Contrary to White House claims that its war against inflation was won, the Bureau of Labor Statistics has revealed that the inflation blew past Wall Street expectations. One of the Federal Reserve’s key inflation measures, the core consumer price index, doubled from July to August. As the dust settled over Wall Street, the BLS reported on Wednesday that the producer price index had a slight 0.1 percentage point decrease in the past month, in line with economist expectations, but that core PPI had a 0.2-point increase.
The supposed expert class is predictably celebrating, with the same liars who claimed that the worst inflation in 40 years would prove transitory. Their claim now is that this PPI information finally shows that inflation will pivot — for real this time!
If you don’t believe that they’re sincere this time, just rewind to 24 hours earlier. They claimed that an 8.3% CPI increase and a 0.6% increase in core CPI in just one month were an excuse to boast.
Most Americans were probably concerned after learning that inflation was at 8.3% and then watching the stock market plummet in response.
But of course, Biden and journalists celebrated the “good news.”
WATCH:
Via @thaleigha_ & @AndrewStilesUSA https://t.co/RsQhMidWkb pic.twitter.com/lh77t8NckN
— Washington Free Beacon (@FreeBeacon) September 14, 2022
Evidently, the experts have short memories, as they seem to believe that the Fed will never fully exercise the only tool capable of actually ending this inflation. Consider that prior to Fed Chairman Jerome Powell’s remarks earlier this month that he would indeed welcome a recession in the hopes of salvaging the greenback’s domestic purchasing power, markets balked at the notion of the Fed signing off on a third consecutive 75-basis-point rate hike. Until the CPI release on Tuesday, markets (even when pricing in the obvious odds of the Fed bringing the rate to 4% by the end of the year) were stupid enough to believe that deflation had occurred in August.
But the truth remains clear to anyone who hasn’t forgotten a century of established monetary theory in favor of the past decade of delusion: Inflation has not peaked, and the Fed will not pivot. Neither of these will reverse until interest rates come even close to 2 points below core CPI, and that’s not a remote possibility until rates reach a minimum of 4%.
Markets may have short memories, but monetary policy doesn’t. The underlying factors that are driving price levels to rise further prove inflation has become an entrenched monetary supply problem and not a commodities supply one. Nearly all of the deflationary effect on consumer prices is attributable to energy costs, and that, in turn, is due somewhat to the White House’s Strategic Petroleum Reserve Release and substantially to demand collapsing to its lowest level since the pandemic panic of July 2020. Producer prices have only been ameliorated by a decrease in goods prices. Service prices, which threaten entrenching inflation because they are much stickier, continue to increase.
An “Inflation Reduction Act” that only reduces the deficit by $300 billion over a decade cannot possibly reduce inflation when coupled with President Joe Biden infusing the economy with at least half a trillion in liquidity in the form of his legally dubious student debt forgiveness. Russia losing its moronic invasion in Ukraine cannot burst the asset bubbles inflated by a decade of quantitative easing, and Jim Cramer pretending to be dumbstruck that centuries of classical economics have been proven right, once again, will not be able to do to near-double digit price increases what the power of Paul Volcker once did. Only as the Fed continues to go back to the basics will the inflation dragon be slayed, and no amount of amnesia can change that.
