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High Inflation Is Here To Stay


Muda69

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https://reason.com/2021/10/13/high-inflation-is-here-to-stay/

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News that the September Consumer Price Index (CPI) rose by 5.4 percent on a year-over-year basis should be evidence enough for Federal Reserve Chair Jerome Powell, White House economists, and even the president to admit that we have more than a temporary inflation uptick on our hands. Better yet, it's proof that we should avoid adding fuel to the fire, even if it means cutting back on President Joe Biden's multi-trillion-dollar American Rescue Plan.

Until recently, evidence of inflation exceeding 2 percent—the Fed's traditional goal for inflation—has been dismissed as temporary or transitory, and for good reason. Newly printed stimulus money has been passing through the system. This, accompanied by serious supply-chain disruptions, might be over in another 12 months—if we're lucky.

Then in August, the Biden administration indicated that 2021's economy would show as much as 4.8 percent inflation—but, with an optimistic spin, would fall to 2.5 percent the next year. Meanwhile, there is some stimulus money pending in the yet-to-be determined infrastructure bill, and that complicates the issue.

 

Avoiding the hard truth or waiting before countering inflationary forces carries a cost. In this case, delays could mean harsher action later when, for example, the Fed hits the money brakes harder to cool the economy. In such a case we might see interest rates head to the ceiling, construction activity and high-tech investment plummet, and the economy roll into a recession.

This is not the first time politicians have obscured the truth with wordplay. In 1978, the CPI was exceeding 7.5 percent and economic growth was slowing because of deliberate Fed action to cool the economy. Economist Fred Kahn, who chaired President Jimmy Carter's inflation tax force, was asked if he believed we were headed toward a depression. Kahn and other senior officials had been warned not to use the d-word. Somehow, it was believed that saying "depression" would become a self-fulfilling prophecy. They didn't even want to say "recession," so a new euphemism was created. Kahn responded in congressional testimony: "We're in danger of having the worst banana in 45 years."

The really bad banana (or r-word, to be more specific) came later during the Reagan years, when Fed chair Paul Volcker hit the brakes long and hard and squeezed out inflation, along with employment growth. The unemployment rate hit 10.8 percent in late 1982. Kahn's bad banana forecast ended up being accurate.

Needless to say, Washington leaders have long been reluctant to call a spade a spade. But today, the no-no isn't depression or even recession. It's referring to unqualified inflation. No one in authority wants to admit that the dollars we hold are systematically losing their purchasing power. We are being quietly robbed by Washington's dollar-printing press, with politicians calling the shots. The presses are not operating without drivers.

Seemingly, it's okay for the Fed chair to recognize CPI heading north, but only if he qualifies the trip by calling it temporary. And while Washington analysts argue that COVID-19 disruptions are affecting just some key items, such as used cars and lumber—and that ports clogged with container ships waiting for workers, drivers, and trucks to be unloaded are the culprit—an analysis of the price movements in the July Consumer Spending Index, which is the Fed's preferred inflation measuring rod, shows 84 percent of included items rising.

 

The price increases are widespread, which suggests they are embedded. No matter how analysts choose to slice and dice the data, the answer is the same: The U.S. inflation rate calls for taking offsetting actions, such as avoiding direct distributions of stimulus or minimum family income dollars (though not harsh, invasive measures to cool off the economy). Let us not forget that inflation is not about rising prices. The rising price level is the result of an inflated money supply—all those trillions of stimulus dollars now out and chasing harder after goods and services.

So, what should our esteemed political leaders do? Gazing into a crystal ball and talking about things that may be transitory is what soothsayers and fortunetellers do. Just give the public the unvarnished story.

 

Good luck with the politicians giving the public the truth.  And this inflation is real, we've seen our monthly grocery/supply budget get stretched thinner and thinner over the past several months. Heck a bag of our preferred pet food went up by the $3 dollars at our local grocery in just a two-week period. So we switched to a cheaper option.

 

 

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Elizabeth Warren Is Trying To Blame Inflation on 'Price Gouging.' Don't Buy It.

https://stackoverflow.com/questions/45985554/installing-jar-file-via-nssm

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Looking for someone to blame for high and rising prices at the pump, Sen. Elizabeth Warren (D–Mass.) has found a familiar villain: big corporations.

During an appearance on MSNBC's The ReidOut on Thursday, Warren said price gouging is to blame for the pain that Americans are feeling at the gas pump these days. Amid rising inflation, the average price for a gallon of regular unleaded gasoline sits at $3.40 nationally, up from about $2.11 at this same time last year and higher than at any time since 2014. This, Warren argued, is great news for oil companies and their shareholders.

"Chevron, Exxon have doubled their profits. This isn't about inflation, this is about price gouging for these guys," Warren said as host Joy Reid nodded along. While Republicans are trying to score political points by talking about inflation, Warren says, the "oil companies say 'I think it's just another opportunity to make profits' and we need to call them out on that."

Prices at the pump have gone up. Why? Because giant oil companies like @Chevron and @ExxonMobil enjoy doubling their profits. This isn't about inflation. This is about price gouging for these guys & we need to call them out. pic.twitter.com/kxiQkC2tYa

— Elizabeth Warren (@SenWarren) November 20, 2021

 

Warren is probably right that successful multinational corporations like oil companies do respond to shifts in the economy by finding ways to turn a profit. Because, well, that's what they have to do to keep being successful multinational companies. There's hardly anything shadowy or suspicious about that. You can put gas in your car this morning because oil companies are making a profit, whether Warren approves or not.

The price-gouging claim, however, is just wildly off base and smacks of political desperation. For months, Democrats claimed that dumping trillions of dollars into the economy during the COVID-19 pandemic—in the form of direct payments, expanded unemployment benefits, and other spending—would not trigger inflation. Then they claimed inflation was transitory. Months later, it now looks like significant inflation will continue well into next year, so a scapegoat must be found.

But Warren's claim that oil companies are jacking up prices to turn a bigger profit doesn't stand up to even the slightest scrutiny.

By their very nature, high prices nudge consumers to buy less than they otherwise would. This is somehow good for the companies that make money by selling things? That's a shortsighted view that only a politician could embrace. Any business operating under the idea that the key to success is screwing over its customers by arbitrarily doubling prices won't be around very long. In Warren's view, Walmart would be more successful if it suddenly doubled the price of everything it sells because that would mean more profit.

It would be helpful to her argument if Warren could point to any evidence of this ever happening, but of course she can't.

There's a less theoretical way to test her claim, too. If Exxon and Chevron had indeed "doubled their profits," as Warren claims, that should translate into a huge boost for their shareholders. You'd expect such a sudden surge in corporate profits to be reflected in their stock prices, right?

But Exxon's stock was trading at about $62 per share on Monday morning. Six months ago, it was trading at…$59.61, according to Google Finance.

Exxon.jpg

Chevron stock is up a bit more over the past six months, but it is still underperforming the market as a whole (the S&P 500 is up more than 12 percent in the past six months):

 

Chevron.jpg Screenshot from Google Finance; November 22, 2021

Where are all those extra profits going? I'm sure Warren would answer by claiming that billionaires are hiding the cash under their gold-encrusted mattresses in the Cayman Islands and that's why the IRS needs the authority to snoop on the bank accounts of Americans earning $600 a year on Etsy—and all that makes about as much sense as blaming inflation on price gouging.

When it comes to assigning blame for any of life's unpleasantries, Warren is like a broken record. Billionaires and corporations, in Warren's view, are responsible for everything from high college costs to the lack of affordable housing to the current supply chain problems. Just as reliably, she ignores the role that government has played in creating or worsening those problems—by subsidizing student loans, imposing restrictive zoning laws, and implementing trade-limiting rules like tariffs and the Jones Act, for example.

The same is true when it comes to gas prices, by the way. Government policies are contributing to inflation already, but Warren was one of several Democrats who backed a carbon tax during the 2020 presidential primaries. Regardless of what merits a carbon tax might have as a way to curb climate change, it is undeniable that it would mean higher prices at the pump.

With inflation suddenly taking center stage in the political discourse, Warren is trotting out the same tired arguments blaming successful businesses for the consequences of failed government policy. There's no reason to believe her.

Yep, here progressive liberal rhetoric/lies are old and tired.  Nobody listens to her anymore.

 

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Thanks Biden:  https://www.dollartreeinfo.com/news-releases/news-release-details/dollar-tree-inc-reports-results-third-quarter-fiscal-2021

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“We experienced a strong finish to the quarter, as shoppers are increasingly focused on value in this inflationary environment,” stated Michael Witynski, President and Chief Executive Officer. “Our Dollar Tree pricing tests have demonstrated broad consumer acceptance of the new price point and excitement about the additional offerings and extreme value we will be able to provide. Accordingly, we have begun rolling out the $1.25 price point at all Dollar Tree stores nationwide. The continuing expansion of our key strategic initiatives, including Dollar Tree Plus, Combo Stores and the H2 format, are all going well and on, or ahead of, plan. I am very proud of our team’s efforts – especially those in our stores and distribution centers – to serve our customers by delivering incredible value on everyday products.”

 

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On 11/25/2021 at 7:24 AM, Impartial_Observer said:

Inflation is demonstratively an over abundance of money, who controls the money supply?

More Trump picks than anyone else on the current Fed. Looks like @Impartial_Observer played himself again by voting for Trump.

It's really cute to see Tories like you trying to do a throwback to Reagan with inflation, but it's not working. 

current Fed.png

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On 11/28/2021 at 10:36 AM, Impartial_Observer said:

Anything of value to refute what I said?

You didn't make any claims to refute.

On 11/29/2021 at 5:36 AM, swordfish said:

SF has found that most gas stations have those stickers removed within a day or so.  Make sure you have more than just a couple on you........

Again, buy a Tesla. The gas prices BS is red herring, and a product of physics. There is a finite amount of oil in the Earth, and scarcity leads to high prices. 

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US inflation surges to 39-year high as consumer prices soar higher

https://www.foxbusiness.com/economy/consumer-price-index-november-2021

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Consumer prices surged at the fastest pace in nearly four decades in November as Americans paid more for practically everything from groceries to cars to gasoline, solidifying hot inflation as a key trait of the economic recovery.

 

The consumer price index rose 6.8% in November from a year ago, according to a new Labor Department report released Friday. The CPI – which measures a bevy of goods ranging from gasoline and health care to groceries and rents – jumped 0.8% in the one-month period from October.

It marks the fastest increase in consumer prices since June 1982, when inflation hit 7.1%.

Economists expected the index to show that prices surged 6.8% in November from the year-ago period and 0.7% from the previous month. 

Thanks, federal government.  This is what happens when you increase the money supply by trillions of dollars.  

 

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What Will 'Build Back Better' Buy? Inflation.

https://reason.com/2021/12/17/what-will-build-back-better-buy-inflation/

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Plans by congressional Democrats for trillions of dollars in taxes and spending hikes appear to be faltering in the face of opposition by Sen. Joe Manchin (D-W.Va.). Publicly and loudly concerned about the so-called "Build Back Better" bill's near-certain escalation of already worrisome federal debt and inflation, he has remained resolute in his demands for reductions in proposed spending increases as prices have risen across the board for Americans. Economic sense is on his side, since the ambitious bill threatens to further strain Americans' budgets.

"Throughout the last three months, I have been straightforward about my concerns that I will not support a reconciliation package that expands social programs and irresponsibly adds to our nearly $29 trillion in national debt that no one else seems to care about," Manchin warned in November of the measures dubbed "Build Back Better." "I, for one, also won't support a multitrillion-dollar bill without greater clarity about why Congress chooses to ignore the serious effects inflation and debt have on our economy and existing government programs."

 

Since then, inflation has hit a year-on-year rate of 6.8 percent, the highest level since 1982, according to the Bureau of Labor Statistics. Also, since then the Congressional Budget Office (CBO) estimated that the Build Back Better bill "would result in a net increase in the deficit totaling $367 billion over the 2022-2031 period" under unrealistic congressional assurances that its policies would be temporary. In the more likely case that the extra spending becomes permanent, it "would increase the deficit by $3.0 trillion over the 2022–2031 period," says the CBO.

As a result, "Manchin over the past two weeks has intensified his criticisms about inflation and repeated his desire that Democrats hit pause on the process" of passing the Build Back Better bill, the Washington Post reported this week.

Manchin has good company in his fears that trillions of dollars of new federal spending is likely to send inflation rocketing even higher.

"In our assessment, the very front-loaded and relatively progressive nature of Build Back Better means that it is more likely to be inflationary in the short term," the Committee for a Responsible Federal Budget cautioned earlier this month. "This inflationary effect appears likely to be both small and temporary, but it carries undesirable risks of contributing to a possible inflationary spiral in a time of already high inflation."

Unfortunately, "temporary" sounds an awful lot like "transitory," which has lost credibility as a description of inflation. Even Federal Reserve Chairman Jerome Powell conceded that "it's probably a good time to retire that word" as the purchasing power of the U.S. dollar erodes month after month. Those months just might continue to drag on if the government keeps flooding the world with dollars.

"Widespread inflation always comes from people wanting to buy more of everything than the economy can supply," observed economist John Cochrane, a senior fellow at Stanford's Hoover Institution and an adjunct scholar of the Cato Institute. "Where did all that demand come from? In its response to the pandemic, the U.S. government created about 2.5 trillion new dollars, and sent checks to people and businesses. It borrowed another $2.5 trillion, and sent more checks to people and businesses. Relative to a $22 trillion economy, and $17 trillion of existing (2020) federal debt, that's a lot of money."

 

Tracy Miller, a senior policy research editor with George Mason University's Mercatus Center, agrees with Cochrane, especially regarding the danger of money created out of thin air.

"Inflation is not directly caused by government deficit spending," notes Miller. "It's the result of the money supply, which is controlled by the Federal Reserve, increasing faster than the output of goods and services."

"We're already experiencing the highest rates of inflation in 30 years, and it can be blamed on the expansion of the money supply since the beginning of the pandemic," Miller adds. He warns that the Build Back Better bill's reliance on debt funded with money created by the Federal Reserve threatens more of the same.

Some defenders of not just the Build Back Better bill, but of expansive government spending in general, argue that deficit spending is perfectly fine and that the government can just keep running up the tab.

"The government, unlike us, doesn't need to pay back its debts before it dies, because it doesn't die … the government can just roll over its debts in perpetuity," Matthew O'Brien argued with a straight face in The Atlantic in 2013.

High-profile investor Warren Buffett argued much the same point last year, though he allowed that, when you keep running the printing presses to pay your bills, you just might erode the value of their output. "What you end up getting in terms of purchasing power can be in doubt," Buffett admitted.

In a video discussion on government debt prepared by Hoover, John Cochrane argues that you can keep running deficits only so long as you keep the red ink within limits as a small share of a growing economy. That's not the case when debt is more than 120 percent of GDP and the federal government proposes to keep spending far more than it takes in.

"Growing out of debt requires that taxes equal spending for a generation or two while growth outpaces interest," Cochrane observes. "The U.S. situation is an intractably exploding debt-to-GDP ratio. Steady large deficits. Not a slowly declining ratio with balanced budgets that we might bump to a higher level with a one-time expansion." 

In a situation like ours, he adds, "too much debt results in either sharp inflation, crushing taxes, and sharp and deep benefit cuts, or in a chaotic debt crisis which would be a financial catastrophe."

There are other reasons to oppose massive deficit-spending proposals like the Build Back Better bill, such as their tendency to centralize power in the hands of federal bureaucrats at the expense of individuals. But horror at the impoverishing impact of escalating government debt and the resulting inflation is a good place to start in objecting to these schemes.

Sounds like our children and grandchildren are doomed.  Thanks Boomers.

 

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Elizabeth Warren Blames High Food Prices on Grocery Chains' 'Record' 1 Percent Profit Margins

https://reason.com/2022/01/12/elizabeth-warren-blames-high-food-prices-on-grocery-chains-record-1-percent-profit-margins/

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On Friday, Sen. Elizabeth Warren (D–Mass.) tweeted a video clip from her appearance on MSNBC's Stephanie Ruhle Reports a couple of days earlier.

What happens when only a handful of giant grocery store chains like @Kroger dominate an industry? They can force high food prices onto Americans while raking in record profits. We need to strengthen our antitrust laws to break up giant corporations and lower prices. pic.twitter.com/DMa9Z7adFr

— Elizabeth Warren (@SenWarren) January 7, 2022

"What happens," the caption asked, "when only a handful of giant grocery store chains like Kroger dominate an industry? They can force high food prices onto Americans while raking in record profits." Warren claimed that "a handful of giant chains" had replaced the wide selection of smaller stores that used to dot the American landscape, and she called for the use of the government's antitrust power to "break up these giant corporations."

This was not a new topic for the senator: In December, she sent a letter to Kroger, Albertsons, and Publix, excoriating the grocery giants for "passing costs on to consumers to preserve your pandemic gains" and "taking advantage of inflation to add greater burdens." The letter noted that while grocers' profits had risen during the pandemic, the chains had not reinvested that windfall into "lower prices for consumers" and "protect[ing] and compensat[ing] their workers."

But Warren could hardly have picked a worse industry to use as an example: Grocery stores consistently have among the lowest profit margins of any economic sector. According to data compiled this month by New York University finance professor Aswath Damodaran, the entire retail grocery industry currently averages barely more than 1 percent in net profit. In its most recent quarter, Kroger reported a profit margin of 0.75 percent, during a time in which Warren claims that the chain was "expanding profits" due to its "market dominance."

In actuality, for much of the last year, grocery stores have seen enormous boosts in revenue, but not increased profitability, for the simple reason that everything has been costing more: not just products, but transportation, employee compensation, and all the extra logistical steps needed to adapt to shopping during a pandemic. Couple that with persistent inflation—which Warren also recently blamed on "price gouging"—and it is no wonder that things seem a bit out of balance.

Warren has had an itchy trigger finger for antitrust laws for some time. In 2019, as part of her presidential platform, she called for using the laws to forbid retailers from selling their own products. This would affect industry leaders like Amazon and Walmart, but ironically, it would have a devastating impact on grocery stores as well: Grocers increasingly rely on their own proprietary goods to stock cheaper alternatives alongside name brands. This provides not only less expensive options for consumers, but lower costs to the stores themselves. Store brands also help fill gaps created by external supply shortages.

If Warren wishes to truly rein in the costs of Americans' groceries, the solutions are clear: Cool off inflation by paring back profligate government spending; remove protectionist restrictions to allow industries to get the supply chain back on track; in the longer term, cut back on red tape to better allow competition among suppliers. These fixes may not be as flashy as "break up Big Grocery," but they at least reflect the situation accurately.

 

 

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