{"id":58391,"date":"2021-06-26T08:09:49","date_gmt":"2021-06-26T13:09:49","guid":{"rendered":"https:\/\/olduvai.ca\/?p=58391"},"modified":"2021-06-26T08:09:49","modified_gmt":"2021-06-26T13:09:49","slug":"transitory-inflation-takes-hold-of-the-economy-how-long-will-it-last","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=58391","title":{"rendered":"Transitory Inflation Takes Hold of the Economy \u2013 How Long Will It Last?"},"content":{"rendered":"
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Transitory Inflation Takes Hold of the Economy \u2013 How Long Will It Last?<\/a><\/h3>\n<\/div>\n<\/div>\n<\/section>\n
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\"Transitory<\/p>\n
Cherry blossoms symbolize the fleeting nature of all things.\u00a0<\/span>Photo by\u00a0Haoshuang Lou<\/a><\/span><\/div>\n<\/div>\n

Just a couple of weeks ago, Bloomberg reported that\u00a0Federal Reserve Chairman Jerome Powell sold investors<\/a>\u00a0on the idea that rising inflation wasn\u2019t going to last. Officially, as of May 2021, inflation had\u00a0risen 5%<\/a>, the highest since August 2008.<\/p>\n

Here\u2019s how we know investors bought it: while the CPI is running at 5%, the yield on the 10-year Treasury languishes around 1.5%. For comparison, back in 2008, the 10-year Treasury yield stayed above 3.5% from January through November (and even broke 4% on a few occasions).<\/p>\n

Bond buyers do\u00a0not<\/em>\u00a0want interest rates to rise. A 10-year bond yielding 1.5% looks pretty pitiful if interest rates rise to, say, 3.5% (like back in 2008). So clearly bond investors aren\u2019t expecting interest rates to rise in response to this little blip of inflation.<\/p>\n

Maybe you remember the specific term Powell used to describe a temporary period of excessive inflation?<\/p>\n

\u201cTransitory.\u201d<\/strong><\/p>\n

Whew, that\u2019s a relief! At least we won\u2019t have to tolerate this way-over-target inflation situation forever.<\/p>\n

Today\u2019s inflation: how high is too high?<\/strong><\/p>\n

We know that real-world inflation is\u00a0somewhere between 9-12%<\/a>, depending on which Federal Reserve methodology is used to calculate it. Either way, it\u2019s quite high.<\/p>\n

That\u2019s right, we can get a closer look at the realities of inflation using methods developed and employed by the Federal Reserve itself.<\/p>\n

In the 1980s, the Fed was aware that Americans spent money to maintain their standard of living (in other words, your level of income, comforts and services like healthcare you purchase). Official inflation calculations took this into account.<\/p>\n

Using the 1980s formula, you can see how today\u2019s Fed \u201cofficial inflation\u201d stacks up on the chart below:<\/p>\n

\"Consumer<\/p>\n

Source<\/a><\/p>\n<\/div>\n

If you thought 5% inflation was bad, 13% is\u00a0much worse<\/em>.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Transitory Inflation Takes Hold of the Economy \u2013 How Long Will It Last? Cherry blossoms symbolize the fleeting nature of all things.\u00a0Photo by\u00a0Haoshuang Lou Just a couple of weeks ago, Bloomberg reported that\u00a0Federal Reserve Chairman Jerome Powell sold investors\u00a0on the idea that rising inflation wasn\u2019t going to last. Officially, as of May 2021, inflation had\u00a0risen […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[18769,1055,172,303,426,16888,31374,827,3650],"class_list":["post-58391","post","type-post","status-publish","format-standard","hentry","category-economics","tag-birch-gold-group","tag-consumer-price-index","tag-cpi","tag-fed","tag-inflation","tag-jerome-powell","tag-transitory-inflation","tag-united-states","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58391","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=58391"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58391\/revisions"}],"predecessor-version":[{"id":58392,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58391\/revisions\/58392"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=58391"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=58391"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=58391"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}