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.
It’s funny to see the left use the same conspiratorial rhetoric as the right did a year ago regarding the jobs numbers being downwardly revised. So many on the right, who knew nothing of how the jobs numbers are calculated or why they revise them, were convinced the downward revisions were a conspiracy to help Biden win.
If people want to have a debate about the birth death model or the survey methods, ok, but that’s not what’s happening here. Most people are under the delusion that the BLS report is the govt reporting every job created and lost, and are thus easily swayed it’s rigged when it suits their political ends.
This is almost laughingly misleading, as it leaves out everything before the letter.
▪️After being repeatedly lampooned by the Smothers Brothers over Vietnam, Johnson finally had enough. One night at 3 am he called the head of CBS William Paley, demanding that he “get those bastards off my back.”
▪️Paley then asked the heads of CBS entertainment to get them to back off of LBJ. However, instead of backing off the Smothers Brothers doubled down, booking a folk musician performing “Waist Deep,” an anti-war song about a soldier being stuck in the mud while “the big fool says to push on,” clearly a dig at LBJ.
▪️At the last minute, CBS cut the song from the pre-taped show to the outrage of the Smothers. They continued to push the boundaries off and on for the rest of his presidency, with CBS sometimes cutting segments that they thought went too far. Basically, it was a soft form of censorship.
▪️It wasn’t until Johnson made his surprise announcement not to run in 1968 ...
