Saturday, 23 November 2024

The Inflation Fire Is Not Extinguished Yet, Far From It

ZeroHedge
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Authored by Peter Reagan,

We’ve been through a lot over the last four years. Between pandemics, actions taken to prop up the economy through the pandemic, and the miserable effects of Bidenomics, you’re probably asking when the misery will end.

It’s a good question to ask, and we all want something hopeful to look forward to. When times are tough, a vision of a better day can keep us going.

And many people look at what the Fed is doing to try to “help” the economy with the hope that what the Fed is doing will be the magic bullet to fix our economic issues.

It’s easy to understand why they hope that: Inflation is still affecting us all, everytime that we go to the grocery store, to the gas pump, or pay our power bill. Eric Revell writes for Fox Business,

Inflation ticked slightly higher in October as prices remained stubbornly high for consumers, giving Federal Reserve policymakers more data to consider ahead of their meeting next month.

The Labor Department on Wednesday said that the consumer price index (CPI) — a broad measure of how much everyday goods like gasoline, groceries and rent cost — rose 0.2% in October from the prior month and was up 2.6% from a year ago.

Core CPI, which excludes food and energy prices (which to be honest can be quite volatile), came in at a more concerning 3.3%.

That’s uncomfortably well above the Federal Reserve’s target of 2%.

Whether you call it 2.6% or 3.3%, we all know that real inflation is higher than that official number, though… John Williams’s data seems a lot closer to correct for me and most people I speak to on a daily basis.

Courtesy of ShadowStats.com

If we still measured inflation the same way we did back in 1990, our uncomfortable 3.3% becomes an alarming 7.5%.

It’s the Fed’s job to keep inflation under control. So you’d expect them to do something.

They did react, but not in the way you might expect…

The Fed lowered interest rates

Wait? They did what?

Yes, they cut interest rates.

Now, they keep telling us that the Fed uses interest rates to control inflation. The Fed, to prevent inflation, will raise interest rates, and they know that we’re dealing with inflation. So, why are they cutting interest rates?

They’re trying to kick-start an economy critically injured by Bidenomics.

Whih, as you know, is bad. I mean, official reports about the economy (and press conferences from the White House) claim it’s humming right along, the greatest economic recovery in American history.

To give just one aspect highlighting how bad things are, Wolf Richter writes,

Total household debt outstanding ticked up by $147 billion in Q3, or by 0.8%, from Q2, to $17.9 trillion, according to the Household Debt and Credit Report from the New York Fed today. Year-over-year, total household debt grew by 3.8%.

And why are average people like you and me borrowing more, now?

It’s because the Biden/Harris economy is struggling. It is being stubbornly slow, not wanting to get moving again. So much so that two respected economists speculate the real economy, the place where you and I live and work, might’ve entered recession in 2022.

And that’s why the Fed cut interest rates again despite the latest CPI report. They’re trying to stimulate the real economy so it starts to seem more like those press conferences and official reports.

So when will it end?

Before we can even begin to answer that question, we have to understand how it started…

What causes inflation?

Most people get inflation and price fluctuations confused – fortunately, my friend and Birch Gold partner Dr. Ron Paul explained the difference between inflation and rising prices earlier this year.

So, what is the real cause of inflation? Dr. Paul says:

When the Federal Reserve prints more money, it makes each dollar worth less. This causes prices to rise for everything, from the raw materials companies use to make products to the prices we pay for finished goods.

When the Federal Reserve pushes interest rates down, that lowers the cost of credit. (Think of credit as spending money before you earn it.) More credit makes each dollar worth less, just like money-printing does.

That’s what inflation is.

Higher prices are a symptom of inflation, not inflation itself.

Ron Paul is one of the few people who actually understands how the cycle works!

The federal government’s addiction to deficit spending – enabled by the Fed’s interest rate repression and outright money-printing – devalue the dollar. Prices go up, but that’s just a side effect.

Side note: Personally I’m absolutely thrilled that Dr. Paul may indeed be joining the Department of Government Efficiency in the near future!

Dr. Paul would agree with me when I tell you It’s incredibly frustrating that the Fed, whose mission is to deliberately debase our currency at 2% and has caused multiple boom and bust cycles in our economy, is still at it.

They think they’re untouchable by mere mortals.

Or President-elect Donald Trump. As Ryan McMaken tells the story:

There were a few seemingly tense moments at the FOMC press conference on Thursday when two reporters asked Jerome Powell about the prospect of Donald Trump asking Powell to resign. The first reporter asked “would you resign if asked to do so by Donald Trump?” To this, Powell responded with a resounding “no” followed by silence. A few moments later, Powell was asked by another reporter if it was lawful for Trump to either remove or “demote” – that is, remove Powell as chairman, but leave him on the Board of Governors – Powell. To this, Powell responded with a forceful “not permitted under the law.”

Huh – maybe someone who’s done such a terrible job should be held accountable? At the very least, lose their authority to cause so much economic harm?

If you asked Chairman Powell about this, I guarantee he’d tell you that whatever financial harm you and I have suffered under his tenure as head of the Fed, it was for the greater good.

They’re saving the economy

And, if you know the history of the Fed (and central banks throughout history), it never has, no matter what happens, ever accepted responsibility for a poor outcome.

Remember Covid, and the 9% official inflation rate? Whose fault? Supply chains and Vladimir Putin – but don’t worry, it’s transitory. Did 0% interest rates and $4 trillion-plus in money-printing have anything to do with it? Next question!

Before that, the Great Financial Crisis – caused by “irrational exuberance” among homeowners and real estate investors. The dot-com meltdown? Well, everybody knows that was the internet’s fault… 

Here’s the real issue: Powell’s “transitory” inflation started more than three years ago! And it’s still hanging around – because lower interest rates and massive deficits continue to destroy the purchasing power of our dollars.

Remember, though – it’s for your own good. And if you disagree, if you’d prefer your purchasing power not steadily destroyed, well, too bad, because nobody can fire the Fed head.

Don’t wait for inflation to subside

If you’ve been waiting and hoping for inflation to finally burn out, I have some bad news for you. That’s not going to happen.

Because the Fed and the federal government keep pouring more fuel on the fire, then fanning the flames.

You can’t fire the Fed – but you can opt out of the rigged boom-and-bust, currency depreciation game. Physical precious metals are real, tangible assets that are immune to inflation. They can’t be printed like currency, they can’t be diluted like nearly every other financial asset in existence – and, best of all, they tend to become much more valuable during economic crises.


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