INFLATION--the Gold bugs are back, led by major Chinese Institutional Investors

Has inflation reached a peak? Three signs that prices could soon come down - CNN

 

Inflation isn't coming down any time soon. I have heard from two different economists that for that to happen the Federal Funds rate will have to rise to more than the inflation rate. Maybe that isn't 100% true, but something fundamental has to change for inflation to change. Making small changes to the margins won't do anything. The most likely thing it could do is start a recession. Even so, that doesn't mean they shouldn't raise the rate to 10% or so.

 

And yet the libtiles swore this would never happen with unnecessary pay raise laws and other nonsensical mandates.

Where did they think the money for the increased hourly pay and increased costs of fuel was going to come from? And since those went up at every step of the process within the USA, that means the consumer takes it in the shorts or the small business ceases to exist...

 

Economics should be a class every year just like math for every kid 7th-12th grade. It is obvious that most liberals have never attended an economics class.

 

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'Very, very unlikely' the Fed can tame inflation without sparking a recession, former NY Fed chief says - CNN

The good news is that a recession does not appear imminent. And Goldman Sachs, Dudley's former employer, has been telling clients that a recession is not inevitable.

Once the Fed brings interest rates above the neutral level, it will effectively be slamming the brakes on the economy. That's when the risk of a recession "goes up a lot," Dudley said, adding that the chance of a recession in 2023 and 2024 is "definitely higher than 50%."

 

This statement is based on Keynesian theory. Assuming interest rates actually make the economy good is false. If that was true then we should never raise rates. Lowering interest rates below what the real demand for money is creates a situation of wealth consumption. We give money to people who are not net-producers. They are net-consumers. Those net-consumers buy goods for essentially nothing. The loans are based on money not backed by production. It transfers wealth from net-producers to net-consumers. The recession is the market figuring out what was reality all along. In that way it is not "bad". It is real. You can only live in a Keynesian fairy tale for so long until you hit problems one way or another.

Things like GDP or even per capita GDP don't really represent the real economy. They are abstractions that can't capture the difference between goods and the proper production levels of each good. Add money supply growth into that mix and the metrics mean even less.

 

i think you're right but what the left will do with the aid of the MSM is take the decrease in the rate and claim they've decreased inflation. In other words, they'll peg their success not to actually getting inflation under control but they'll use some speculative number and claim that they've decreased inflation based on what was already baked in. And unfortunately many on the left will buy it. They'll try to say that 9.5% was inevitable based on the pandemic and then they will claim a 20% reduction based on getting it to 7.6%. you know...Dem economics. Hate that we have to let the Dem's crash the bus to win the midterms, but for the future of the country maybe the next 6 months of pain will serve us long term.

 

Fed raises interest rates by 0.50%, largest move since 2000

https://www.cnbc.com/2022/05/04/heres-what-the-feds-half-point-rate-hike-means-for-your-money.html

Welp, they did it. They didn't just threaten it, suggest it, or hint it, they actually did it. Powell's comments suggest more of the same coming down the pike.

 

https://www.usnews.com/news/busines...ollow-wall-st-lower-as-rate-hike-worries-grow

Dollar index slips from 20-year high, Fed rate path in focus

The dollar slipped against a basket of currencies on Friday after two volatile days as investors focused on how aggressive the Federal Reserve will be in hiking rates as it tackles rising inflation.

The dollar index hit a 20-year high overnight on safe haven demand, following a sharp stock selloff on Thursday driven by concerns about the Fed's aggressive tightening and as European currencies weakened on worries about growth in the region.

In relative terms, the dollar is the strongest it's been compared to other currencies in 20 years. (the sky isn't falling folks...) But don't let facts get in the way of your pet narratives...

The U.S. Dollar Index (USDX, DXY, DX, or, informally, the "Dixie") is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners' currencies.The Index goes up when the U.S. dollar gains "strength" (value) when compared to other currencies.
U.S. Dollar Index - Wikipedia

 

Chop, all that means is that the $ won't lose world reserve status. It has nothing to do with inflation and how damaging it is to working class people right now. The sky is falling for people living paycheck to paycheck and many more are now paycheck to paycheck because of it.

 

Can I eat these currencies, put them in my car's tank, or pay rent with them?

 

https://www.usnews.com/news/us/arti...recession-fears-grow-but-how-high-is-the-risk

https://www.cnbc.com/2022/05/09/americans-say-inflation-may-have-a-big-negative-impact-on-goals.html

Inflation May Fall Slower Than Expected

 

Capital Economics forecasting inflation under 4% at year-end

Andrew Hunter, Senior U.S. Economist at Capital Economics wrote in an email, “We aren’t expecting headline CPI to fall all the way to 3% by the end of this year – it’s likely to be just under 4% as we are expecting some categories to decline from here – namely energy and used vehicles, while others keep rising but at a slower pace as supply and labor shortages ease.”

Michael Pierce, Senior U.S. Economist at Capital Economics, wrote in mid-April, “While we expect the 8.5% rate in March to mark the peak, CPI inflation is still going to remain uncomfortably high over the next few months before beginning to fall back more markedly in the second half of the year. Gasoline prices have reversed part of their surge seen in March in recent weeks but the decline in April will be modest. It will also be partly offset by the surge in natural gas prices, which will push electricity and utility prices up further.”

Inflation may be lower than expected - Business News

 

https://www.cnbc.com/2022/05/06/use...ord-highs-easing-the-impact-of-inflation.html

"Used-car prices are down from record highs, easing the impact of inflation"

 

https://www.thedenverchannel.com/news/national/president-biden-to-unveil-plan-to-fight-inflation

The White House said Biden will call on Congress to make oil companies pay fees on idled wells and non-producing acres on federal lands, “so that companies that continue to sit on excess capacity will have to choose whether to start producing or pay a fee.”

 

The Biden-Harris Inflation Plan: Lowering Costs and Lowering the Deficit | The White House

...taking actions to crack down on illegal price fixing and enforce the antitrust laws in the meat and poultry processing sector; investing federal resources to create more competition in meat-processing...


[Not a bad idea there...This could be good for Texas cattlemen...]

...

Lowering Housing Costs by Building More Homes: Calling on Congress to invest in building more than 1 million affordable homes, including through a set of tax credits that have received bipartisan support; expanding and improving federal financing for the construction of new housing; and using existing federal funding to reward communities that eliminate needless barriers that prevent new housing from being built


[this last one means an attack on zoning ordinances, esp. wrt zoning for single family homes.]

 

Fascism.

 

Is this really a problem? Price fixing? How about printing trillions and trillions of dollars in 2020 and 2021?

This is good if they are eliminating zoning and regulations. However, "government investment" sounds like more taxes or money printing. No thank you.

Federal funding is what has led to the high real estate prices in the first place.

 

Basically, while it may (or may not) push us towards a recession, the Fed's going to have to keep hiking the rates, again-and-again, until inflation gets under control.

Supply side issues, especially wrt energy, also need to be worked out.

 

There is evidence to say most of the price hikes have materialized. Energy prices probably have peaked or at least plateaued. Same for cost of metals (I’m told). Same for the chemicals at my company. That’s on the supply side. On the demand side, higher interest rates will dent demand. I agree it will take rest of year to see improvement due to Covid in China and Ukraine war, but I think the worse is over. If you have cash, I highly suggest you buy the dip in the stock market. Yes it may drop further in next 3 months but you should be happy by Dec 31.

 

I just talked to my broker; he had the same advice. If you're a long-term investor, this looks like a very good opportunity to buy some solid stocks at depressed prices.

 

The housing proposal will be multifamily structures - just look no farther than Katy. I cannot even count the number of units (all new) around the Katy Costco that have been built and they continue to build. Thank goodness there is no traffic issue - ha.

 

Businesses do this on their own. It is called trying to earn a living.

 

I was looking at the inflation curve, it isn't leveling off at all.

I don't see how this is true. China is locking down hard against covid again. So bad people are jumping out of apartment buildings. It's either that or starve to death. It really is a dystopian novel type situation there. That means they aren't producing anything. It will get worse.

About Ukraine, the continuance of the war will further reduce the supply of food and fertilizer. Prices will go up and people will starve. We haven't come anywhere close to the end of this. All the while the US works to extend the war, not bring it to a close.

 

You are looking at what has come out of the pipe. From my viewpoint, I am not seeing more inflation in the pipeline.

 

Demented.

 

I am looking at the curve with an understanding of the Cantillon Effect. Money supply inflation (the real inflation) causes prices to increase. But that increase isn't all at once or equal across the economy. It starts where the money is injected and then goes out from there. Some goods are much less affected than others. Much of it depends on what the people who first get the money buy and so on.

That means a curve isn't going to go straight up and straight down. The curve will follow a natural pattern of high slope, decreasing slope, inflection point, and then beginning of negative slope. The inflation curve is still in a high slope situation, which means the Cantillon Effect hasn't completely played out yet.