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This Inflation Will Be Tough to Get under Control

By Wolf Richter

It’s like a dam broke. And now higher interest rates and mortgage rates for much longer, with lower asset prices, as the Everything Bubble gets repriced.

So now the media suddenly focuses on this big problem I’ve been screaming about for many months: Inflation has shifted from energy and from goods tangled up in supply-chain issues to services where there are no supply chain issues.

A great example is insurance. I guarantee you that there is an unlimited supply of insurance, and yet health insurance costs spiked by 24% over the 12-month period, and auto insurance jumped by 9%.

It’s small stuff too. I just got a 20% increase on my broadband service that I subscribed to a year ago to replace Comcast, which had doubled its monthly fee a year earlier.

Other service prices jumped too. Motor-vehicle maintenance and repair jumped 9%, rents are spiking, and all kinds of service providers are jacking up their prices, and consumers are paying them.


That’s services inflation. And most of it is unrelated to energy and supply chains.

Yet gasoline prices have plunged from their highs in June, and many supply-chain issues that drove up prices of some goods have been resolved, and lots of commodities prices have come way down.

So now we’re dealing with inflation in services. This type of inflation means that something has seriously changed in the economy, and how the participants in that economy – so that’s consumers, businesses, and governments – are reacting to price increases. And how they’re reacting is that they’re paying those price increases.

Businesses are paying them because they know they can pass them on to their customers. Consumers are paying them because they’re getting raises, and they’re still flush with cash from all the pandemic money, from the PPP loans, the mortgage payments and rental payments they didn’t have to make, and from the gains in real estate and from the cash-out refi last year, and from the gains in stocks and cryptos, though those gains have started to dissipate.

And governments at all levels sit on huge amounts of pandemic-era cash, and this cash is getting spent, and so wholesale prices go up and businesses pay them, and consumer prices go up, and people pay them. And it happened suddenly, starting nearly two years ago.

For many years, central banks have engaged in massive amounts of money printing and interest rate repression. The Bank of Japan started this over two decades ago, and it bought up a big portion of the government’s debt, and it repressed interest rates to zero, and in recent years below zero. It got away with it for years, and there was essentially no consumer price inflation.

And then during the Financial Crisis, starting late 2008, the Federal Reserve in the US started printing large amounts of money and it repressed short-term interest rates to zero, in order to bail out the bondholders and stockholders of the banks, and to inflate asset prices in general, to inflate stock prices, and bond prices, and real estate prices. And that didn’t trigger a big wave of consumer price inflation either.

And when the European Central Bank saw that neither the Bank of Japan’s money printing, nor the Federal Reserve’s money printing triggered consumer price inflation, but just asset price inflation, it too jumped into the game and printed huge amounts of money and repressed interest rates to zero, and then below zero.

And central banks of smaller countries were doing it, and just about everyone in the developed world was doing it…..

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Continue reading this article at Wolf Street.

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Are you fed up? Are you worried that America in rapidly sliding into a neo-Marxist state by the radical left in control of Washington with historically narrow majorities in the U.S. House and Senate and an Executive controlled by unnamed far leftists in place of a clinically incompetent President Biden? They are desperate to keep power and complete their radical progressive agenda that will change America and our liberty forever.

Americans just witnessed the passage of the Inflation Reduction Act of 2022 without one Republican vote in the U.S. Senate and House (just as Obamacare was passed in 2010). The IRS  will be hiring 87,000 new agents, many armed, to terrorize American taxpayers.

Americans witnessed the FBI raid at the Trump Mar-A-Lago home and property of President Trump, truly a first in all of American history. We know what that is about. 

It is undeniable that the Democrat Party and the administrative state (the executive branches of the DOJ, FBI, IRS, et al) are clear and present dangers to our Republic and our liberty as they increasingly veer further away from the rule of law and the Constitution. What is the solution? At this critical juncture, there is only one action we can all take.

The only viable and timely solution at this critical point is to vote – yes, vote correctly and smartly to retake the U.S. House and Senate on November 8th and to prepare the way to retake the White House in two years. Vote and help everyone you know to vote. Please click the TAKE ACTION link below – we must vote correctly and in great numbers to be sure our votes are counted to diminish the potential for the left to rig and steal the midterms and the 2024 elections as they are clearly intending to do after their success in 2020.