially true as the Biden administration policies of higher taxes, more regulation, and open borders that import cheap labor take effect.

Biden has also shut down new oil and gas exploration and wants to push a Green New Deal that will guarantee higher energy prices. Higher energy prices are a burden on the economy.

Little Cause for Optimism

Where’s the evidence that growth is slower than the Fed expects?

Inflation measures remain weak. The annual core consumer price inflation rate moved down from 1.7% in September 2020 to 1.3% in February 2021.

The overall consumer price inflation rate (including food and energy) rose modestly from 1.4% in September 2020 to 1.7% in February 2021.

On a year-over-year basis, the core personal consumption expenditures rate of increase (the Fed’s preferred index) moved from 1.4% in October 2020 to 1.5% in January 2021.

…click on the above link to read the rest of the article…

daily reckoning, james rickards, fed, us federal reserve, inflation, price inflation, cpi, consumer price inflation,

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