While most people are aware of the Consumer Price Index (CPI) fewer people are aware of the Producer Price Index (PPI). The CPI measures what consumers pay for a basket of goods and services. The PPI on the other hand measures what businesses (producers manufacturers commercial) pay for things that they need to produce their goods. The PPI tends to lead the CPI in trends in other words as businesses pay more they will pass those costs along to the consumers and that will be eventually reflected in the CPI. Also different producers face different costs and have different ability to pass along costs. Hence the need for 2 types of measurements.
The PPI goes into great detail at this link:
https://www.bls.gov/pPI/
This link brings you to the different industry tables.
https://www.bls.gov/ppi/home.htm#tables
The current trailing twelve month average (TTM) of October 2020 to October 2021 shows on an unadjusted basis, the final demand index rose 8.6%.
https://www.bls.gov/news.release/pdf/ppi.pdf
While the CPI for the same TTM shows "only" a 6.2% increase. This large disparity looks like a matter of timing. IMO the large disparity between the CPI and PPI indicates that within the next 90 days we will see further uptick in the CPI of a further 2.4% +/- between now and February 2022 as these costs increases are passed along to consumers.
https://www.bls.gov/news.release/cpi.nr0.htm
In short inflation is here and it is working its way through the pipeline. IMO there is no way the "transitory inflation" is going transit anytime soon. I can think of about 2 trillion reasons to support that assumption.
Good information and tough to hear.
Have you heard the people talking about deflation hitting? I can strongly see the arguments that we are hitting inflation. Some people are talking about money supply tightening. The other thing I've heard is "The Fed will pull back the money supply, see the results, panic, and let loose the money supply again."
I'm just curious if you have thoughts on that or observations, or WAGs and pickelbarrel speculation on what might be happening and coming?
Quote from: woodsghost on November 10, 2021, 02:37:03 PM
Good information and tough to hear.
Have you heard the people talking about deflation hitting? I can strongly see the arguments that we are hitting inflation. Some people are talking about money supply tightening. The other thing I've heard is "The Fed will pull back the money supply, see the results, panic, and let loose the money supply again."
I'm just curious if you have thoughts on that or observations, or WAGs and pickelbarrel speculation on what might be happening and coming?
There are several reasons to suspect that we getting into stagflation. Low GDP growth, high unemployment and rising prices.
https://www.investopedia.com/terms/s/stagflation.asp
I do not think we will see deflation short term. Longer term could be another story. The last time we had wholesale deflation was 2008 with the liquidity crisis. So we would need an event like to trigger a deflationary cycle.
I could be wrong but several areas to watch for deflation is the housing market pricing, Jobs ( unemployed and out of the work force) and commodity prices. We had oil crater in 2020 but that was the only commodity that cratered price wise anyway.
In my area there are several employers who announced large force reductions in the last couple of months.
https://apnews.com/article/hurricane-ida-floods-business-mississippi-river-storms-cc7d00516965e67c8c1b64baf8af8f32
https://www.reuters.com/article/us-refinery-operations-shell-convent-idUSKBN27L2RI
https://concealedaz.com/gun-news/hodgdon-closes-goex-black-powder-production-facility-in-louisiana/
This certainly will make the economy here stagnate.
Fresh from the local MSM's:
https://www.youtube.com/watch?v=DfZ_OBLNeT8 (https://www.youtube.com/watch?v=DfZ_OBLNeT8)
The word of the day...stagflation.
https://www.wsj.com/articles/the-summer-of-stagflation-economy-biden-administration-11635453473
https://finance.yahoo.com/news/stagflation-is-the-message-of-spiking-prices-yields-morning-brief-100608345.html
https://www.msn.com/en-us/money/markets/what-is-stagflation-the-economic-phenomenon-that-stifled-growth-through-the-1970s/ar-AAQfgX1
https://realmoney.thestreet.com/investing/stocks/stagflation-s-prospects-keep-rising-with-all-the-government-spending-going-on-15824441
I remember the 1970s and 8% and higher inflation. It was devastating for those on fixed incomes and even wage earners had a real issue with wages not keeping up with inflation. I was working and while I got annual raises the prices that would restore parity but even with the raise it meant I was working for exactly what I was making last year in terms of buying power.
With economy stagnant in 1970's the ability to job hop was limited and in changing jobs it was generally at the same rate of pay as the existing position. The job market was very competitive and balanced in favor of the employer. So the only real way to get ahead was to "moonlight" and hope your employer was not pissed off by your doing that...Yes moonlighting and working extra side gigs was frowned upon then and could get you fired (at least in my profession).
Quote from: Raptor on November 11, 2021, 12:18:37 PM
The word of the day...stagflation.
https://www.wsj.com/articles/the-summer-of-stagflation-economy-biden-administration-11635453473
https://finance.yahoo.com/news/stagflation-is-the-message-of-spiking-prices-yields-morning-brief-100608345.html
https://www.msn.com/en-us/money/markets/what-is-stagflation-the-economic-phenomenon-that-stifled-growth-through-the-1970s/ar-AAQfgX1
https://realmoney.thestreet.com/investing/stocks/stagflation-s-prospects-keep-rising-with-all-the-government-spending-going-on-15824441
I remember the 1970s and 8% and higher inflation. It was devastating for those on fixed incomes and even wage earners had a real issue with wages not keeping up with inflation. I was working and while I got annual raises the prices that would restore parity but even with the raise it meant I was working for exactly what I was making last year in terms of buying power.
With economy stagnant in 1970's the ability to job hop was limited and in changing jobs it was generally at the same rate of pay as the existing position. The job market was very competitive and balanced in favor of the employer. So the only real way to get ahead was to "moonlight" and hope your employer was not pissed off by your doing that...Yes moonlighting and working extra side gigs was frowned upon then and could get you fired (at least in my profession).
My current employer gets pissy about moonlighting too.
Quote from: woodsghost on November 11, 2021, 01:18:15 PM
My current employer gets pissy about moonlighting too.
Yeah I do not get that...to me it shows a person with a good work ethic.
I get it that in some professions there is liability to an employer but those same firms had no issues with pro-bono work. Go figure.
Oh and one other thing about the 1970s 1980s stagflation. The income tax rate was high (along the lines of what is proposed now) so as rising inflation ate away at your earnings the raises would put you in a higher tax bracket so between the taxes & inflation you got a double whammy there.
Then even as I moonlighted to get extra $$$$, the taxes on these $$$$ left you with $ after taxes.
Quote from: Raptor on November 11, 2021, 01:33:43 PM
Quote from: woodsghost on November 11, 2021, 01:18:15 PM
My current employer gets pissy about moonlighting too.
Yeah I do not get that...to me it shows a person with a good work ethic.
I get it that in some professions there is liability to an employer but those same firms had no issues with pro-bono work. Go figure.
Oh and one other thing about the 1970s 1980s stagflation. The income tax rate was high (along the lines of what is proposed now) so as rising inflation ate away at your earnings the raises would put you in a higher tax bracket so between the taxes & inflation you got a double whammy there.
Then even as I moonlighted to get extra $$$$, the taxes on these $$$$ left you with $ after taxes.
The 70s and 80s led to some dramatic changes in financial policy, if I understand right. Both in the US and a number of European countries.
Yes the tax rates were high but there were a lot of deductions, credits and adjustments available. Inflation was whipped by both spending policies but also in no small part by the The Tax Equity and Fiscal Reform Act of 1982. TEFRA. It dramatically reduced tax rates in the US but also eliminated many deductions and tax credits. It dramatically changed the real estate market among other industries.
It did things to the tax code similar the tax code changes made in 2017. It had similar results. It boosted the economy. That was neccessary to offset the anti inflation tactics of the Fed.
It was a difficult business environment but it controlled inflation and the pain was worth it.
Most of the world followed suit to some extent. Now 37 years later it looks like the ptb are going to relearn this lesson at our expense...btw it will always be at our expense...the ptb always seem to avoid the pain.
.
Quote from: Raptor on November 11, 2021, 01:33:43 PM
Oh and one other thing about the 1970s 1980s stagflation. The income tax rate was high (along the lines of what is proposed now) so as rising inflation ate away at your earnings the raises would put you in a higher tax bracket so between the taxes & inflation you got a double whammy there.
I remember as a kid my Dad caused a bit of a stir at his work when he asked them to take away a raise he'd been given. He showed them how he lost money from the raise due to being tipped over into a higher tax bracket.
To give them credit, they gave him another raise to balance out the tax impact after they had their accountants double check his math.
My company had a "town hall" meeting this week. One of the questions was what they would be doing about the surge in inflation. I think any sensible person would understand the question really was about adjusting wages to account for inflation. Instead leadership answered it more literally and talked about how only the Federal .gov can address inflation and it's outside my company's power to stop inflation. :rolleyes1:
Quote from: RoneKiln on November 11, 2021, 10:18:37 PM
My company had a "town hall" meeting this week. One of the questions was what they would be doing about the surge in inflation. I think any sensible person would understand the question really was about adjusting wages to account for inflation. Instead leadership answered it more literally and talked about how only the Federal .gov can address inflation and it's outside my company's power to stop inflation. :rolleyes1:
This came up in my company townhall this week as well. Like every other business, we're having trouble filling positions. To help keep current employees happy so that they won't leave, they're taking a look at factoring inflation into our raises early next year. We're actually having a good year, so this shouldn't be too hard of a sell with the board of trustees. Fingers crossed!
BTW you can expect the MSM to write articles saying silly and moronic claims that inflation is good.
This quote will be typical:
QuoteIt's the predictable product of the economy's rapid recovery, and its costs have been offset, to a large degree, by robust wage growth and government policies.
So based upon this moronic statement; inflation does not hurt you because your salary will increase to cover it and besides you can afford it. :hitsfan:
A link to the source (beware the stupidity is great here that reading it may reduce your IQ by 1 or 2 points ) also there is a discussion of politics and a claim that COVID is also a hero.
https://www.msnbc.com/opinion/how-covid-became-unlikely-hero-our-inflation-crisis-n1283443?cid=sm_npd_ms_tw_ma
In a normal healthy economy a 1 to 2.5% inflation rate is basically unavoidable. Inflation in the 1% to 2% APR range is not bad but neither is it good; it is simply unavoidable. That rate of inflation shows a functioning economy with healthy spending by the fully employed populous. Eliminating it would cause more harm than good.
This link provides some historical context.
https://www.thebalance.com/u-s-inflation-rate-history-by-year-and-forecast-3306093
It shows the rate of inflation and the Fed Funds rate the banks paid for money. If you look at the year 1970 you will see the rate of inflation was about equal to the fed funds rate.
Then in 1971 you will see inflation went down when the feds put in wage and price controls in an attempt to tamp down prices and wages. Yes in 1971 the feds said you could not raise the wages of employees and businesses could not raise prices unless approved by a Wage and Price board. It was an utter failure that resulted in the term stagflation being created.
It did nothing for inflation because once the wage and price controls were lifted prices spiked while wages stayed the same assuming you had a job. Because that was the other issue unemployment.
Inflation beat the hell out wage earners and especially people on fixed income until about 1980 when the federal reserve raised the Fed rate to 18%. Yes a prime rate 18%. That almost crashed the economy. It did get inflation under control but man it was a tough time to borrow any kind of $$$$. If you wanted a house the mortgage rate was ~ 18%...how would like to sign a mortgage note for 30 years at 18%?
So when you see articles written by morons saying inflation over 2% is not a bad thing, simply stop reading and find another source of information.