What is the deal with inflation these days? Are Americans going to need to fill up their wheelbarrows to purchase a loaf of bread and a tank of gasoline, if there are any gallons left in a few years? Or should households put their personal protective equipment (PPE) back on and return to their basements to wait out the so-called transitory inflation event?
After the larger-than-expected annual inflation rate of 4.2% in April, it turns out that the United States has to pay for all the money printing and spending of the last year. But it was not the only inflation-related measurement to dominate the economic data cycle and business headlines.
According to the Bureau of Labor Statistics (BLS), producer prices soared 6.2% year-over-year in April, up from 4.2% in March. This was also higher than the median estimate of 5.9%. On a monthly basis, the producer price index (PPI) jumped 0.6%, doubling the market forecast of 0.3%. Some economists will say that the PPI is a better reflection of the inflationary environment than the consumer price index (CPI) because it gauges the average adjustment over time in the selling prices received by U.S. producers for their output.
The BLS also reported that U.S. import prices rose 0.7% in April, coming in slightly higher than the 0.6% expectation. On an annualized basis, import prices surged at a decade-high 10.6%. Export prices increased 0.8% month-over-month in April and 14.4% year-over-year.
Do U.S. consumers anticipate more inflation? The University of Michigan released the results of its monthly study, finding that inflation expectations stand at 4.6% in May and the five-year inflation forecast is 3.1%. So, billionaires see inflation, investors see inflation, and the American people see inflation – but Washington still cannot wrap its mind around the possibility.
Uncle Sam Needs an Accountant
Another month, another federal budget deficit record. If politicians or bureaucrats ever wanted to make an accountant sick to his or her stomach, show that person the U.S. balance sheet. The Treasury Department recently confirmed that the budget deficit increased to an all-time high of $1.9 trillion in the first seven months of the fiscal year, up from $1.5 trillion the same time a year ago. In April alone, the government was in the hole by $226 billion.
In the first seven months of the 2021 fiscal year, outlays climbed 22%, and receipts rose 16%. In April, spending was down 32% compared to last year, while the amount of revenue received was up 82%. This is not too surprising since the government only postponed individual tax payments by about a month. Last year, the federal government suspended tax payments until July.
It is widely anticipated that the federal deficit will be higher than last year’s $3 trillion record; potentially totaling $3.4 trillion. Over the next decade, all these budget shortfalls will add to the national debt, lifting it to a projected $37 trillion. Today, the nation’s debt obligations total about $28 trillion.
Is this becoming unsustainable? Even the Federal Reserve, which regularly monetizes Uncle Sam’s debt, conceded that Washington needs to return to “a sustainable path.” But, of course, the Eccles Building agrees with kicking the can down the road because now is ostensibly not the time to start prioritizing the nation’s fiscal mess.
Elon Musk Breaks Up with Bitcoin?
Is legend-in-the-making Elon Musk falling out of love with bitcoin to make room for a new mistress by the name of dogecoin? Tesla Motors announced that it would be suspending automobile purchases using bitcoin, only a few months after declaring the historic move of allowing customers to buy its vehicles using the cryptocurrency.
According to Musk, Tesla is concerned about the harmful environmental consequences of bitcoin mining. The billionaire tech genius says that he and Tesla believe in the fundamental principles of cryptocurrency, but he noted that “we are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” For now, Tesla is not selling any of its bitcoin holdings. However, Tesla will be “looking at other cryptocurrencies that use <1% of bitcoin’s energy/transaction.”
The move decimated the overall cryptocurrency market, eliminating approximately $365 billion. Bitcoin plunged below $50,000, Ethereum slumped nearly 2%, and dogecoin cratered 11.5% to under 44 cents.
But while he threw shade on bitcoin for driving “a massive increase in fossil fuel use,” he quickly announced that he would be working with dogecoin developers “to improve transaction efficiency.” His critics were quick to point out the amount of energy consumed to produce Tesla car batteries and the CO2 emissions spewed out from SpaceX rockets. However, Musk may have been too busy coming up with the next blueprint for a mission to Mars or donating $100 million to a charity.
So, is this 4D chess? Is he sending cryptic messages? Is he trolling social media? Of course, when you are as rich, powerful, and hilarious as Musk, you can do whatever you please.
Read more from Andrew Moran.