Typically when we think of inflation, we look at the Consumer Price Index (CPI), which measures prices affecting Consumers. Today we are going to look at the November Producer Price index. According to the U.S. Bureau of Labor Statistics (BLS), "the Producer Price Index (PPI) measures the average change over time in the prices domestic producers receive for their output. It is a measure of inflation at the wholesale level that is compiled from thousands of indexes measuring producer prices by industry and product category." The index is published monthly, but unlike the CPI, the PPI is subject to adjusting/correcting over the following four months after publication. The CPI is considered … [Read more...]
Gasoline Prices vs. Wages Over Time
Historical Gasoline Prices in Pictures-- I thought it would be fun to look at some pictures of gasoline prices in days gone by. Of course, we have to remember that salaries were much lower in those days as well. Inflation doesn't affect all prices equally. Let's look at how Gasoline Prices and Wages relate since the 1920s. In 1924 my grandfather probably paid around 21 cents a gallon for gasoline. The average wage was about 62.6¢/hour. But that was just the average, a unionized carpenter in Boston would have made a whole Dollar an hour. Imagine paying 15½ cents for a gallon of gasoline. Although we don't have an exact date for these pictures, we can estimate the … [Read more...]
Annual Inflation Retreats in October
The Bureau of Labor Statistics reported that Annual Inflation for October 2022, fell from 8.20% to 7.75% Monthly inflation at 0.41% was still very high for a month in the fourth quarter, which is traditionally negative or at least very close to zero. But although high, October 2022 monthly inflation was still lower than in October 2021. So… Annual inflation for the 12 months ending in October 2022 fell to 7.75%. This was down from 8.20% in September 2022. Inflation Summary: Annual Inflation fell from 8.20% to 7.75% CPI Index rose from 296.808 to 298.012 Monthly Inflation for October was 0.41% Next release is December 13th October Annual Inflation was 7.75%. Jan. … [Read more...]
November FED Announcement Rocks Stock Market
The FED Giveth and the FED Taketh Away On Wednesday, November 2nd, the FED held its "Federal Open Market Committee meeting" and made the announcement the market has been breathlessly awaiting. As expected, Chairman Jerome Powell announced a hike of 75 basis points in the fed funds rate. Along with the announcement, the market was hoping for some indication of a "pivot", i.e., that the FED would give some indication that it was going to be slackening off on its rapid rate increases. And in this respect, the November FED Announcement did throw the market a bone. It added the new phrase “Cumulative Tightening” to the standard announcement. So, going forward, the FED will take the fact … [Read more...]
What is the Reverse Wealth Effect and Why Does the FED Want It?
To understand the reverse wealth effect first we must understand the economic concept of the "Wealth Effect". According to Economics Help the "Wealth Effect" occurs as "Rising personal wealth has a positive effect on consumer spending". In other words, when people feel richer they spend more. The Impact of Increasing Wealth As people feel richer they: Are more willing to spend, borrow and take risks. Re-mortgage and withdraw equity. Invest more resulting in even higher income from dividends, rent, or interest. During a period of rising wealth, we may see a fall in the savings ratio (i.e. they spend more and save less because they feel confident in their income stream). … [Read more...]
September 2022 Inflation Virtually Unchanged
The Bureau of Labor Statistics reported that for September 2022, Annual Inflation fell from 8.26% to 8.20% Inflation Summary: Annual Inflation fell from 8.26% to 8.20% CPI Index rose from 296.171 to 296.808 Monthly Inflation for September was 0.22% Seasonally Adjusted Monthly Inflation was 0.4% Next release November 10th September Annual Inflation was 8.20%. Jan. 2021 -- 1.40% | Jan. 2022 -- 7.48% | Feb. 2022 -- 7.87% | March 8.54% | Apr. 2022 --8.26% May 2022 -- 8.58% | June 2022 -- 9.06% | July 2022 -- 8.56%% | August 2022 -- 8.26% | September -- 8.20% BLS Inflation Report: The BLS Commissioner reported, "The Consumer Price Index for All Urban Consumers (CPI-U) … [Read more...]
Jerome Powell “Channels” His Inner Paul Volcker
Federal Reserve Chairman Jerome Powell is sounding more and more like former FED Chairman Paul Volcker, who served as the chairman of the Federal Reserve from August 1979 to August 1987. Volcker is best known for his historic fight to vanquish inflation in the early 1980s. Before Volcker took over as the head of the FED, Inflation had risen from a low of 4.65% in December 1976 to 11.26% in July 1979. During that time, FED chairman William Miller raised the FED funds rate from 4.61% to 10.47% in July of 1979. During Miller's time, the FED funds rate pretty much tracked the inflation rate, with a couple of month lag. Prior to Volcker, the prevailing monetary theory was that the FED … [Read more...]
August 2022 is Actually Disinflationary
The Bureau of Labor Statistics reported that in August, Annual Inflation fell from 8.52% to 8.26% Inflation Summary: Annual Inflation fell to 8.26% from a peak of 9.06% in June CPI Index fell from 296.276 to 296.171. Monthly Inflation for August was -0.04% Next release October 13th August 2022, Annual Inflation was 8.26%. Jan. 2021 -- 1.40% | Jan. 2022 -- 7.48% | Feb. 2022 -- 7.87% | March 8.54% | Apr. 2022 --8.26% May 2022 -- 8.58% | June 2022 -- 9.06% | July 2022 -- 8.56%% | August 2022 -- 8.26% BLS Inflation Report: According to the BLS Commissioner: "The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in August on a seasonally adjusted basis … [Read more...]
Will Corn Prices Drive Up Inflation?
Corn prices peaked in April and began coming down in May, June, and July... but all that may be over. According to Bloomberg corn prices may be set to drive up inflation. Recently they've been running a series of articles on Corn Prices: Their article US Crop Tour Stokes Fears of Looming Corn Shortage says, "Parched soils. Grasshopper infestations. Scorching heat. Hail damage. This year’s US corn crop has been put through the wringer... Things are so bad that scouts currently on a four-day tour through the Midwest are finding plants that are stunted and browning. Scores of fields have visible damage from pests. Cobs of grain are unusually small, and sometimes, stalks aren’t producing the … [Read more...]
Two Ways to Destroy the Economy: Hyperinflation and Central Planning
In the following video, Professor Engelhardt says that if he were a "Super Villain" and wanted to destroy an economy, there are two ways that seem obvious to him. The first is "Central Planning", aka. "Socialism" and the Second is Hyperinflation. Since he would be a lazy super villain, he says Central Planning is "too much work", so he would choose hyperinflation. He goes on to say that hyperinflation is difficult to define; even Economists like Murray Rothbard and Ludwig Von Mises used different definitions of plain inflation depending on the context. Generally, inflation was originally defined as an "increase in the money supply in excess of the increase in the demand for money". More … [Read more...]
