Leading indicators

[Dukasaur]

Inflation


“All hell will break loose” - Professor

https://www.kitco.com/news/2021-05-13/- ... Hanke.html

5% inflation is high, but it's not exactly an extinction level event.

[HitRed]

My mortgage was 8.75% when I had it. So sure, 5% is nothing. The concern is the inflation rate going from around 0 to 5% in just a few months. Remember the USA is pumping TRILLIONS into the economy in just 2 years and planning more.

[jusplay4fun]

Causes of Inflation:

What Causes Inflation and Who Profits From It?
By INVESTOPEDIA Reviewed by MICHAEL J BOYLE Updated Apr 26, 2021
Inflation is a measure of the rate of rising prices of goods and services in an economy. If inflation is occurring, leading to higher prices for basic necessities such as food, it can have a negative impact on society.

KEY TAKEAWAYS
Inflation is a measure of the rate of rising prices of goods and services in an economy.
Inflation can occur when prices rise due to increases in production costs, such as raw materials and wages.
A surge in demand for products and services can cause inflation as consumers are willing to pay more for the product.

https://www.investopedia.com/ask/answers/111314/what-causes-inflation-and-does-anyone-gain-it.asp#:~:text=Key%20Takeaways-,Inflation%20is%20a%20measure%20of%20the%20rate%20of%20rising%20prices,pay%20more%20for%20the%20product.

Causes of Inflation
4 November 2019 by Tejvan Pettinger
Inflation means there is a sustained increase in the price level. The main causes of inflation are either excess aggregate demand (AD) (economic growth too fast) or cost push factors (supply-side factors).

Summary of Main causes of inflation
Demand-pull inflation – aggregate demand growing faster than aggregate supply (growth too rapid)
Cost-push inflation – For example, higher oil prices feeding through into higher costs.
Devaluation – increasing cost of imported goods, and also the boost to domestic demand.
Rising wages – higher wages increase firms costs and increase consumers’ disposable income to spend more.
Expectations of inflation – causes workers to demand wage increases and firms to push up prices.
1. Demand-pull inflation
If the economy is at or close to full employment, then an increase in aggregate demand (AD) leads to an increase in the price level (PL). As firms reach full capacity, they respond by putting up prices leading to inflation. Also, near full employment with labour shortages, workers can get higher wages which increase their spending power.

to read more, see: https://www.economicshelp.org/macroeconomics/inflation/causes-inflation/

The current US federal fiscal policies, especially with the additional $300 of federal assistance to the unemployed, means that those potential workers can make more money doing NO employed work AND drawing benefits out of the system as opposed to working. In other words, they can sit on the ass and watch cartoons and play video games rather than go to work. They suck money off the government and pay no (or very few) taxes on income. (And yes, they do pay state sales and other taxes.)

The net impact is money (coming from some unnamed federal source) chasing fewer goods. Fewer goods is caused mostly by few(er) workers producing what is in demand: cars, chicken, catsup packets, lumber for projects and for housing, and many more such examples of goods that are in short or tight supply. AND those two conditions lead to inflation. And, as noted earlier in this thread, an inflation rate over 4% is quite significant when compared to the last several years.

Duk is right, even if inflation hits 5%, that is NOT a HUGE issue. But the danger is there that inflation may exceed 4-5%. An inflation rate of near or above 10% may prompt the Fed (the Federal Reserve Board) to act to counter inflationary pressures in the US Economy by raising interest rates. We will have to wait and see. I would actually hate for inflation to get to near 10% as that will have major economic disruptions for many. I hope that my warning does not come to fruition as this will spell major problems for many. My points are to 1) watch carefully and 2) consider the economic impact of all this FREE federal money.

There is no such thing as a free lunch

, as per Milton Friedman.

NEWS RELEASES
CPI for all items rises 0.8% in April; used cars and trucks among many indexes rising
05/12/2021

In April, the Consumer Price Index for All Urban Consumers rose 0.8 percent on a seasonally adjusted basis; rising 4.2 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.9 percent in April (SA); up 3.0 percent over the year (NSA).

https://www.bls.gov/cpi/

Expect much higher inflation this year, with overall prices rising 4.4%, as a reopening economy, government stimulus, and shortages combine to push prices up in many areas. Prices rose 0.8% in April from March, the largest one-month jump in 12 years. Shortages of new cars and trucks due to a lack of computer chips, plus government stimulus checks, created a run on used vehicles, whose prices jumped 10%, accounting for more than a third of the total monthly price increase.

https://www.kiplinger.com/economic-forecasts/inflation

This surge in inflation is going to create a quandary for the Federal Reserve, since one of the Fed’s goals is to fight inflation. But Chair Jerome Powell has indicated a commitment to keeping short-term interest rates near zero in order to push down the unemployment rate, and his analysts tell him that the inflation surge is temporary. So, it is likely that the Fed will stand pat, but if consumer demand means that businesses now have pricing power, then this could create a self-fulfilling prophecy and leave the Fed playing catchup.

https://www.kiplinger.com/economic-forecasts/inflation

[HitRed]

I watch markets, companies and silver. Things are absolutely changing. Inflation and scarcity of goods is taking off.

https://www.kitco.com/news/2021-05-13/U ... emand.html

[jusplay4fun]

I watch markets, companies and silver. Things are absolutely changing. Inflation and scarcity of goods is taking off.

https://www.kitco.com/news/2021-05-13/U ... emand.html

I think I addressed the issue of specific commodities, such as silver, as ONLY ONE indicator, and

2) we need to watch the trends in the Economy. AND the more who watch for dangers, like HitRed, the better for the Herd to avoid approaching dangers. There are indications that inflation may become more significant (or even a serious) problem soon.

[HitRed]

https://www.foxbusiness.com/politics/bi ... 1bt2,hp1bt

Biden is going for 4T this time.

[jusplay4fun]

President Biden has proposed so many spending bills that it all gets confusing. I will give him credit for offering a means to fund SOME of these proposals, but anyone with any knowledge of economics knows that the middle class, NOT THE RICH, will pay for any approved new spending done. He wants to claim he will only "tax the Rich" and taxing the corporations (who will merely pass those higher costs on their consumers and buyers of their goods and/or services).

[jusplay4fun]

Do you like the "Biden gasoline tax increase"? Be ready for more tax increase:

(And yes, I know that there was no direct increase in federal gasoline taxes, and the price of gasoline is dependent on many factors, but the price of gasoline is up since President Biden took office, and I refer to this as Biden's gas price increase.)

Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 View History
Gasoline - All Grades
2.200 2.284 2.420 2.587 2.898 2.948

https://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_m.htm

CBO Projects Individual Income Tax Liability Will Rise 66% By 2031

taxes will most likely rise in the not-too-distant future. As we emerge from the grasp of Covid-19, once the economy stabilizes, Congress and President Biden are poised to raise rates. Even without the president’s proposed tax hikes, individual income tax liability is expected to rise 66% by 2031 according to a recent Congressional Budget Office report. The CBO projection is based on current tax law, which is subject to change when President Biden’s tax increases are implemented. Why are taxes projected to rise? Look no further than the federal budget.

https://www.forbes.com/sites/mikepatton/2021/03/02/cbo-projects-individual-income-tax-liability-will-rise-66-by-2031/?sh=46c8e55b62c4

CBO Study: Benefits of Biden’s $2 Trillion Infrastructure Plan Won’t Outweigh $2 Trillion Tax Hike
March 31, 2021

Scott A. Hodge
Twitter Logo
This has been updated based on new information.

President Joe Biden is preparing to roll out an eight-year, $2 trillion infrastructure plan paid for by $2 trillion in tax increases on U.S. corporations spread out over 15 years. Setting aside the questionable mix of math and years, the premise is that the economic benefits of government infrastructure spending outweigh the economic harm from an increase in corporate taxes. The Biden administration has yet to make that case, and economic studies—including those by the Congressional Budget Office (CBO)—indicate that the benefits of the Biden infrastructure plan won’t outweigh the cost to the economy of the tax increases.

As I wrote about last year when presidential candidates were discussing infrastructure spending, CBO determined in a June 2016 report, The Macroeconomic and Budgetary Effects of Federal Investment, that:

Federal investments deliver only half the economic returns as private sector investments, 5 percent versus 10 percent.
A dollar of federal spending results in only $0.67 worth of actual investment because state, local, and private sector entities reduce their spending in response to the federal dollars.
Federal investment financed by debt or taxes could do more economic harm than good because federal borrowing and taxes crowd out private investment. To avoid harming the economy, federal investments should be financed by cuts in other discretionary programs.

https://taxfoundation.org/biden-infrastructure-spending-tax-hike/

[HitRed]

https://www.kitco.com/news/2022-01-13/I ... Hanke.html

It’s all about the money supply.



I haven’t stopped buying silver.

[jusplay4fun]

It’s all about the money supply.

That is the simple summation of the view of the monetarist school of economic thought. But that is not the only such school.

[jusplay4fun]

Do you like the "Biden gasoline tax increase"? Be ready for more tax increase:

(And yes, I know that there was no direct increase in federal gasoline taxes, and the price of gasoline is dependent on many factors, but the price of gasoline is up since President Biden took office, and I refer to this as Biden's gas price increase.)

Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 View History
Gasoline - All Grades
2.200 2.284 2.420 2.587 2.898 2.948

https://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_m.htm

CBO Projects Individual Income Tax Liability Will Rise 66% By 2031

taxes will most likely rise in the not-too-distant future. As we emerge from the grasp of Covid-19, once the economy stabilizes, Congress and President Biden are poised to raise rates. Even without the president’s proposed tax hikes, individual income tax liability is expected to rise 66% by 2031 according to a recent Congressional Budget Office report. The CBO projection is based on current tax law, which is subject to change when President Biden’s tax increases are implemented. Why are taxes projected to rise? Look no further than the federal budget.

https://www.forbes.com/sites/mikepatton/2021/03/02/cbo-projects-individual-income-tax-liability-will-rise-66-by-2031/?sh=46c8e55b62c4

CBO Study: Benefits of Biden’s $2 Trillion Infrastructure Plan Won’t Outweigh $2 Trillion Tax Hike
March 31, 2021

Scott A. Hodge
Twitter Logo
This has been updated based on new information.

President Joe Biden is preparing to roll out an eight-year, $2 trillion infrastructure plan paid for by $2 trillion in tax increases on U.S. corporations spread out over 15 years. Setting aside the questionable mix of math and years, the premise is that the economic benefits of government infrastructure spending outweigh the economic harm from an increase in corporate taxes. The Biden administration has yet to make that case, and economic studies—including those by the Congressional Budget Office (CBO)—indicate that the benefits of the Biden infrastructure plan won’t outweigh the cost to the economy of the tax increases.

As I wrote about last year when presidential candidates were discussing infrastructure spending, CBO determined in a June 2016 report, The Macroeconomic and Budgetary Effects of Federal Investment, that:

Federal investments deliver only half the economic returns as private sector investments, 5 percent versus 10 percent.
A dollar of federal spending results in only $0.67 worth of actual investment because state, local, and private sector entities reduce their spending in response to the federal dollars.
Federal investment financed by debt or taxes could do more economic harm than good because federal borrowing and taxes crowd out private investment. To avoid harming the economy, federal investments should be financed by cuts in other discretionary programs.

https://taxfoundation.org/biden-infrastructure-spending-tax-hike/

and now:

Inflation reaches highest level since 1982 as consumer prices jump 7% in 2021
Paul Davidson
USA TODAY

https://www.usatoday.com/story/money/2022/01/12/cpi-2021-consumer-prices-climbed-7-2021-fastest-pace-since-1982/9178235002/

and
when President Biden’s tax increases are implemented. Why are taxes projected to rise? Look no further than the federal budget.[/quote]

[HitRed]

https://www.youtube.com/watch?v=iIs5TfeQfDs

Start at 9:40

[jusplay4fun]

I was getting gasoline a few days ago. (I drive a Camry and not a gas guzzler, like a Chevy Tahoe, F-150, or a Toyota Tundra or Tacoma, btw.)

While looking at the pump, I saw a decal of an image of President Biden, with a silly grin, pointing to the price on the gas pump saying "I did that". I laughed and shared the story with my wife.

Yes, the President did not DIRECTLY raise prices of gasoline; that economics is also complex. BUT his actions so far and the Executive Orders signed on Day 1 of his Administration:
1) Shut down an oil pipeline construction;
2) reduced drilling on Federal lands; AND
3) his statements on Climate Change.

ALL these actions and words sent signals of the move away from fossil fuels which caused a change of expectations that ultimately led to price increases on gasoline.

Biden administration suspends new oil, gas drilling permits on federal land
Published: Jan. 21, 2021 at 7:46 p.m. ET
By Associated Press
comments
Move could be the first step in an eventual goal to ban all leases and permits to drill on federal land

https://www.marketwatch.com/story/biden-administration-suspends-new-oil-gas-drilling-permits-on-federal-land-01611276375

And now, look at this change by President Biden, in response to rising Gasoline prices:
https://www.washingtonpost.com/politics/2021/12/06/biden-is-approving-more-oil-gas-drilling-permits-public-lands-than-trump-analysis-finds/
The words of the URL make the point without clicking on it, btw.

[mookiemcgee]

And now, look at this change by President Biden, in response to rising Gasoline prices:
https://www.washingtonpost.com/politics/2021/12/06/biden-is-approving-more-oil-gas-drilling-permits-public-lands-than-trump-analysis-finds/
The words of the URL make the point without clicking on it, btw.

You realize the article is new, but the actions in it largely took place over the course of mid 2021...The very same time period when you were being so critical of 'biden make gas price higher cus keystone'. So you can call it a pivot if you want, but he did in his first year in office because in spite of news/political kabuki he was doing his best to manage the US economy in a rational way. Just saying, Biden is easy to pile the poop on... and he will never be popular... but he's doing the right things for the country in these situations rather than appealing to only the fringe of his party (unlike out last president).

[jusplay4fun]

And now, look at this change by President Biden, in response to rising Gasoline prices:
https://www.washingtonpost.com/politics/2021/12/06/biden-is-approving-more-oil-gas-drilling-permits-public-lands-than-trump-analysis-finds/
The words of the URL make the point without clicking on it, btw.

You realize the article is new, but the actions in it largely took place over the course of mid 2021...The very same time period when you were being so critical of 'biden make gas price higher cus keystone'. So you can call it a pivot if you want, but he did in his first year in office because in spite of news/political kabuki he was doing his best to manage the US economy in a rational way. Just saying, Biden is easy to pile the poop on... and he will never be popular... but he's doing the right things for the country in these situations rather than appealing to only the fringe of his party (unlike out last president).

I am sure the same things were said about ...Trump, Obama, Bush 2, Clinton, Reagan, Bush 1, and Carter, TOO.

[jusplay4fun]

Opinion: Profligate Democrats, delusional Republicans and the $30 trillion sprint toward deficit disaster

There is an exception to the federal government’s general inability to accomplish anything briskly. It drove the national debt past $30 trillion this past week, which only two years ago it had not been expected to accomplish until 2026.

Defenders of the government’s fiscal performance say: Who could have predicted the pandemic? But that is the point — prudent people expect the unexpected and plan risk management accordingly. Instead, today’s deficit doves are doubling down on their hubris, asserting (in the skeptical words of the Manhattan Institute’s Brian Riedl) “that this time they can predict interest rates decades in advance.” The average interest rate on government borrowing has fallen from 8.4 percent to 1.4 percent since 1990, a decline economists did not forecast but which many now forecast far into the future.

The soaring nominal interest rates of the 1970s were largely unanticipated by economic forecasters and Wall Street, as was the collapse of the housing bubble that triggered the 2008 recession. Nevertheless, such supremely confident experts foresee low yields on 10-year Treasury bonds until 2050. However, a rate of even just 5 percent — which Washington was paying in 2008 — combined with merely modest new federal spending, would push the debt toward 300 percent of gross domestic product in three decades.

Riedl’s “How Higher Interest Rates Could Push Washington Toward a Federal Debt Crisis” requires only a one-word edit: replace “could” with “will.” Today’s government debt is more than 100 percent of GDP (161 percent, if state and local debt is included), and the Congressional Budget Office sees more than 200 percent, anticipating $112 trillion in deficits under current law — no new tax cuts, no new spending programs — over the next three decades. Even on these unreasonable assumptions, by 2051 interest on the debt will be the largest federal expenditure, consuming almost half of federal tax revenue.

Demography — the aging and longer-lived U.S. population — is the predictable destiny for Social Security and Medicare, the principal drivers of deficits. Riedl: “Over the next three decades, the costs of these programs will exceed their dedicated revenues (such as payroll taxes and senior premiums) by approximately $20 trillion for Social Security and $47 trillion for Medicare.” This means huge infusions of general revenues, and $45 trillion in increased interest costs.

Thank God someone like Sen Joe Manchin of W. VA understands ECONOMICS, unlike former bartender AOC. He is one of the few in Congress who even addresses and is quoted about being concerned about the burdens of Social Security, Medicare, and Medicaid.

High rates mean higher borrowing costs, which mean higher annual deficits, which mean more borrowing: a vicious circle. And even an interest rate of just 3 percent on debt at 250 percent of GDP would siphon up approximately 40 percent of tax revenue. Inflation amounts to repudiation, paying debts in devalued dollars, and as debt increases, so does the government’s incentive to choose inflation.

Just one year before the pandemic became progressives’ excuse for spending sums they think justice demands, Republicans ran a nearly $1 trillion deficit with the economy growing and at full employment. Although congressional Democrats are by conviction even more profligate than Republicans are for political convenience, Republicans are more delusional, or pretend to be, about the possibility of restraint.

The Brookings Institution’s Robert P. Beschel Jr., writing in National Affairs, notes that nine months ago the House Republican Study Committee — supposedly the most conservative House members — proposed a budget. It called, Beschel says, for “deficit reductions of nearly $12.5 trillion over the next decade without raising taxes — in fact, the RSC proposes another $1.9 trillion in tax cuts,” reaching a balanced budget by 2026 and reducing the national debt to 75 percent of GDP. How? By a slew of politically inconceivable deep cuts to discretionary domestic spending, and cutting eligibility for Medicare, Medicaid, Social Security and the Children’s Health Insurance Program, and repealing significant parts of the Affordable Care Act. While the RSC was perpetrating this performative gesture, why didn’t it also propose requiring lobsters to grow on trees?

https://www.washingtonpost.com/opinions/2022/02/04/democrats-republicans-and-deficit-disaster/

Note that the opinions written in the Washington Post is supported by factual data and a "Think Tank."

[HitRed]

Inflation 7.5%

https://www.foxbusiness.com/economy/con ... nuary-2022

[mookiemcgee]

Inflation 7.5%

https://www.foxbusiness.com/economy/con ... nuary-2022

Thanks Trump

[HitRed]

Steve Hanke looks at future inflation, gold and Bitcoin. Explains the Fed and the money supply.

[mookiemcgee]

https://fred.stlouisfed.org/series/T5YIFR

https://fred.stlouisfed.org/series/T5YIE

[jusplay4fun]

The recent posts do not offer what I consider to be prima facie evidence. No explanation or summary of the evidence is offered. There is no synopsis of key points given.

What is your point? For example, what does the St. Louis Fed say? Why should I care what Steve Hanke says? Who is Steve Hanke?