Inflation had to come around sooner or later. After the greatest monetary and fiscal expansion in the nation’s history, the chickens are coming home to roost, turning President Joe Biden’s vision for America into a bad dream. It has been a terrible few days for the White House, from the bombings in the Middle East to the gasoline shortages on the Eastern seaboard. The red-hot inflation numbers for April added insult to injury, leaving the nation with one question: Will this be a short-lived night terror, or will Bidenomics spawn prolonged agony for millions of Americans heading into the 2024 U.S. election?
Inflation Nation
The U.S. annual inflation rate in April climbed to 4.2%, up from 2.6% in March, representing the highest reading since September 2008. The market had penciled in a jump of 3.6%. The core inflation rate, which removes the volatile food and energy components, increased to 3% year-over-year. On a monthly basis, the consumer price index (CPI) advanced 0.8%, quadrupling the median estimate.
Higher prices were concentrated in gasoline (49.6%), fuel oil (37.3%), and used automobiles (21%). Inflation accelerated for food (2.4%), shelter (2.1%), new vehicles (2%), and apparel (1.9%). The food index climbed by 0.8%, the energy index dipped by 0.1%, and the index for all other items jumped at a rate of 0.9%.
So, what is costing you more at the supermarket? Here are some of the more notable increases:
Ham: +4.3%
Bacon: +2.9%
Pork: +2.6%
Bread: +2.6%
Oranges: +2.5%
Tomatoes: +2.3%
Milk: +2.1%
Instant Coffee: +2.0%
Bananas: +1.4%
Poultry: +1.1%
What else in the marketplace is going to become more expensive on your next shopping trip?
Car and Truck Rentals: +16.2%
Computers: +5.1%
Televisions: +3.1%
Toys: +2.7%
Furniture: +2.1%
Suffice it to say, the cost of living is only going up in the U.S. and global economies. The necessities are becoming more expensive, from medical care to groceries to shelter. Despite these figures and the broad array of circumstances that have led to this moment, the Biden administration and the Federal Reserve are in denial that price inflation is here to stay, using the term “transitory” to describe this stage of the post-coronavirus economy.
Inflation Scare or Inflation Scar?
Will inflation be comparable to a momentary jump scare in a modern-day horror film? Or will it be a permanent scar on the world’s largest economy?
For the last few months, the U.S. central bank has shrugged off the inflation threat, with some Federal Open Market Committee (FOMC) members asserting that it will be as brief as last year’s toilet paper shortage. The Fed is more concerned about growth and unemployment than it is price inflation and monetary debasement.
Richard Clarida, the Fed’s vice chairman, conceded to The Wall Street Journal that he was taken aback by the April inflation report, but he stressed that he wants to see more data before policy action is discussed.
"I was surprised. This number was well above what I and outside forecasters expected. If, contrary to our baseline view, demand relative to supply was excessive and persistent and pushed up inflation and inflation expectations to levels that were not potentially consistent with our mandate we would not hesitate to act and to use our tools to bring inflation back down to our 2% longer-run goal.”
Minneapolis Fed Bank President Neel Kashkari has confirmed that the central bank will unlikely taper its unprecedented quantitative easing program, arguing that the economy still has a long way to go. This means interest rates would stay near zero, and the $120 billion monthly Treasury, mortgage, and corporate bond purchases would stay intact.
The Biden administration is mirroring the Fed's sentiment. Council of Economic Advisers Chair Cecilia Rouse recently stated that inflation has more to do with supply chain problems than the trillions in new spending. White House Press Secretary Jen Psaki also repeated the “transitory” line, adding that the president takes “the possibility of inflation quite seriously.”
Republicans are pouncing on the data, warning about the stagflation era that the United States suffered during the Carter days. Sen. John Thune (R-SD) cautioned that the money pumped into the economy is "outpacing supply and it's started to push prices up." But how high could prices jump moving forward?
Is a Tsunami Coming?
The Bank of America recently forecast that the U.S. would go through a period of brief hyperinflation in the coming months, alluding to the commodities supercycle and monetary easing. But could the U.S. economy really go through 50% inflation per month this year? While it is unlikely that the country will endure something as catastrophic as that, inflation is here to stay. How high it can go is anyone’s guess right now: 3%, 5%, 9%? Not only does everyone want everything simultaneously, but the inflation bomb is also a reflection of the Fed printing one-quarter of all U.S. dollars ever created in less than a year. Once again, Keynesian economics and the fiat empire have failed. So why are these ideologies still given any credibility and respectability by the smartest men and women in the room?
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Read more from Andrew Moran.
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