The PPI and the coming inflationary conflagration

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The government measures many versions of inflation.  

Some argue that the different versions exist so the administration of the day can then dig up whenever the version propagates the desired political spin at the time.  I am not picking on the current administration mind you, as they all do it, and seemingly, a new version is dug up every week to better fit the problems of the day.  

The different types of inflation consist of various looks and adjustments, and I have covered many examples in the past here on Money Matters, both in print and on the radio show.  The latest statistics on inflation that has made me more than concerned is the Producer Price Index (known as the PPI). 

Whereas the Consumer Price Index (CPI) measures major changes in price on a variety of goods and services as it pertains to the consumer, the PPI takes a look at prices further up the food chain, which are the price changes experienced by those producing the goods we use.  

As such, inflationary increases at the producer level tell us not only what prices are increasing and at what rate, but what prices will do in the future as well.  

Since an increase in producer prices will have to be passed on to the consumer in the form of higher prices when goods hit store shelves, a persistent and severe PPI reading means things are getting worse, not better, and will continue to worsen.  

The latest configures measuring year over year, March 2021 to March 2022, reflect the worst increase on record, likely dating back some 250 years or more (records are spotty the further back we go).  

The inflation rate at the PPI level came in at an eye-popping 11.2%.  Producer price index figures started accelerating about a year ago, and are getting worse with each subsequent month, with March 2022 being the worst yet.  

The causes are many, including but not limited to egregious money printing by central banks everywhere to address the CoVid shutdowns, a reduction in oil drilling due to pressure from environmentalists, the war in Ukraine, and a shortage of available workers, all of which are affecting supply chains and commodity costs.  

Since monetary inflation (government deficit spending) is the most potent contributor to rising prices, and with even more spending proposals working their way through Washington, this analyst once again warns inflation is about to get a whole lot worse.  

No doubt, the American consumer is about to get a dose of inflation unparalleled in modern history, and the Feds (U.S. Federal Reserve) is going to have to take some pretty drastic steps to quell it.  

Since the inflationary fires are already lit and the inflationary inferno I and many other analysts have been warning about is about to explode, unfortunately for us, the Feds, as usual, are already well behind the eight ball.  

Since their track record has and continues to be woefully lacking in foresight, by the time they realize what is coming and how severe it will be, it will be a full-fledged inflationary conflagration, with dire circumstances for markets and our economy.  

This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, 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, 1997, SDSU, and California Insurance License #0L34249. His website is moneymanagementradio.com, and was recently voted Best Financial Advisor in Nevada County. (530) 559-1214

Marc Cuniberti

Marc Cuniberti hosts Money Matters Financial Radio and the Money Management Radio on KVMR FM and is carried on 67 stations nationwide. He is a financial columnist for the Union News and half a dozen newspaper publications. Marc holds a degree in Economics with Honors from San Diego State University. He is a registered financial advisor for Vantage Financial Group in Auburn, California. He holds California Insurance License 0L34249 and is the owner of BAP Inc. Insurance Services. He also owns Bay Area Process Inc., an engineering and services corporation. He is the founder and producer of the video series “Investing in Community” carried on NCTV and on hundreds of social media sites. He is also the founder and administrator of Money Matters, Investing in Community Video Series, Fire Insurance Information and Inquiries, Daily Laughter and Inspiration and Nevada City Peeps Facebook pages. He has appeared on NBC and ABC television and the subject of a host of TV documentaries for his financial insights, successfully calling the banking and real estate implosion of 2008 two years before it occurred. Marc holds a teaching certification in Tang Soo Do Korean martial arts and is a former big brother for the Big Brothers Big Sisters program in Nevada and Marin Counties. He is presently media consultant for the IFM Food Bank of Nevada County.