Yesterday’s CPI report was good news, in the sense that it was lower than expected, which is obviously better than worse than expected. But I agree with this meme’s vibe, and don’t see any reason to celebrate based on the actual data.
▪️First, the CPI was up 0.4% in Oct, which was the same amount as Sept. Yet Sept was seen as “worse than expected” and terrible news. Meanwhile, the Aug CPI was flat and July was +0.1%, so if anything inflation is trending up in recent months, and 0.4% is a 5% annual rate, still high.
▪️Energy resumed its rise after 3 months of significant declines, up 1.8% in Oct. Energy’s decline was the primary reason for the recent slowing of inflation, but now seems unlikely to continue. If seems more likely that energy spikes again than that it falls.
▪️Shelter continues to climb, up 0.8% in Oct and 6.8% YoY, now a 40 year high. Remember, shelter makes up nearly 1/3 of the CPI, by far the biggest component, and it’s sticky. In the beginning of the inflation wave shelter actually kept numbers down, now it’s keeping them up.
▪️Even if housing prices come down, shelter could stay high due to higher interest rates and maintenance/material costs. Shelter is a function of the monthly payment, not just the value of the property.
▪️The major indexes that fell in price during Oct were used cars (-2.4%), energy services (-1.2%), apparel (-0.7%), medical care services (-0.6%) and airline fares (-1.1%). It seems doubtful these keep falling, but if shelter and energy keep climbing they must fall to keep inflation low.
▪️Despite record inflation, this past year saw the dollar strengthen considerably in relation to other currencies, as investors believed the Fed would aggressively raise rates to fight it. Thus, as bad as inflation has been, it was fighting a headwind of a strong dollar, keeping import prices down.
▪️If markets start thinking those high rates won’t materialize (which they’re currently indicating as the dollar index plunges) a weakening dollar would add a tailwind to inflation. Particularly since we import so many goods, a weaker dollar means we pay more for imported goods.
▪️Back in the 1970s, inflation went through a series of ups and downs, but was persistent. By 1974, it reached over 12%, but fell to just under 5% by 1976. This was short lived, though, and resumed its climb to 13% by 1979. Anyone cheering in 1974 was soon proven wrong.
▪️It’s naive to assume inflation will magically come down when the underlying fuel is still there. The Federal funds rate is still far below the inflation rate, and government spending is still running massive deficits in perpetuity. Declaring victory too soon ignores history and economics.
I first critiqued this terrible take by looking at how food has actually improved substantially. Even though I said the same could be done in every category, people said “you’re only doing food.” So let’s do air travel and see why it’s not gotten better, not worse.
▪️Aircraft have greatly improved. Just 15-20 years ago, many domestic routes (~15%) were flown by turboprops like the Brasilia, Dash 8 or Saab. Now, almost everything is in jets, and most aircraft have WiFi. Some even have Starlink, where you probably have faster WiFi than your home. Most major airlines offer dozens or hundreds of movies and shows to watch.
▪️Newer designs like the 787 have lower cabin altitudes and improved humidity, which make a huge difference in passenger comfort on long haul flights. The first/business class international market has gotten very competitive globally, with many carriers offering excellent service and amenities. Pods, suites, showers, etc. Coach still sucks but is dramatically cheaper ...
This is the complete opposite of an empirical fact. The right has now joined the left in being pessimistic about the modern world and completely unappreciative of the amazing abundance we now have. I’ll just focus on food here, but you could do it for almost every category.
▪️Fresh produce used to be available only in season. In the winter it was canned or frozen. People used to send fruit for Christmas gifts, it was that much of a luxury good. Now, you can get giant, sweet berries year around in every grocery store. Corn on the cob in February. Not to mention once rare items like dragon fruit, heirloom tomatoes or baby bok choy.
▪️If you didn’t live on the coast, seafood was either not available, frozen, or extremely expensive. If you lived in the Midwest and traveled to coastal locales you would quite literally be able to eat food you had never seen. Salmon has become much more abundant and accessible. You can get fresh ahi at Walmart today. Sushi and oyster bars exist everywhere ...
▪️This is a proposal that pertains only to graduate level nursing degrees, not undergraduate ones (which were never considered professional degrees). The proposal will have a 30-60 day public comment period next year, where groups can object, before the DoE will decide on it.
▪️This is about how much federal student loans someone can take out for a particular degree. The cap on graduate degrees is $100k ($20,500/yr), while a “professional degree” limit is $200k ($50k/yr).
▪️Under the new rule proposal, professional degrees include:
🔹Pharmacy
🔹Dentistry
🔹Veterinary medicine
🔹Chiropractic
🔹Law
🔹Medicine (including osteopathic medicine & podiatry)
🔹Optometry
🔹Theology
▪️The nursing degrees excluded are ones like master of science in nursing (MSN), doctor of nursing practice (DNP) and PhD in nursing. These degrees would be limited to $100k in federal student loans, like all other graduate degrees.
▪️These changes came from the One Big Beautiful Bill’s...
