Joe Biden may be celebrating his historic achievement in reaching an inflationary milestone previously set by Jimmy Carter, but the working class is paying the price for their economic stupidity.

The Bureau of Labor Statistics releases the November inflation rate today [DATA HERE] showing another rise in the annualized rate of inflation of 6.8 percent.  As you review the data, ask yourself this question: ‘Is there anything in the current economic landscape to indicate this is going to stop?’  The honest answer is no.  Here’s why…

As the BLS accurately (albeit briefly) notes, their inflation data reflects the cumulative increases in costs of products and services at all stages in the supply chain.  Raw materials cost more (extraction, regulation impact), processing costs more (energy impact), transport costs more (fuel impact), final goods assembly costs more and handling costs more.  From field-to-fork or mining-to-showcase, the total cost to create stuff costs more. [AP Interactive Chart]

Yes, the inflation data is backward looking. Meaning, it is looking back toward the previous period to compare costs.  However, despite the White House protestations to the contrary, that’s not a good thing, because it is going to get worse.

The contracted price for goods delivered (depending on sector) are net terms in 30, 60 or 90 days.  Meaning, the purchase price on final goods wholesalers are receiving now, were agreed upon months ago.  Those terms for current arriving goods are no longer valid.  The new terms (purchase orders) carry higher costs, and as an outcome higher prices to consumers are still coming.

The AP chart above shows the ascending spike in inflation overall.   Do you see that little plateau (mid spike)?  That’s June and July of this year, when we noticed the economy overall appeared to have stalled out.  As we highlighted yesterday {Go Deep}, that brief plateau corresponds with a gear change internally in the macro economy as productivity dropped by 5% very quickly in the third quarter.

Immediately following that two month plateau around 5%, the next few months of data showed that American consumers, writ large, were reacting to inflation by changing their spending habits.  That’s when future contracts for new housing starts stalled out.  In the next few months, up to today, all the data indicates working class U.S. consumers are hunkering down with less disposable income and prioritizing spending on essentials: housing, rent, gasoline, food.  All else is less than.

In the service sector, specifically hospitality and venue employment, overall demand for services slowed, but the employment data -showing the contraction- remained hidden, because we were climbing out of the COVID lockdown hole.   It appeared the service sector was gaining back jobs; but the backward to last year comparison was clouding an actual slowdown in services, because the data was comparing itself to 2020 when services were shut down.  Demand for services was down, but we couldn’t really see it.

All of this inflation is being driven by policy.  •[1] Energy policy (oil, gas leases nullified & pipelines cancelled) in combination with regulations targeting environmental impacts (CA ports emissions rules) is driving up energy costs. CORE inflation results from this. •[2] Fiscal policy by White House and legislature has been spending like drunken sailors, and that adds to a storm of •[3] monetary policy, with the Fed buying back the debt created by spending, and as a consequence devaluing the dollar currency.

The cost of exporting products is less, because China and the Euro benefit from lower U.S. dollar values.  However, more export of raw materials means higher prices domestically in what little remains of the supply/demand influence.  The multinationals are making out like bandits, Wall Street is happy, and the middle class of America is once again a victim of economic policy.

First, the DC politicians delivered the “rust belt” to us as an outcome of their favoring Wall Street over Main Street, and now they are wiping out our checking accounts with massive inflation.  Remember the oft repeated -and infuriating- catch phrase, “The U.S. is a service driven economy?“, said by both wings of the UniParty?   Well, put another way… first they off-shored our jobs, now they off-shore our wealth.   This is not an accidental outcome of flawed policy, they are doing this intentionally.

We are being gutted from the inside.

You don’t accidentally stop pipelines, cancel oil leases, shut down refining capacity, change port regulations and then act surprised by saying: ‘whoopsie’ gasoline seems to be costing more?  Duh! It’s a feature not a flaw.   Many of the people behind Joe Biden are stupid, but they ain’t *THAT* stupid.  They know what they are doing, but they have to pretend not to know things in order to avoid the tar and feathers.

Table-1 gives us a good snapshot of how the sector specific prices are rising [data here]:

If you want to go even deeper into the categories, check out Table-2 HERE.

Final points….  This is backward looking data, and there’s nothing visible right now to give any optimism that prices will not continue rising yet again in the next few months.  Exactly the opposite is true.  There is visible evidence that prices will go up again in December, January and February based on the current situation.

If the Build Back Better legislation is passed, the current rate of inflation will jump even higher after February.  If it doesn’t pass, we may plateau again in March and April of 2022 as we did in June/July of this year.  However, prices will never drop back, because the devalued dollar status is permanent.

What will change this scenario is an actual drop on the demand side as U.S. consumers see their income values wiped out.   Unfortunately, that appears to be part of the policy agenda for the White House.  If they can reduce demand by making things unaffordable, they can claim victory over inflation and proclaim their economic policies a success.  The downside of their achieving success is we have nothing left, we’re broke.

 

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