Inflation: Nevermind or To the Extreme?

                                                           

Dances with Wolves and Mariah Carey.      August 27, 2021   Today's Top Stories From the Breitbart News Desk Dances with Wolves and Mariah Carey. Those were the Best Picture and Best New Artist award winners in 1991—the last time year-over-year consumer inflation ran as hot as it did in July. Vanilla Ice's debut album was topping the charts, but the cool kids were getting into a bunch of bands from Seattle. Consumer prices last month were up 4.2 percent compared to a year ago. That's the first time year-over-year inflation topped four percent since January and February of 1991. Core prices, which strip out volatile food and energy costs, were up 3.6 percent, also a thirty-year high. These figures come from the Commerce Department's Bureau of Economic Analysis, which produces the Personal Consumption Expenditures Price Index. That's the inflation gauge Fed officials use when targeting two percent inflation. They argue that the PCE is better than the more familiar Consumer Price Index published by the Department of Labor because PCE allows for substitutions between similar items when one of them becomes more expensive. Over time, the PCE index and CPI tend to move together, although CPI tends to show more inflation than PCE. If CPI were Vanilla Ice's To the Extreme, the PCE Price Index would be Nirvana's Nevermind. Speaking to the virtual Jackson Hole monetary policy powwow on Friday, Fed Chair Jerome Powell nodded to the high level of inflation but argued at length that inflation was likely to be transitory. "Inflation at these levels is, of course, a cause for concern," Powell said. "But that concern is tempered by a number of factors that suggest that these elevated readings are likely to prove temporary." So what are those factors? Narrow inflation: "The spike in inflation is so far largely the product of a relatively narrow group of goods and services that have been directly affected by the pandemic and the reopening of the economy." The test here will be whether measures such as the Dallas Fed's trimmed mean inflation gauge—which excludes prices making huge moves—rises much beyond the Fed's target. Moderating inflation in higher-inflation items: The prices of used cars, for example, are no longer rising at the staggering month-to-month levels seen early this summer. Wages: Powell said that wage gains have not been alarming so far—in fact, they're not keeping up with the cost of living—but warned that if "wage increases were to move materially and persistently above the levels of productivity gains and inflation, businesses would likely pass those increases on to customers, a process that could become the sort of 'wage-price spiral' seen at times in the past." Inflation expectations: Powell, like many Fed economists, is convinced that inflation is a self-fulfilling prophecy. This means that so long as people don't expect too much inflation, we're unlikely to get high inflation. The prevalence of global disinflationary forces over the past quarter-century: China's entrance into the global marketplace was a major disinflationary event because the Chinese produce much more than they consume, creating what Ben Bernanke called a "global savings glut." That had a massive deflationary effect that China basically exported to the rest of the world. Powell here seems to assume that this will continue. But what happens if it doesn't? Whether or not Powell convinced anyone, the market was convinced that Powell's speech was a sign that the Fed would not be in a rush to taper its bond purchases and that actual interest rate hikes are years off. So stocks jumped back to or at least near record highs. In the immortal words of Vanilla Ice, "Will it ever stop? Yo, I don't know." – Alex Marlow & John Carney Breitbart News Network     TOP STORY   Bidenflation: Consumer Prices Rise at Fastest Pace in 30 Years It's been more than thirty years since consumer inflation ran as hot as it did in July. Consumer prices were up 4.2 percent compared with July of 2021, according to the Personal Consumption Expenditures Price Index released Friday. That's the highest since January of 1991. Core prices, which strip out volatile food and energy costs, were up 3.6 percent, also a thirty-year high. Fed officials use the PCE price index when targeting two percent inflation. Fed officials have argued that the PCE is better than the more familiar Consumer Price Index published by the Department of Labor because PCE allows for substitutions between similar items when one of them becomes more expensive. Over time, the PCE index and CPI tend to move together, although CPI tends to show more inflation than PCE. [Click here for more]   IN OTHER STORIES... Bidenflation and Delta Crashed Consumer Sentiment in August U.S. consumer sentiment plummeted in early August and weakened even further in the latter half of the month as households struggled with inflation and the resurgence of coronavirus. The University of Michigan's consumer sentiment index fell to a near-decade low of 70.3, a 13.4 percent decline from July's 81.2, data released... [Click here for more]   Report: Eviction Moratorium Hurts Minority Landlords Disproportionately The U.S. Supreme Court ruled against President Joe Biden's moratorium on evictions on Thursday, and those who may be the most pleased with the ruling are minority landlords, according to an Urban Institute report. The report, conducted during the coronavirus pandemic, resurfaced on social media in the wake of the High Court's decision that held that it is "'virtually certain' that the landlords who claimed... [Click here for more]   Billionaire Fight: Elon Musk Quips that Jeff Bezos Retired from Amazon to Make Suing SpaceX a 'Full-Time Job' SpaceX founder Elon Musk has attacked fellow billionaire and Amazon founder Jeff Bezos over a number of complaints filed by Bezos' Blue Origin against SpaceX. According to Musk, Bezos retired from Amazon so he could make filing lawsuits against SpaceX his "full-time job." The Verge reports that Elon Musk has lashed out at Jeff Bezos following recent news of Bezos' space exploration company Blue Origin suing NASA over a contract awarded to SpaceX and a recent Amazon complaint relating to... [Click here for more] FOLLOW   Did you receive this email from a friend? Sign up to receive Breitbart Business Digest. T ©2021 Breitbart News 149 S. 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