Connect with us

Economics

Peter Schiff: Government Serves Grade-A B.S. On Inflation

Peter Schiff: Government Serves Grade-A B.S. On Inflation

Via SchiffGold.com,

Both the Federal Reserve and the Biden administration continue…

Share this article:

Published

on

This article was originally published by Zero Hedge

Peter Schiff: Government Serves Grade-A B.S. On Inflation

Via SchiffGold.com,

Both the Federal Reserve and the Biden administration continue to insist inflation is transitory. And they are also trying to shift the blame for rising prices so they avoid any responsibility. In this clip from his podcast, Peter Schiff explains why the government inflation narrative is Grade-A B.S.!

The Fed has finally acknowledged that inflation is running hotter than they’d expected. During the September FOMC meeting, the central bank raised its forecast, anticipating core inflation to increase 3.7% this year. That compares with a 3% projection in June. But the Fed and US government officials insist that rising prices are simply a function of supply chain issues and that it will be “transitory.”

Meanwhile, they ignore the elephant in the room – the increasing money supply. The central bank created new money at a record pace in response to the economic chaos caused by government shutdowns for COVID-19. And while money creation has slowed in recent months, it continues at a very high pace. Last month, M2 grew at the fastest rate since February.

If inflation is always and everywhere a monetary phenomenon, and you have this record increase in money supply, and then you also have this big increase in consumer prices, how can you not bring up the possibility that all of this money printing is potentially responsible for prices going up?”

But the central bankers continue to focus solely on the supply chain.

Peter suggested the money printing could account for the supply chain problems.

Whenever there is a surplus of money, there is automatically a shortage of stuff, because the government can print money very easily. It’s a whole other thing to produce stuff because the Fed doesn’t actually produce any stuff to buy with the money they print. They just print the money. And if the economy is not capable of producing the goods to go with the money, then they can always claim, ‘Well, it’s a supply shortage.’ Yeah, everybody’s got all this money to buy stuff, but we haven’t made anything. But the reality is it’s not that there’s a shortage of supply.”

In fact, there is always a shortage of supply. We don’t have unlimited stuff. So, we have to ration supply with prices. The more money we have in circulation, the higher the prices have to climb in order to ration the supply. You have more dollars chasing the same amount of stuff. This is inflation 101.

But all of these Fed guys are ignoring the fact that money supply is going through the roof, and they’re simply focusing on goods supply and saying, ‘Hey, we have a shortage.’”

It’s not just the central bankers at the Fed spinning this narrative. Director of the White House National Economic Council Brian Deese also tried to explain away rising consumer prices, particularly grocery prices. He claimed if you don’t factor in beef, pork, or poultry, grocery prices aren’t rising.

About half of the overall increase in grocery prices can be attributed to a significant increase in prices in three products: in beef, in pork, and in poultry. And in beef and in pork, we’ve seen double-digit increases in prices over the last couple of months. If you take out those three categories, we’ve actually seen price increases that are more in line with historical norms.”

Peter said this is ridiculous. He’s only talking about food. And he wants to throw out meat.

I guess if you’re a vegetarian, then it’s no big deal.”

Peter said this is typical government spin.

Ignore the stuff that’s going up and just focus on the stuff that’s not — except everything is going up. It’s just that some things are going up a lot more, and the government wants us to ignore that.”

It’s like a kid claiming he has a great GPA if you just throw out the D he got in chemistry.

You can’t throw out the bad grades. You have to take into account all the grades when you are factoring in your grade point average. And you have to look at all of the prices that are going up. You can’t throw out the ones that are going up and just focus on the ones that aren’t.”

Meanwhile, Joe Biden is trying to blame meat producers for the price increases. He’s called for investigations to determine why these companies are hiking prices.

Peter said this is yet another tried and true government strategy.

They create inflation. And then they try to shift the blame to the public.”

It’s easy to blame “evil” companies for raising prices. But in reality, they have no choice because their own costs are rising too. They are simply passing on their higher prices to consumers.

It’s not their fault. It’s the government’s fault. The government is creating the inflation.”

And this is exactly why the government redefined inflation from an expansion of the money supply to an increase in prices. When you define inflation properly, you can’t blame the private sector. Meat processors don’t increase the amount of money in circulation.

When you properly define inflation, you know exactly who’s causing it. But when you pretend inflation is rising prices, well, then it’s easy to blame the price increase on the people who are raising the prices.”

By redefining inflation, government officials can duck the blame for rising prices and blame inflation on the “free market.”

Tyler Durden
Tue, 10/05/2021 – 13:35






Author: Tyler Durden

Share this article:

Economics

Failure To Bury “Transitory” Inflation Narrative Risks Sparking Biggest Fed Error In Decades: El-Erian Warns

Failure To Bury "Transitory" Inflation Narrative Risks Sparking Biggest Fed Error In Decades: El-Erian Warns

Authored by Tom Ozimek via The…

Share this article:

Failure To Bury “Transitory” Inflation Narrative Risks Sparking Biggest Fed Error In Decades: El-Erian Warns

Authored by Tom Ozimek via The Epoch Times,

Failure on the part of the Fed to toss its stubbornly-held “transitory” inflation narrative and act more decisively to rein in persistently high price pressures raises the likelihood the central bank will need to slam on the brakes of easy money policies much more forcefully down the road, risking avoidably severe disruption to domestic and global markets, according to Queen’s College President and economist Mohamed El-Erian.

In stark contrast with the mindset of corporate leaders who are dealing daily with the reality of higher and persistent inflationary pressures, the transitory concept has managed to retain an almost mystical hold on the thinking of many policy makers,” El-Erian wrote in an Oct. 25 op-ed in Bloomberg.

“The longer this persists, the greater the risk of a historic policy error whose negative implications could last for years and extend well beyond the U.S.,” he argued.

Consumer price inflation is running at around a 30-year high and well beyond the Fed’s 2 percent target, to the consternation of central bank policymakers who face increasing pressure to roll back stimulus, even as they express concern that the labor market hasn’t fully rebounded from pandemic lows.

The total number of unemployed persons in the United States now stands at 7.7 million, and while that’s considerably lower than the pandemic-era high, it remains elevated compared to the 5.7 million just prior to the outbreak. The unemployment rate, at 4.8 percent, also remains above pre-pandemic levels.

At the same time, other labor market indicators, such as the near record-high number of job openings and an all-time-high quits rate—which reflects worker confidence in being able to find a better job—suggest the labor market is catching up fast. Businesses continue to report hiring difficulties and have been boosting wages to attract and retain workers. Over the past six months, wages have averaged a gain of 0.5 percent per month, around twice the pace prior to the pandemic, the most recent jobs report showed.

Besides measures of inflation running hot, consumer expectations for future levels of inflation have hit record highs, threatening a de-anchoring of expectations and raising the specter of the kind of wage-price spiral that bedeviled the economy in the 1970s. A recent Federal Reserve Bank of New York monthly Survey of Consumer Expectations showed that U.S. households anticipate inflation to be 5.3 percent next year and 4.2 percent in the next three years, the highest readings in the history of the series, which dates back to 2013.

El-Erian, in the op-ed, argued that the Fed has “fallen hostage” to the framing that the current bout of inflation is temporary and will abate once pandemic-related supply chain dislocations will abate.

“It is a framing that is pleasing to the ears, not only to those of policy makers but also those of the financial markets, but becoming harder to change,” he wrote.

“Indeed, the almost dogmatic adherence to a strict transitory line has given way in some places to notions of ‘extended transitory,’ ‘persistently transitory,’ and ‘rolling transitory’—compromise formulations that, unfortunately, lack analytical rigor given that the whole point of a transitory process is that it doesn’t last long enough to change behaviors,” he wrote.

El-Erian said he fears that Fed officials will double down on the transitory narrative rather than cast it aside, raising the probability of the central bank “having to slam on the monetary policy brakes down the road—the ‘handbrake turn.’”

“A delayed and partial response initially, followed by big catch-up tightening—would constitute the biggest monetary policy mistake in more than 40 years,” El-Erian argued, adding that it would “unnecessarily undermine America’s economic and financial well-being” while also sending “avoidable waves of instability throughout the global economy.”

His warning comes as the Federal Open Market Committee (FOMC)—the Fed’s policy-setting body—will hold its next two-day meeting on November 2 and 3.

The FOMC has signaled it would raise interest rates sometime in 2023 and begin tapering the Fed’s $120-billion-a-month pandemic-era stimulus and relief efforts as early as November.

Some Fed officials have said that, if inflation stays high, this supports the case for an earlier rate hike. Fed Governor Christopher Waller recently suggested that the central bank might need to introduce “a more aggressive policy response” than just tapering “if monthly prints of inflation continue to run high through the remainder of this year.”

“If inflation were to continue at 5 [percent] into 2022, you’ll start seeing everybody potentially – well, I can’t speak for anybody else, just myself, but – you would see people pulling their ‘dots’ forward and having potentially more than one hike in 2022,” he said in prepared remarks to Stanford Institute for Economic Policy Research.

The Fed’s dot plot (pdf), which shows policymakers’ rate-hike forecasts, indicates half of the FOMC’s members anticipate a rate increase by the end of 2022 and the other half predict the beginning of rate increases by the end of 2023.

For now the market is pricing in a more hawkish Fed response in 2022

Tyler Durden
Tue, 10/26/2021 – 16:49









Author: Tyler Durden

Share this article:

Continue Reading

Economics

Kimberly-Clark Forecasts Price Increases as Inflationary Pressures Accelerate, Supply Chain Disruptions Worsen

In yet another sign that inflation pressures are proving to be a lot more than just transitory, Kimberly-Clark (NYSE: KMB)
The post Kimberly-Clark Forecasts…

Share this article:

In yet another sign that inflation pressures are proving to be a lot more than just transitory, Kimberly-Clark (NYSE: KMB) — the maker of staple household goods such as Kleenex tissues, Huggies diapers, tampons, and toilet paper— has sounded the alarm over impacts of rapidly accelerating prices and supply chain headaches.

Shares of Kimberly-Clark tanked to a six-month low after the company cut its annual forecast due to rising inflation and supply chain disruptions. Third quarter net income stood at around $469 million, which equates to approximately $1.39 per share, against the $472 million— or $1.38 per share reported during the same period one year ago. The company reported an adjusted earnings per share of $1.62, which failed to meet consensus estimates calling for $1.65.

“Our earnings were negatively impacted by significant inflation and supply-chain disruptions that increased our costs beyond what we anticipated,” said Kimberly-Clark CEO Mike Hsu. As a result, Hsu warned that the company will be implementing price increases across a variety of goods in an effort to offset implications of supply chain woes and subsequent acceleration in commodity costs. “We are taking further action, including additional pricing and enhanced cost management, to mitigate these headwinds as it is becoming clear they are not likely to be resolved quickly,” he added.

However, Kimberly-Clark is far from being the only households goods company to sound the alarm over the effects of global supply chain disruptions and a persistent inflationary macroeconomic environment. Recall, General Mills, P&G, among others, have all issued warnings about impending cost-push inflation, as companies contend with margin compression that is further exasperated by ongoing labour shortages.


Information for this briefing was found via Kimberly-Clark. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post Kimberly-Clark Forecasts Price Increases as Inflationary Pressures Accelerate, Supply Chain Disruptions Worsen appeared first on the deep dive.



Author: Hermina Paull

Share this article:

Continue Reading

Economics

Oil Prices Soar Above $85 as OPEC Continues to Restrict Global Supply

The price of oil soared to $85 per barrel on Monday, as OPEC members continue to restrict supply despite growing
The post Oil Prices Soar Above $85 as…

Share this article:

The price of oil soared to $85 per barrel on Monday, as OPEC members continue to restrict supply despite growing global demand for crude as skyrocketing natural gas prices prompt gas-to-oil switching.

US benchmark WTI futures hit a high of $84 per barrel at the time of writing, while benchmark Brent crude soared to just above $86 per barrel on Monday morning, marking the highest since 2014, as the growing global energy crisis continues to send commodity prices accelerating.

The latest rally comes after Saudi Arabia informed its oil producers that the current jump in oil prices will subside, and that demand for crude could soon crash given growing uncertainty over the Covid-19 pandemic. “We are not yet out of the woods. We need to be careful. The crisis is contained but is not necessarily over,” Saudi Arabian Energy Minister Prince Abdulaziz bin Salman told Bloomberg TV.

However, with natural gas prices repeatedly hitting new record-highs around the world— particularly in Europe, gas-to-oil switching has been on the rise, further contributing to the growing demand for crude just as economies reopen from the Covid-19 pandemic. As a result, Goldman Sachs forecasts that the acceleration in gas prices could boost oil demand by 1 million barrels per day, especially if there is an unseasonably cold winter in the months ahead.

Information for this briefing was found via Bloomberg and Goldman Sachs. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post Oil Prices Soar Above $85 as OPEC Continues to Restrict Global Supply appeared first on the deep dive.


Author: Hermina Paull

Share this article:

Continue Reading

Trending