Some of us remember the high levels of inflation reached during the Carter Administration in the 1970s. Those who don't learn from experience repeat the mistaked of the past. The inflation rate in the United States is starting to tick upwards and may once again reach the extremely high inflation levels of the 1970s.
The official U.S. price inflation rate based on the Bureau of Labor Statistics (BLS)’s consumer price index (CPI) in the month of May on a year-over-year basis was 3.57%. This was well above the Fed’s informal inflation target of 1.5% to 2%.
The year-over-year increase in the Consumer Price Index has been moving upwards for several month as the following chart shows:
Year-over-Year
CPI Increase
May 2011 3.57%
April 2011 3.16%
March 2011 2.68%
February 2011 2.11%
January 2011 1.63%
December 2010 1.50%
November 2010 1.10%
Note that the official rate of price inflation has more than tripled over the past 6 months.
The National Inflation Association estimates the real rate of U.S. price inflation to currently be approximately 7.5% on a year-over-year basis. This is consistent with the Shadow Statistics inflation chart below.
Source: http://www.shadowstats.com/alternate_data/inflation-charts
Remember that the Fed’s core CPI, ignores food and energy prices. If you have been to the grocery store or the gas pump then you know that those prices have been increasing as well.
After yesterday's stock market dive I expect a dead cat bounce today. The unemployment news toady was "good" with only 414,000 new unemployment claims issued. That's down 16,000 from the week before. However the 4-week moving average has been constant at about 424,750.
Watch the money supply. During the inflation of the 1970’s, surges in money supply growth predicted surges in CPI inflation, with now what appears simplistically to be a 3-4 year lag. The long period of disinflation that began in the early 1980s was also correlated with changes in the money supply. Rising money supply may not be directly correlated with the CPI any more and so increases in the money supply don't tell where the inflation will show up. However, money supply increases can serve as an early warning system for when you need to start looking. For example, money will be chasing something, and it might not be the goods and services in the CPI basket. It might be financial assets . . . .
The official U.S. price inflation rate based on the Bureau of Labor Statistics (BLS)’s consumer price index (CPI) in the month of May on a year-over-year basis was 3.57%. This was well above the Fed’s informal inflation target of 1.5% to 2%.
The year-over-year increase in the Consumer Price Index has been moving upwards for several month as the following chart shows:
Year-over-Year
CPI Increase
May 2011 3.57%
April 2011 3.16%
March 2011 2.68%
February 2011 2.11%
January 2011 1.63%
December 2010 1.50%
November 2010 1.10%
Note that the official rate of price inflation has more than tripled over the past 6 months.
The National Inflation Association estimates the real rate of U.S. price inflation to currently be approximately 7.5% on a year-over-year basis. This is consistent with the Shadow Statistics inflation chart below.
Remember that the Fed’s core CPI, ignores food and energy prices. If you have been to the grocery store or the gas pump then you know that those prices have been increasing as well.
After yesterday's stock market dive I expect a dead cat bounce today. The unemployment news toady was "good" with only 414,000 new unemployment claims issued. That's down 16,000 from the week before. However the 4-week moving average has been constant at about 424,750.
Watch the money supply. During the inflation of the 1970’s, surges in money supply growth predicted surges in CPI inflation, with now what appears simplistically to be a 3-4 year lag. The long period of disinflation that began in the early 1980s was also correlated with changes in the money supply. Rising money supply may not be directly correlated with the CPI any more and so increases in the money supply don't tell where the inflation will show up. However, money supply increases can serve as an early warning system for when you need to start looking. For example, money will be chasing something, and it might not be the goods and services in the CPI basket. It might be financial assets . . . .
No comments:
Post a Comment