In today's post, Daniel Lacalle looks at the problems plaguing the eurozone. He says their major problems aren't China, rate hikes, or the Ukraine war. Instead, he demonstrates that the curse of the eurozone is central planning. Subsidizing obsolete sectors and zombie firms, bloated government spending, and high taxes. ~Tim McMahon, editor The Eurozone Disaster: Between Stagnation and Stagflation The eurozone economy is more than weak. It is in deep contraction, and the data is staggering. The eurozone manufacturing purchasing managers’ index (PMI), compiled by S&P Global, fell to a three-month low of 43.1 in October, the sixteenth consecutive month of contraction. However, … [Read more...]
The Great Phony Disinflation
People are often confused about the difference between DEFLATION and DISINFLATION. Deflation is when prices are actually falling compared to last year, i.e., you will actually pay less for enough items to reduce your cost of living. It doesn't necessarily mean that everything costs less but enough items cost less to make the inflation rate negative. Disinflation on the other hand, simply means that the rate of inflation is slowing. This could be for as little as one month, i.e., annual inflation was 4% in May 2023 and then it was 3% in June 2023. That is a big disinflation. But it was 3.2% in July 2023. So there was no monthly disinflation but there was still disinflation over two months … [Read more...]
September Inflation Virtually Unchanged
According to the Bureau of Labor Statistics CPI report released on October 12th, Annual Inflation was unchanged at 3.7% in September. (but since we calculate it to two digits, it was actually up from 3.67% to 3.70%.) Monthly inflation went from 0.44% in August to 0.25% in September. But, even though monthly inflation was lower than last month, Annual inflation increased. This is because monthly inflation in September 2023 was slightly higher than monthly inflation in 2022. Thus, as the 2022 number fell out of the calculation, it was replaced by a slightly higher monthly number, thus increasing the Annual Inflation number. September 2023 Inflation Summary: Annual Inflation rose … [Read more...]
How Germany is Fudging Their Inflation Numbers
Playing with Official Inflation Statistics: An Example from Germany By Karl-Friedrich Israel The Harmonized Index of Consumer Prices (HICP) consists of 12 subindices, which are weighted according to their shares in total household expenditures. If, for example, food and non-alcoholic beverages (subindex 1) account for 15% of expenditures, they should also be given a weight of 15% in the overall index. In this way, each expenditure category would be given the importance it has for an average household. This is the claim of official statistics. But here, too, as so often, aspiration and reality diverge. In Germany, the traditionally largest subindex covers housing, water, electricity, … [Read more...]
Inflation Is a Huge Wealth Redistribution Scheme
In today's article, Charles A. Smith explains how bankers and bureaucrats conspire to consistently rob the common person through inflation. We have become conditioned to believe that 2% inflation is the norm, and not only that, but it is even desirable and beneficial. Charles argues that, quite to the contrary, productivity improvements should create lower consumer prices, i.e., deflation. The reason that doesn't happen is because "Inflation makes bankers’ and bureaucrats’ lives easier and keeps them in power". ~Tim McMahon, editor. Inflation Is a Giant "Skim" on the American People The price of a McDonald’s hamburger in the United States has inflated 3.75 percent annually over the … [Read more...]
Do Private Corporations Cause Inflation?
We often hear the cry that those greedy corporations are raising prices and causing inflation. If they would only bite the bullet and stop raising prices all would be well. They even have a name for it "greedflation". As recently as April 27th 2023, Bloomberg published an article entitled ECB (The European Central Bank) Wakes Up to Greedflation as Key Culprit in Price Struggle. The article tells us that French politician and President of the European Central Bank Christine Lagarde blames "corporate margins" for inflation. Today's article looks at the problems with that view. ~Tim McMahon, editor Private Corporations Don't Cause Price Inflation. Governments Do. By Daniel … [Read more...]
Default by Inflation
As long as I can remember, the "boogeyman" of government debt has always been default. This is not an insignificant concern. Over the years, governments HAVE defaulted on their sovereign debt. In the 1700s, corporate debt was seen as more likely to be repaid than government debt. As recently as a year ago, Russia was facing the prospect of default on Eurobonds maturing in 2023 and 2043. According to the following chart by Reuters, 34 governments have defaulted on at least some of their sovereign debt since 1989. The largest defaults were Congo in 2012 and Ukraine in 2015, but there was also Ecuador, Nicaragua, Argentina, Venezuela, Russia, and Pakistan, along with many others. But … [Read more...]
Is There an Optimum Growth Rate of Money?
It is widely held that a growing economy requires a growing money stock because economic growth increases demand for money. Many economists also believe that failing to accommodate the increase in the demand for money leads to a decline in consumer prices. This could destabilize the economy and produce an economic recession or even a depression. Some economists who follow Milton Friedman—also known as monetarists—want the central bank to target the money supply growth rate to a fixed percentage. They hold that if this percentage is maintained over a prolonged period, it will create economic stability. The idea that money must grow to support economic growth implies that money sustains … [Read more...]
Inflation Less Than Experts Predict in March
Annual inflation PLUNGED in March according to the Bureau of Labor Statistics CPI report released on April 12th. Monthly inflation was 0.33% for March 2023, compared to 1.34% in March 2022. This resulted in a 1% drop in Annual inflation. But despite the significant drop in inflation, the stock market did not rally. Instead, the NYSE lost a few points, and the NASDAQ lost just over 100 points. March 2023 Inflation Summary: Annual Inflation fell from 6.04% to 4.98% CPI Index rose from 300.840 to 301.836 Monthly Inflation for March was 0.33% Next release May … [Read more...]
Food and Shelter Prices Keep Climbing as CPI Growth Hits a Three-Month High
The federal government’s Bureau of Labor Statistics (BLS) released new price inflation data today, [i.e., February 14th], and according to the report, price inflation during the month decelerated slightly, coming in at the lowest year-over-year increase in sixteen months. According to the BLS, Consumer Price Index (CPI) inflation rose 6.4 percent year over year in January before seasonal adjustment. That’s down very slightly from December’s year-over-year increase of 6.5 percent, and January is the twenty-third month in a row with inflation above the Fed’s arbitrary 2 percent inflation target. Price inflation has now been above 6.0 percent for sixteen months in a row. [Editor's note: … [Read more...]