{"id":428,"date":"2021-11-13T14:34:36","date_gmt":"2021-11-13T14:34:36","guid":{"rendered":"https:\/\/sfawbn.com\/home\/?p=428"},"modified":"2021-11-13T14:34:38","modified_gmt":"2021-11-13T14:34:38","slug":"price-inflation-hits-a-31-year-high-as-janet-yellen-insists-its-no-big-deal","status":"publish","type":"post","link":"https:\/\/sfawbn.com\/home\/2021\/11\/13\/price-inflation-hits-a-31-year-high-as-janet-yellen-insists-its-no-big-deal\/","title":{"rendered":"Price Inflation Hits a 31-Year High as Janet Yellen Insists It\u2019s No Big Deal"},"content":{"rendered":"\n

October\u2019s rate was up from 5.3 percent in September and remains part of a surge in the index since February 2021, when year-over-year growth was still muted at 1.6 percent.<\/p>\n\n\n\n

\"cpi\"<\/a><\/figure>\n\n\n\n

Not surprisingly, producer prices surged in October as well. The Producer Price Index for commodities in October was up 22.2 percent year over year<\/a>, reaching a forty-eight-year high. We must go back to November 1974 to find a higher Producer Price Index increase\u2014at 23.4 percent.<\/p>\n\n\n\n

Asset price inflation has naturally continued unabated as well, with the result being rising housing costs. In addition to the Consumer Price Index\u2019s thirty-one-year high, home prices in the second quarter surged to near a forty-two-year high. According to the Federal Housing Finance Agency\u2019s home price index, home price growth reached 11.9 percent in the second quarter of this year<\/a>. Since 1979, only the second quarter of 2005\u2014also with 11.9 percent growth\u2014showed home-price growth as high.<\/p>\n\n\n\n

This is troubling information indeed, given that average real weekly earnings have turned negative this year<\/a>, with inflation-adjusted earnings down 0.5 percent from September to October<\/a>. It is increasingly clear that wages are not keeping up with rising prices for a great many Americans.<\/p>\n\n\n\n

None of this means policymakers will diagnose the problem properly, however. We should expect the discussion around inflation in Washington to keep missing the point and denying any connection to the central bank or to monetary inflation. <\/p>\n\n\n\n

For example, rising prices are so obvious now that not even the administration can ignore them anymore. Today, the White House released a statement<\/a> in which President Joe Biden admitted: \u201c[T]oday\u2019s report shows an increase over last month. Inflation hurts Americans pocketbooks\u201d<\/p>\n\n\n\n

Yet the administration continues to be very much in denial about the causes of price inflation. The Biden statement continues:<\/p>\n\n\n\n

I have directed my National Economic Council to pursue means to try to further reduce these costs, and have asked the Federal Trade Commission to strike back at any market manipulation or price gouging in this sector.<\/p><\/blockquote>\n\n\n\n

As if \u201cprice gouging\u201d were the cause of nationwide price inflation!<\/p>\n\n\n\n

If it were \u201cgouging,\u201d we\u2019d be seeing increases only in the areas where so-called gouging is taking place. Moreover, that would mean a decline in spending\u2014and thus price deflation\u2014in areas where the gouging isn\u2019t taking place. The overall effect would be price stability.<\/p>\n\n\n\n

Similarly, the administration has also tried to blame inflation on a lack of childcare. In an incoherent series of non sequiturs, secretary of transportation Peter Buttigieg this week claimed<\/a> that paid family leave is \u201cpart of [the administration\u2019s] tool kit to fight inflation.\u201d Buttigieg simultaneously claimed that paid family leave means more people can take time off from work, and yet this somehow will also translate into more people going back to work. While it\u2019s true more workers could help temper\u2014to some extent\u2014upward pressure on prices, more paid family leave would contribute nothing to this \u201csolution\u201d to price inflation. Rather, it\u2019s apparent the memo went out at the administration that every policy must now be tied into some kind of plan to fight inflation\u2014no matter how tenuous the connection.<\/p>\n\n\n\n

Yet we should expect more of this sort of blind grasping at excuses for our economic malaise as time goes on. The same strategy was used by the Ford administration in the dark days of the mid-1970s and the \u201cWhip Inflation Now\u201d campaign. The administration then claimed that the American public should fight inflation through strategies such as planting a vegetable garden at home.<\/p>\n\n\n\n

Then, as now, the regime refused to admit that rising monetary inflation had anything to do with rising prices. Instead, we\u2019re told it must be a lack of daycare services or \u201cprice gouging.\u201d<\/p>\n\n\n\n

A Second Strategy: Total Denial<\/h4>\n\n\n\n

But some in the administration are sticking to their narrative that there\u2019s nothing at all to see here. Janet Yellen, for example, declared on Tuesday<\/a> that \u201cI\u2019d expect price increases to level off, and we\u2019ll go back to inflation that\u2019s closer to the 2% that we consider normal.\u201d She insists the Fed is very much in control of the situation and won\u2019t allow 1970s style inflation to occur. <\/p>\n\n\n\n

What Yellen fails to mention is that even if inflation rates of, say, 4 to 6 percent, last only a year, middle-class workers won\u2019t make up these losses later just because inflation falls again at some point to \u201cto the 2% that we consider normal.\u201d After all, this year\u2019s declines in real average weekly wages mean real hardship for many people, even if Janet Yellen will be just fine, with her private driver shuttling her from her luxury home to opulent cocktail parties all the while.<\/p>\n\n\n\n

But not everyone is as uninterested in the effects of inflation as Janet Yellen. As MSNBC reports<\/a>:<\/p>\n\n\n\n

\u201cFor now, inflation is going to continue to run above very solid wage growth,\u201d said Joseph LaVorgna, chief economist for the Americas at Natixis and former chief economist for the National Economic Council during the Trump administration. \u201cThis is why when you look at consumer confidence, it\u2019s really taking a beating. Households do not like the inflation story, and rightly so.\u201d<\/p><\/blockquote>\n\n\n\n

For at least one MSNBC columnist, though, people don\u2019t know how good they have it. On Monday, James Surowiecki insisted everyone is better off and discussion of inflation amounts to little more than fearmongering. He writes<\/a>:<\/p>\n\n\n\n

[A]ny discussion of inflation needs to include the context in which it\u2019s happening. Historically, recessions have left Americans poorer, not better off. But the Covid recession was different. As people shift[ed] their habits drastically in response to the pandemic, they spent much less and saved more. Even though millions of Americans lost their jobs, enhanced unemployment benefits and stimulus payments left many<\/a> of them better off<\/a>, not worse. And the stock market, after initially falling, boomed.<\/p><\/blockquote>\n\n\n\n

Surowiecki goes on to claim American consumers \u201care relatively speaking, flush\u201d and high prices are nothing more than the result of the fact the economy is booming and everyone is getting so much richer so fast. He claims Americans are enjoying \u201crobust wage growth\u201d and are piling savings in their bank accounts.<\/p>\n\n\n\n

It\u2019s difficult to guess what universe Surowiecki phoned in his column from, but it\u2019s apparently not this <\/em>universe, where real wage growth is negative and the personal savings rate has collapsed over the past six months<\/a>. It could be Surowiecki is just stuck in the past, when new money was flooding into the economy but prices had not yet adjusted to new monetary realities. Of course people felt richer back then<\/em>. But that\u2019s not where we are now. <\/p>\n\n\n\n

Nonetheless, it is entirely possible that inflation rates could quickly turn downward again in coming months. That could occur if recession sets in, with businesses and households unable to pay off their debts. If that happens, monetary deflation will set in and demand will decline, leading to a real drop in price inflation. Of course, that won\u2019t exactly do wonders for real wages, either.<\/p>\n","protected":false},"excerpt":{"rendered":"

October\u2019s rate was up from 5.3 percent in September and remains part of a surge in the index since February 2021, when year-over-year growth was still muted at 1.6 percent. Not surprisingly, producer prices surged in October as well. The Producer…<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-428","post","type-post","status-publish","format-standard","hentry","category-uncategorized","wpcat-1-id"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/sfawbn.com\/home\/wp-json\/wp\/v2\/posts\/428","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sfawbn.com\/home\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sfawbn.com\/home\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sfawbn.com\/home\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/sfawbn.com\/home\/wp-json\/wp\/v2\/comments?post=428"}],"version-history":[{"count":1,"href":"https:\/\/sfawbn.com\/home\/wp-json\/wp\/v2\/posts\/428\/revisions"}],"predecessor-version":[{"id":430,"href":"https:\/\/sfawbn.com\/home\/wp-json\/wp\/v2\/posts\/428\/revisions\/430"}],"wp:attachment":[{"href":"https:\/\/sfawbn.com\/home\/wp-json\/wp\/v2\/media?parent=428"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sfawbn.com\/home\/wp-json\/wp\/v2\/categories?post=428"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sfawbn.com\/home\/wp-json\/wp\/v2\/tags?post=428"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}