Marc Cuniberti Yahoo Finance reported that the inflation rate is at 3.24%, compared to 3.70% last month and 7.75% last year.
The market seems to regard this as good news because not only does it appear inflation is coming down, but the belief is the Federal Reserve (FEDS) may have engineered the proverbial soft landing many thought impossible.
Soft landing means the economy remains somewhat stable as it recovers from an economic set back.
Seems a stretch to me that the worst inflation in 40 years will give itself up without severe pain being inflicted on the consumer and the economy.
Economic hiccups of much lesser degrees in the past few decades have given way to some serious economic downturns almost without exception.
It is for that and other reasons that I have a hard time swallowing the current inflationary fires will be able to be extinguished in short order without causing at least as serious a setback such as the Dotcom crisis, the 1987 stock meltdown, and the 2008 banking blowup caused.
Considering we shut down the entire world economies for over a year, printed up about 85% of the entire stock of U.S. dollars in existence in a mere three years addressing CoVid and saw recent inflation rates approaching the double digit inflation we saw way back in early 1980, I am supposed to believe all is well and there will be no pain in reversing it all?
The Bureau of Labor Statistics (BLS) is responsible for reporting inflation and have four different metrics for doing so.
Some argue that the BLS stats are suspect because they continue to change the way they measure inflation.
There is a long standing website, Shadowstats.com, run by a fellow named John Williams. Williams received an A.B. in Economics, cum laude, from Dartmouth College in 1971, and was awarded a M.B.A. also from Dartmouth. He has studied and reported on government statistics for over 30 years and I interviewed him way back in the early 2000’s. I found him to be extremely well spoken, highly intelligent and seemed to know his stuff better than anyone I have met over decades of studying economics.
According to Williams, there have been numerous changes to the way the BLS reports inflation and employment so their statistics are badly flawed. One of the most famous bond traders of our time, Mr. Bill Gross, goes so far as to call the Governments CPI inflation reports a “haute con job”.
In the latest reporting from Shadowstats, which figures inflation as it was calculated in the 1990’s, Williams pins the current inflation rate at about 12% with a 2023 high of 17%. A far cry from the stats out of the BLS.
Shadowstats of course has its detractors. Notable economists have cast a shadow of doubt on Shadowstats and its methodologies, but some argue what the BLS reports versus what the average Joe sees at the supermarkets are worlds apart.
The truth might lie somewhere in between the two reporting agencies, but no matter which agency you believe, the fact is that our ongoing inflation has already inflicted serious damage to consumer pocketbooks.
Even if one believes the BLS, the current 3.24% is adding to the 7.75% we have already seen. If you instead lean into Shadowstats, it is significantly worse.
Simply put, just because inflation may be slowing, it is still GROWING. Therefore if current prices are stressing your pocketbook, you just wait.
Although the markets dwell on an inflation figure that is decelerating, prices are still RISING.
In short, while stock proponents seem to be celebrating a slowing inflation rate with a brief rally in stocks, they ignore the fact that unless inflation growth stops all together and prices start going down, it will be even harder for many to make ends meet in the months that follow.
So who believes inflation will turn negative?
I see a blue moon rising.
Meanwhile, the stock market and the news media seem to be celebrating that prices, by whomever measures it, will be even higher next year.
I find that perplexing at best.
“Watching the markets so you don’t have to”
This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249 His insurance agency is BAP INC. insurance services. Email: [email protected]
