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Thursday, June 10, 2021

5% inflation turns $15 an hour into $14.25

Inflation hit 5% in May to go with a 5.8% unemployment rate. That brings Josef Biden's Misery Index into the double digits. As Laura Ingraham said in a tweet, "Notice that under Biden, inflation exceeds expectations while job numbers are worse than expected."

The Misery Index -- the unemployment rate plus the inflation rate -- has judged the economic performance of every president from Truman forward. Via L&T, here is the Misery Index of the last 13 presidencies:

• Harry Truman – 7.80

• Dwight D. Eisenhower – 9.26

• John F. Kennedy – 7.14

• Lyndon B. Johnson – 6.77

• Richard Nixon – 10.57

• Gerald Ford – 16.00

• Jimmy Carter – 16.26

• Ronald Reagan – 12.19

• George H.W. Bush – 10.68

• Bill Clinton – 7.80

• George W. Bush – 8.11

• Barack Obama – 8.83

• Donald Trump 6.60

Jimmy Carter was the highest (16.26) and Donald Trump was the lowest (6.60). Biden is off to a shaky start.

Mind you, Trump's average includes a month of 14.7% unemployment -- higher than any of the other 12 faced. But being a capitalist and not a lifer senator, he knocked that down to a mere 6.3% when he left office.

Our lifer senator president is already in George Herbert Walker Bush territory.

Market Watch reported, "The cost of living surged again in May and drove the pace of inflation to a 13-year high of 5%, reflecting a broad increase in prices confronting Americans as the economy recovers.

"The consumer price index jumped 0.6% last month to mark the fourth large gain in a row, the government said Thursday. Soaring used-car prices accounted for one-third of the overall increase in May.

"Economists polled by Dow Jones and The Wall Street Journal had forecast a 0.5% increase in the CPI."

That used cars are driving this inflation seems odd, but if anyone wants to give me $25,000 for the Mustang convertible, it is yours. I'll just drive the wife's Elantra and curse the darkness.

Inflation reflects commerce returning to normal, as well as supply-chain problems. When demand exceeds supply, prices rise. That means it is a temporary problem; however, by temporary we mean years when it comes to computer chips and cattle. Inflation will be with us.

13 years ago, a global recession ended inflation. Seemingly overnight, oil fell from $150 a barrel to less than $50. 

That is the wrong way to end inflation.

But that could be what happens this time. Zero Hedge commented on Red China's rising Producer's Price Index yesterday, and noted, "The last time China's PPI was this high, the global financial system collapsed."

The story said, "Moments after reporting a red hot PPI which was the highest since Lehman, China effectively launched price controls, with China’s economic planning agency vowing to increase supply of key consumer goods to stabilize prices, according to a statement on NDRC website on a national video meeting Tuesday."

Truman's price controls led to a shortage of white shirts and the introduction of Hawaiian shirts so producers could get around the price controls.

Nixon's price controls did not work, either.

Basically, a recession is the only thing that quells inflation.

However, do not despair. Experts assure me this is at worse a temporary inconvenience.

Larry Light of Forbes wrote on March 30, "Is Inflation Coming? Hell, No."

That's not just no, but hell no. Larry Light will personally make sure it does not happen.

Light wrote, "Former Treasury Secretary Lawrence Summers, a baby boomer economist who well remembers the 1970s, warns that inflation may get out of hand again. But Oxford Economics’ Gregory Daco, a millennial economist, believes any inflation will be temporary. Paul Krugman, the New York Times columnist and Princeton economist (and a baby boomer), agrees with Daco. He recalls the small 2010 and 2011 CPI blips, post-recession, which Republican lawmakers used to oppose President Barack Obama’s federal spending plans." 

Who am I to disagree with Krugman? He has a Nobel Prize and he was an Enron advisor. And was he not the one who predicted the worldwide depression on Election Night 2016, you know the one that led to 3.5% unemployment and 1.8% inflation.

The New York Times said in its report on the 5% inflation, "As prices have climbed in recent months, government officials and many economists have said the jump is likely to fade with time. The annual number in particular is getting a boost from what’s called a base effect: The year-ago number was depressed by pandemic-driven shutdowns, so the current figures look large by comparison.

"But the strong monthly figure for May, which came on the heels of a sharp rise in April, showed that prices have been moving up quickly for more than just technical reasons. The critical question is whether that is a transient trend tied to reopening or something more persistent."

But have no fear. The Federal Reserve keeps pumping trillions into the economy.

NYT reported, "Investors on Thursday were sanguine about the data. Yields on 10-year government bonds, which have been particularly sensitive to concerns about inflation were unchanged by midmorning, while stocks rose about half a percent — gains that put the S&P 500 on track to close at a record."

The rich get richer.

The poor get inflation.

Consider the rise in prices to be Biden's inflation tax, which made that $15 an hour living wage worth $14.25 compared to last May.

12 comments:

  1. If we calculated inflation using the price of fuel, electricity, food staples and housing, the table would really change. We had no inflation under Barry, but costs of nontracked things went through the roof.

    ReplyDelete
    Replies
    1. Sorry, Jeffery, we had plenty o f inflation/

      Commodity prices jumped so bad things that cost $2 or less cost $3 or more.

      It's like the way the fudged the misery index for Zippy.

      Delete
  2. This is ONLY day 142 of the Xiden debacle. The worst is yet to come, and I don’t need The Reverse Krugman Effect to tell me that. It only reinforces it.

    ReplyDelete
    Replies
    1. Maybe the worst president ever crown is about to be awarded to Xiden,Kamala Roundheels
      has a shot, too.

      Delete
    2. Maybe it's time for reinstatement.

      Delete
    3. I don't think even the Demos want Chlamydia.

      Delete
  3. I have total confidence in the US Government, under Democrat control, to totally eff things up for us.

    ReplyDelete
  4. OSB was $9 a sheet when Fauci's flu started. It's now over $40 a sheet.

    ReplyDelete
    Replies
    1. But you insisted we all wear masks and the body count was real, Jeffery.

      Delete
  5. This is when the public is going to start wanting Trump back.

    Stick around. Could be a wild summer.

    ReplyDelete
  6. Don't you think that printing and pumping all that money into the system might have an affect on inflation?

    ReplyDelete