CPI jumps 5% in May of 2021, fastest since 2008

[Occam's Banana]

https://twitter.com/Breaking911/status/1513582387317334016

https://twitter.com/SpectrumNews1WI/status/1513872092348960777

https://twitter.com/brad_polumbo/status/1513624837855531013

 

[Occam's Banana]

 

[oyarde]

as anyone knows inflation is double digits . lets take a moment to reflect on the costs that matter to the avg , median income type american . we have housing , energy and food . now we also know that at least roughly half of those people are clearly full retard. these are the type that vote for gore , kerry , clinton , obama , biden , pelosi and schumer ( for at least 13 consecutive years ). also we know only 6 in 10 americans actually work , considering this includes govt employees . probably less than that are actually productive towards anything somewhat useful. Of those 6 only about two pay more fed tax than they receive . We also know the fed allowed 12 months of record third world inflation before really ever looking at raising the interest rate. Considering the severity of these facts ( none of which are favorable , zero ), now we arrive at a point where we can predict that there is nothing to stop this inflation for lasting through 2022 and 2023. Today your worthless FRN is more worthless than ever ( until tomorrow).

 

[Madison320]

00

Not only was money in the 1920s not loose, it is almost the perfect exemplar of Austrian monetary policy in that it allowed prices to fall because of productivity growth. You said base money was the best measure of monetary policy in the past. The monetary base in 1920 was $6.9 billion. It was $6.978 in 1929. Does that sound loose? The price of gold was the same at every point in the 20s so no inflation using that metric. Nominal GDP only grew 5% over 10 year or roughly .5% a year. That is very deflationary in the good sense. You had huge productivity growth during that time. Prices fell by some metrics in the 1920s.

Using this data, the average inflation rate in the 1920s using the CPI data was .38%, basically the lowest ever outside of the the deflation of the Great Depression. https://inflationdata.com/articles/...inflation-cpi-consumer-price-index-1920-1929/

I like Austrian economists a lot. But the data is devastating to the Austrian depression narrative. What is the response to what I posted?

It is true the Federal Reserve caused the Depression but it was because the Federal Reserve raised interest rates to 6 percent when the inflation rate was zero to burst the stock bubble. Just like I think you would agree a hugely negative real rate is bad (like now), why is having a huge positive real rate good? As gold flowed into the country instead of expanding money as the gold standard would dictate, the Federal Reserve purposefully collapsed the money supply by a third.

Both inflation and deflation are bad policy outcomes. Deflation in the early 30s wasn't some beautiful corrective process caused by letting the market work. It was a purposeful choice by monetary central planners that should be thought of the same way as choosing inflation as a policy.

Those are good points but I have some questions. If the fed wasn't printing why did they have to reprice gold from 20 to 35 an ounce?

Also what was going on with rates during the 1920s? In my opinion the fed's balance sheet is the most important long term thing that affects inflation, but rates are very important also.

Anyway I'm not sure what we're arguing about. I agree that the Fed can cause massive deflation if they wanted to. My original point is that the idea of a deflationary spiral is wrong. Maybe I have the wrong definition of a deflationary spiral. I'm assuming it means that a free market economy, with free market money will inevitably have a period where prices start to fall and it spirals out of control until the economy is ruined.

Even if you're right and the there was no bubble in the 1920s, it wasn't falling prices out of the blue that created the great depression. In that case it was the fed artificially raising rates ABOVE the free market level. Austrian economics doesn't say that rates should always be high, it says that rates should be set by the market.

P.S. I used to think that the monetary base was the amount of printed money but I've since realized that the fed's balance sheet is really the mount of printed money so I use that instead.

 

[Krugminator2]

Those are good points but I have some questions. If the fed wasn't printing why did they have to reprice gold from 20 to 35 an ounce?

It was a quick way to devalue the currency to inflate away debts and raise nominal incomes.

This price change incentivized gold miners globally to expand production and foreigners to export their gold to the United States, while simultaneously devaluing the U.S. dollar by increasing inflation.

My original point is that the idea of a deflationary spiral is wrong. Maybe I have the wrong definition of a deflationary spiral. I'm assuming it means that a free market economy, with free market money will inevitably have a period where prices start to fall and it spirals out of control until the economy is ruined.

Some random quotes from Hayek related to this.

“I agree with Milton Friedman that once the Crash had occurred, the Federal Reserve System pursued a silly deflationary policy. I am not only against inflation but I am also against deflation. So, once again, a badly programmed monetary policy prolonged the depression.”

Although I do not regard deflation as the original cause of a decline in business activity, such a reaction has unquestionably the tendency to induce a process of deflation – to cause what more than 40 years ago I called a ‘secondary deflation’ – the effect of which may be worse, and in the 1930s certainly was worse, than what the original cause of the reaction made necessary, and which has no steering function to perform. I must confess that forty years ago I argued differently. I have since altered my opinion – not about the theoretical explanation of the events, but about the practical possibility of removing the obstacles to the functioning of the system in a particular way”

Such a "secondary depression" caused by an induced deflation should of course be prevented by appropriate monetary counter-measures. Though I am sometimes accused of having represented the deflationary cause of the business cycles as part of the curative process, I do not think that was ever what I argued. What I did believe at one time was that a deflation might be necessary to break the developing downward rigidity of all particular wages which has of course become one of the main causes of inflation. I no longer think this is a politically possible method and we shall have to find other means to restore the flexibility of the wage structure than the present method of raising all wages excep those which must fall relatively to all others.

 

[oyarde]

Russian warship Moskva sinks into the Black Sea, Europe drafting plan to ban ruskie oil , russia threatening finland and sweden again with moving nukes closer to them if they join nato . Europe currently buys about 25 percent of its oil from russia . The groups 27 votes would be needed to ban the russian oil. Meanwhile here , inflation keeps on chooglin at double digit third world level while nothing is done about it . Nothing.

 

[oyarde]

Wall St journal says mortgage rates reach 5 percent for first time since 2011 . The week prior the avg was 4.72 on 30 yr mortgages. This moves the avg monthly payment up 38 percent increase from one yr ago ( 1223 after a 20 percent down payment to 1700). Jan to Jan home prices increased 19.2 percent ( S&P Core Logic Case - Shiller National home pice index ). Jan 2021 mortgage rates were 2.65 percent . Wells Fargo says mortgage applications suddenly dropped by 27 percent , JP Morgan Chase 37 percent . Credit card rates will also rise this yr . I expect the double digit inflation to continue . While the pool of worthy borrowers is shrinking by the moment they still expect around 2.6 trillion in mortgage types for this yr.

 

[oyarde]

This evening paper share spot silver price 25.77 , real 90 percent silver dimes and quarters trading at 31 1/3 ounce buy and 32.52 sell ( wholesale to dealers ) , Halves 23.29 times face buy (11.65 ea) and 24 1/3 times face sell wholesale ( 12.16) moving retail to about 13 or roughly 40 per ounce Dealer wholesale buy price for Silver Eagles 38.22 pushing retail to 42 . 99.9 percent silver rounds dealer buy price 29.17 keeping retail @ 32. Junk 90 percent silver dimes trading at 32.52 per ounce to dealers and roughly 35 3/4 retail reflects the inflation from start of plague to now ( twice the price of Feb 2020) . If you put 1K in a savings account in 2019 or 2020 it is essentially worth zero as it would take 2K FRNs now to buy the same housing , auto , energy or groceries as the 1K would have then and you wouldve made zero off your 1K. That is what double digit inflation does , makes people poorer. Right this moment the US is full of people trying to enjoy the new zero that was given them.

 

[oyarde]

With the paper share gold spot price at 1974.20 the cheapest American gold coin a dealer can purchase wholesale is a one ounce gold Eagle for 2049 pushing retail to 2125. Real gold price 2125 , probably should be 2400 or more

 

[devil21]

With the paper share gold spot price at 1974.20 the cheapest American gold coin a dealer can purchase wholesale is a one ounce gold Eagle for 2049 pushing retail to 2125. Real gold price 2125 , probably should be 2400 or more

It's pretty clear they don't want spot gold price crossing 2000 for more than a day or two. Big psychological price point even if generally meaningless compared to 1975 or thereabouts. It'll continue to be managed until the very last moment right before the major monetary paradigm shift occurs. Whether that shift takes the form of a major upward revaluation (gold-backing existing FRNs) or a major downward revaluation (dollar reset haircut) I don't know.

 

[Madison320]

With the paper share gold spot price at 1974.20 the cheapest American gold coin a dealer can purchase wholesale is a one ounce gold Eagle for 2049 pushing retail to 2125. Real gold price 2125 , probably should be 2400 or more

I think it should be somewhere around 4,000 based on the historical fed balance sheet/gold price ratio.

 

[Madison320]

Wall St journal says mortgage rates reach 5 percent for first time since 2011 . The week prior the avg was 4.72 on 30 yr mortgages. This moves the avg monthly payment up 38 percent increase from one yr ago ( 1223 after a 20 percent down payment to 1700). Jan to Jan home prices increased 19.2 percent ( S&P Core Logic Case - Shiller National home pice index ). Jan 2021 mortgage rates were 2.65 percent . Wells Fargo says mortgage applications suddenly dropped by 27 percent , JP Morgan Chase 37 percent . Credit card rates will also rise this yr . I expect the double digit inflation to continue . While the pool of worthy borrowers is shrinking by the moment they still expect around 2.6 trillion in mortgage types for this yr.

And when you factor in heating/cooling and maintenance I'm guessing it's easily 50% more to live in a home from a year ago.

I think I've said this before but I think there's going to be a huge shift in demand from mcmansions to small homes under 1500 sq ft. I'll bet the price of a smaller home has gone up much more than the price of a big home over the last year. Also I think those mcmansions are going to be split into duplexes and shared in other ways, like renting out rooms, etc.

It really irritated me when I was looking for a home about a year and a half ago. It seemed like for every 1200 sq ft house there were 10 3,000 sq ft houses. That's what 20 years of artificially low rates and govt backed loans have done. Almost everyone has bought too much house.

 

[oyarde]

I expect mortgage rates to creep to 5.2 or 5 1/4 this week or next but I dont think it will stop home values or large dollar amount mortgages. I expect inflation to keep on chooglin'. Fed a disaster for waiting so long to stop pumping money and leaving interest at nothing in the face of inflation clearly beyond control.

 

[oyarde]

I think it wouldve done that a decade ago but now there is two trillion probably in crypto t.hat much of wouldve gone to gold or silver so it is hard to judge

 

[Krugminator2]

And when you factor in heating/cooling and maintenance I'm guessing it's easily 50% more to live in a home from a year ago.

I think I've said this before but I think there's going to be a huge shift in demand from mcmansions to small homes under 1500 sq ft. I'll bet the price of a smaller home has gone up much more than the price of a big home over the last year. Also I think those mcmansions are going to be split into duplexes and shared in other ways, like renting out rooms, etc.

It really irritated me when I was looking for a home about a year and a half ago. It seemed like for every 1200 sq ft house there were 10 3,000 sq ft houses. That's what 20 years of artificially low rates and govt backed loans have done. Almost everyone has bought too much house.

I was looking home prices in Peter Schiff's neighborhood over the last three years. (I think he lives in an even nicer subdivision but same general block). It is the most insane thing I have ever seen. This generic place sold for $1.15 million in 2019. https://www.realtor.com/realestateandhomes-detail/2306-Plantation-Vlg_Dorado_PR_00646_M37215-15852 An almost identical unit is listing for $6.35 million with the price being adjusted up. For a 2500 sq ft place not even on the ocean. https://www.zillow.com/homedetails/Plantation-Village-Plantation-Dr-Dorado-PR-00646/2065479790_zpid/ These are the poor people houses in that area.

I have always viewed housing as an expense and not an investment. I honestly have no idea where people get this kind of money and how they can possibly think spending this much on a house is a good financial decision regardless of income or net worth. Maybe home prices keeping going up and they will be right. I doubt it is a bubble but it "feels" like something isn't right. All of it feels very bullshit to me. His neighborhood is just an extreme example.

 

[oyarde]

I think housing is getting to bubble territory but I dont see how it would stop as inflation continues . The cost of putting in driveways , septics , pouring basement walls and building/ matl.s is insane

 

[oyarde]

And when you factor in heating/cooling and maintenance I'm guessing it's easily 50% more to live in a home from a year ago.

I think I've said this before but I think there's going to be a huge shift in demand from mcmansions to small homes under 1500 sq ft. I'll bet the price of a smaller home has gone up much more than the price of a big home over the last year. Also I think those mcmansions are going to be split into duplexes and shared in other ways, like renting out rooms, etc.

It really irritated me when I was looking for a home about a year and a half ago. It seemed like for every 1200 sq ft house there were 10 3,000 sq ft houses. That's what 20 years of artificially low rates and govt backed loans have done. Almost everyone has bought too much house.

I think 50 percent is nearly exact from 2019 to now.

 

[oyarde]

Right now I dont see next months reported cpi inflation getting in under 9 unless they fudge something. Short month and a Holiday ( Good Friday ) but probably a little extra spending too for Easter , Mothers Day once all those pesky increased property taxes are out of the way.

 

[Madison320]

I think housing is getting to bubble territory but I dont see how it would stop as inflation continues . The cost of putting in driveways , septics , pouring basement walls and building/ matl.s is insane

I read a book a few years ago on hyperinflation by a guy who lived thru 3 of them. 2 in argentina and one in chile. One thing he mentioned is that prices didn't all go up in fact real estate prices crashed hard each time because people were selling their homes so they could afford to buy food. I think the basic idea is that essentials like food go way up but non-essentials go way down.

 

[Madison320]

I think housing is getting to bubble territory but I dont see how it would stop as inflation continues . The cost of putting in driveways , septics , pouring basement walls and building/ matl.s is insane

The fed just printed another 20 billion last week. Why????? I'm telling ya, I think behind the scenes the fed is freaking out, it sure looks like they are desperately trying to keep the bubble afloat for some kind of miracle to happen and bail them out.