Inflation, recession: “unexpectedly”
The economic news is grim, and often described as worse than expected. But for anyone who spends time purchasing groceries – just to take one near-universal example – it’s not really a surprise of any sort.
Prices consumers pay for a wide variety of goods and services rose more than expected in September as inflation pressures continued to weigh on the U.S. economy.
The consumer price index increased 0.4% for the month, more than the 0.3% Dow Jones estimate, according to the Bureau of Labor Statistics. On a 12-month basis, so-called headline inflation was up 8.2%, off its peak around 9% in June but still hovering near the highest levels since the early 1980s.
Excluding volatile food and energy prices, core CPI was even higher for the month, accelerating 0.6% against the Dow Jones estimate for a 0.4% increase. Core inflation was up 6.6% from a year ago, the biggest 12-month gain since August 1982.
And then there’s this:
Headline PPI inflation showed prices increasing 0.4 percent in September, double the 0.2 percent economists predicted for a 12-month increase of 8.5 percent, a rate that also surpassed Wall Street estimates. What’s more, the month-over-month number shows that cost increases are accelerating for producers, with final demand services advancing 0.4 percent in September after increasing 0.3 percent in August.
If you need a crib sheet for those acronyms, here it is:
Consumer Price Index (CPI) and Personal Consumption Expenditure (PCE) data measure costs for consumer goods and services. In contrast, Producer Price Index (PPI) measure costs for producers, such as businesses. The PPI was once called the Wholesale Price Index (WPI) which may be a simpler description of what it’s measuring – whole prices rather than consumer prices.
Here’s a pessimistic overview and prediction about the situation:
We are in a recession and we are going into a deep one. I don’t see anything changing until at a bare minimum 2026…
Why do I say 2026 before anything trending now changes?
We have an election in 26 days. Even if the Republicans sweep and take over Congress, there still is an administration running the massive Executive Branch of government that will push inflationary policies. They will continue their war on fossil fuels because of “global warming” which is one of the biggest charlatan canards ever put on humanity. Hence, even with a Republican Congress things only slow down
You assume Republicans will cut spending and do the right things. That’s a big assumption. There is a new crop of Republicans that are running that seem to “get it” and hopefully will be a strong voice in the conversation. They will be better than the Democrats but there are plenty of stupid Republicans. See Mitt Romney and Lindsay Graham.
The next President will assume office in 2025. Assuming he/she is an accomplished executive from the Republican Party, it will take them a year to get their administration up to speed.
Energy underpins the economy. Steady cheap energy helps moderate prices. Manufacturing needs cheap energy. People need cheap energy to get to their place of business. Trucking and shipping need cheap energy to deliver goods.
Are we having fun yet?
I see no reason why the Democrats would change their ideological war on common sense. It’s not just “fossil fuels,” it’s sexual identity, racial hostility and the whole global warming delusion. It has become a religion in which abortion is a sacrament and normal energy sources are evil. How this will end is a mystery. Probably with economic collapse. Perhaps with losing a war. Does anyone think our “Woke” military can defend the country ? The military academies are infected with Affirmative Action and CRT. That letter was written in 2017.
When people who have never in their life known food insecurity go hungry, never in their life known energy insecurity go cold and dark and never in their life known financial insecurity see their economic future obliterated, well you can use your imagination as to what might come next.
Wonder what the rate of inflation is from 2020? Today’s rate is cumulative right. All I know is how much more I am paying for things than I did in January.
How this will end is a mystery. Probably with economic collapse.
Mike K:
That’s my bet. I’m quite pessimistic about the economy. There is too much going wrong *everywhere* for us to skate around a deep recession or worse.
Aside from the inflation inherent in all the Biden money-printing and Covid disruptions, the Ukraine War is driving up the price of energy, which will hurt the US, but it will be murder for Europe and China, which are already on shaky ground.
So, if this is indeed the beginning of a dark economic chapter lasting years, I believe Americans will come to see the Biden years as a tragic waste of time, money and attention that made everything worse.
Then there’s the genuine possibility of a nuclear incident or, God help us, war.
The Democrats are going to find themselves on the real wrong side of history.
FWIW, useful info for hard times:
Available thru amazon:
“How to Sprout Raw Food: Grow an Indoor Organic Garden with Wheatgrass, Bean Sprouts, Grain Sprouts, Microgreens, and More”
“Microgreens: Tap Into the world of tiny superfoods and learn to grow them at home”
“Year-Round Indoor Salad Gardening: How to Grow Nutrient-Dense, Soil-Sprouted Greens in Less Than 10 days”
Info easily found on the net and YouTube:
Learn how to make Pemmican*.
Grow a Moringa Tree (does best in zones 9-10).
“Grow Salad Greens All Winter for Less Than $20”
https://youtu.be/7IXn2t8GLh0
“Heat the Person Not the Room
https://youtu.be/3qtcr_qTBrM
* Native American food, Canadian fur trappers lived on it.
Huxley
I think the American public won’t even see the Biden years. They will carefully exonerate themselves from any responsibility. That’s the nature of how the country was supposed to work. An informed, involved and virtuous electorate.
Richard Cook:
Not sure of your point. I don’t expect Americans who voted for Biden to blame themselves. Perhaps a few.
But like a mouse in a maze expecting a nice piece of cheese but getting an electric shock instead, they will remember that Something Went Terribly Wrong in the Biden years and they will move away from it.
Maybe even “MoveOn” from it.
Conservatives who expect apologies and tearful “You were right all along!” from Democrats will be disappointed.
But the country will change. I say, it’s already halfway there, even without an economic meltdown.
Huxley
My point is that, for a country who’s founding documents place such a emphasis on the electorate being involved, the American electorate seems to place its emphasis on not being involved. At all levels of elections. I think this is one of the major problems of why we have the issues we have today. Thinking that government is a wind up toy
Richard Cook:
OK. So you prefer to blame the electorate.
Clearly some of the electorate is involved and passionately so — both on the right and the left. It seems that percentage fails to meet with your approval.
I’m not much interested in blame. I would rather understand what is happening and how it might change.
Maybe every 5 years a citizen must pass the test given in the naturalization process. (“Demonstrate a knowledge and understanding of U.S. history and government;”) Set up an online basic citizenship course, so no excuse for not passing.
If a citizen fails, no vote. And they must take the test again a month later, if they still fail, one more try another month later. If they fail to show up for the second or third test, unless extenuating circumstances, automatic 3 strikes.
3 strikes, permanent loss of the right to vote.
If you want to think that way be my guest. Troubleshooting is about assigning blame. A part that failed, a process that failed, etc. Unlike you I do not consider the electorate sacrosanct. We all have a responsibility, and, I believe a significant number of Americans have failed in performing that responsibility. If so much rests on the electorates shoulders, part and parcel of the people having the power, don’t they have a responsibility to inform themselves and act? Citizenship evidently doesn’t compute with you.
As an addendum: from Thomas Jefferson:
“If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be.”
huxley,
The President, Vice President and every member of Congress is elected. They have the authority to dismiss every federal official. If not the electorate, who?
Richard Cook, Geoffrey Britain:
Of course, the electorate elects candidates standing for election. What are your points?
Voters vote with varying amounts of information and concern. They are human, therefore imperfect, and some more so than others.
But it is not true that no one is concerned and everyone is ignorant if the Wrong People get into office.
It’s also a standard human response to a problem to search for the guilty and blame them rather than find a solution. That’s what I’m objecting to.
Huxley
You work real hard at not seeing the point.
“Energy underpins the economy. Steady cheap energy helps moderate prices. Manufacturing needs cheap energy. People need cheap energy to get to their place of business. Trucking and shipping need cheap energy to deliver goods.”
The inflation of the 1970s and early 80s was spawned by the OPEC embargoes of oil that sent prices up for everything. The government also tried to soften the blow with lots of spending. So, we’ve seen this movie before.
I picked up a few yard care supplies at the hardware store today. Two years ago, I would have spent $55. The bill today – $105. Yikes!
Self-inflicted wounds. We know what will work. Drill, baby drill, and cut wasteful government spending. A Republican majority congress will be a start.
A decades old quote of uncertain provenance is “a billion here, a billion there: pretty soon you’re talking real money!”
Yet, despite waste, fraud and growing gov’t power, disaster never struck. People began to wonder if it ever would.
Leaders have kicked the can down the road so long, it’s hard to accept we may have come to the end of the road. There may be one final trick. Politician: “Well, we tried that Capitalism thing. Gave it our best shot. Just couldn’t make it work. Now for the sake of Justice Survival Fairness Equity (etc) we’re gonna have to put our elected officials in charge of the economy and turn away from cold hearted inhumane markets.”
The inflation of the 1970s and early 80s was spawned by the OPEC embargoes of oil that sent prices up for everything.
It wasn’t. Inflation is a monetary phenomenon. Lyndon Johnson insisted in 1965 that the Federal Reserve adopt an expansive monetary policy. Wm. Martin held out for about a year, then relented. During the 1970s, prominent economists got the idea that it would be hideously costly to restabilize prices (James Tobin’s thesis) or that monetary policy was not the source of the inflation (the thesis of Arthur Burns, who ran the Fed from 1970 to 1978). Paul Volcker proved them wrong during his time in charge of the Federal Reserve. Jimmy Carter insisted in March of 1980 that he abandon his program of controlling the growth of monetary aggregates, so his first 15 months in office were bereft. Ronald Reagan told him to have at it, and the rate of price increases was reduced to a tolerable level within two years. (Tobin had advised it would take 15 years).
The inflation antedated OPEC and the OPEC hikes were a modest and temporary part of the phenomenon. Note, Congress and our lawyer-presidents responded with measures which exacerbated problems. These included general wage and price controls and price controls on particular commodities like natural gas and imported oil. These generated shortages. Gerald Ford was addled by the memory of WWii era scrap drives, so you had the hortatory WIN program, which Alan Greenspan advised the President was stupid and irrelevant to the problems at hand. Moral: do not put lawyers in charge of bloody anything. They cannot even run the court system well.
“global warming” which is one of the biggest charlatan canards ever put on humanity. ”
Understates the case.
The “billion here, billion there, real money” quote is credited to GOP senator Dirksen. Although there appears to be an industry of “scholars” which want to believe that no one ever said something unless it was written down with quote marks, we have a lot of reasons to believe that he may well have said it. It is completely consistent with everything he stood for throughout his career. Especially since everyone agrees he said the first part and his purpose and meaning for saying it was to express what follows.
Nixon ended the Gold Standard, which had become a liability because of LBJ’s spending on “Guns and Butter” as he put it. That unleashed the inflation that Volker and Reagan finally stopped. There is no way we could do that again. In 1982, I bought treasury bonds at 16% interest. Home mortgage rates were 21%. With our present national debt, can anyone imagine 16% interest ? I can’t. The debt will be repudiated if not inflated away.
Nixon ended the Gold Standard, which had become a liability because of LBJ’s spending on “Guns and Butter” as he put it. That unleashed the inflation that Volker and Reagan finally stopped.
The gold standard was discontinued in 1933. The Bretton Woods system, which included an official gold price and fixed exchange rates, did not allow private ownership of monetary gold or for the international monetary system to be regulated by gold flows. Sir Alan Walters referred to Bretton Woods as a system of ‘Irish fixed rates’. “They’re fixed. Until they change”. He was of the opinion that you should have a fixed rate regime or a floating rate regime. He did not favor reinstitution of the classical gold standard, a project he called ‘crackers’. Milton Friedman favored floating rates. Inflation rates were higher after 1971 than prior to 1971, but the fixed rate regime was neither necessary nor sufficient to restabilize prices.
There is no way we could do that again.
We can and it can be accomplished in < 2 years. A project of restabilizing prices has been implemented successfully in countries of every possible description in the last generation.
Art Deco, you are technically correct but the $35 per ounce was the “standard” until 1971. I remember it well.
My point is that, for a country who’s founding documents place such a emphasis on the electorate being involved, the American electorate seems to place its emphasis on not being involved. At all levels of elections.
Richard Cook, you have a good point. New York City, which has elected such luminaries as AOC, has an average voter turnout of 23%. Some of that apathy may expire as inflation grows.
Art Deco, My comment on “we could never do that again” was referring to interest rates given our national debt. I suppose a dictator could impose fixed lower rates but to what end ?
Art Deco @ 7:53am:
“It wasn’t. Inflation is a monetary phenomenon.”
If so, how do we explain the eight b years of quantitative easing and low interest rates following 2008. If inflation was always a monetary issue, we would have had inflation during those years. IMO, the full and “just-in-time” supply chain had a lot to do with keeping inflatioon in check during that period.
Decrease the supply of anything and the price rises. (Supply side economics.) Decrease the supply of an item so basic to the production of nearly everything as oil is, and you will see prices for most things rise, even in the absence of monetary stimulation. Admittedly, the price rises, absent monetary stimulation will be self-limiting because people stop buying as much. This usually leads to recession/depression and eventual lower prices. And, a lot of human suffering. However, in the case of food and fuel, (both highly dependent on oil prices) it’s very n difficult to cut spending. This leads to bankruptcies and other financial tragedies.
To get the balance correct between monetary supply and a full supply chain isn’t easy. However, I would prefer a full supply chain and low energy prices for fighting inflation as opposed to the Fed getting interest rates and monetary supply “just right.”
Mike Rowe explains that 7.3 million able-bodied men have dropped out of the work force since 2020. He can’t explain why. There are undoubtedly different reasons. What he does know is that the price for skilled and unskilled labor has risen dramatically. Supply is not meeting demand. Supply side again.
I was in the airline industry in the 1970s and 80s. Believe me, the OPEC oil price shocks and resulting shortages affected that business for the entire time. Statistics are one thing, but actual conditions on the ground affecting people’s jobs and livelihoods aren’t always reflected in the statistics. One can study the statistics of any economic disaster and claim to know exactly what happened, but not understand the jig saw of various areas and industries that don’t conform to the statistics. Lived experience does not always conform to statistics.
The elephant in the china shop is the Federal Reserve. Since March, 2020 the national debt has increased $5.1 trillion and climbing and the federal reserve has “purchased” about $3 trillion of that debt.
By the way, since the first OPEC embargo, the national debt has doubled about every 9 years.
Art Deco, My comment on “we could never do that again” was referring to interest rates given our national debt. I suppose a dictator could impose fixed lower rates but to what end ?
Elevated interest rates would be present on new issues. This would generate a burden for bonds, notes, and bills issued over a circumscribed set of years.
By the way, since the first OPEC embargo, the national debt has doubled about every 9 years.
Has nothing to do with OPEC, everything to do with our dysfunctional and irresponsible federal legislature.
If so, how do we explain the eight b years of quantitative easing and low interest rates following 2008.
They paid interest on reserves and dramatically lowered the money multiplier.
“Has nothing to do with OPEC” – Art Deco
I never said that OPEC had anything to do with the debt increases. But since you brought it up, OPEC did have a role in the sustained high inflation of the 70’s.
Inflation can be caused by both a debasement of the currency and increased material costs or shortages of materials.
“Since internationally traded commodities are priced in dollars, the falling dollar made stockpiling metals, grains and oil appear cheaper to foreigners who bid their prices up in dollars. That demand-side effect inflated commodity prices so long as the dollar fell, which meant many years. But it also had a big supply-side impact on the sellers of commodities, because it encouraged suppliers of storable commodities such as oil and crude oil to withhold supplies until they got more dollars per barrel (or per ounce) to compensate for the dollar’s shrinking buying power.
https://www.aier.org/article/nixonomics-in-retrospect-devaluation-and-wage-price-controls-august-15-1971/
“Federal Reserve Chair Jerome Powell said in his semiannual testimony before the U.S. Senate Banking Committee in March 2022 that, as a rule of thumb, every $10 per barrel increase in the price of crude oil raises inflation by 0.2% and sets back economic growth 0.1%”
Then there’s this: “Crude oil was a bigger contributor to inflation in the 1970s, when it was used much more intensively per unit of economic output. Back then, the U.S. economy consumed more than a barrel of crude per $1,000 of gross domestic product. By 2015, that had dropped to about 0.4 barrels per $1,000 of GDP.”
“…Historically, oil prices have exerted more influence on the Producer Price Index (PPI), which measures the prices of goods at the wholesale level, than the CPI, which measures the prices consumers pay for goods and services.”
“Between 1970 and 2017, the correlation between oil prices and the PPI was 0.71. That’s much stronger than the 0.27 correlation with the CPI, according to the Federal Reserve Bank of St. Louis.”
“The weaker link between oil prices and consumer prices likely comes from the relatively higher weight of services in the U.S. consumption basket, which you’d expect to rely less on oil as a production input,” according to the St. Louis Fed.”
https://www.investopedia.com/ask/answers/06/oilpricesinflation.asp