Services inflation is out of control. The haircut that was 25 last July is now 35. The acupuncture session that was 42 last July is now 50. The deductible at the Chiropractor is now 20, last July it was 15. The $100 oil change is now $120. The list is endless.
It’s all crap. Actual inflation, the real destruction of purchasing power that people feel at the end of the month is running 8-12% per year. And has been since 2019.
Whether they are retired or not, 90% live on an income that is fixed. And the actual purchasing power of that income has been literally and figuratively obliterated over the past 5 years. The fact that the 15,000 Viking stove your wife covers is the same price as a year ago is irrelevant to the rest of us.
Interest rates need to go up. Not down. Govt measured inflation has now been above the 2% target for nearly 5 straight years. Every month of those years.
Oh. And BTW. The amended Fed Reserve Act of 1977 mandates “stable prices”. To every person with an IQ above 50 (except bureaucrats and academics) stable prices means zero. Not 2%
Powell should be fired. But not for his ‘failure’ to
Lower rates.
I respect your work. But you are not dealing in reality.
Depends on how inflation is measured. We cannot trust what the government says or what the goons at the Fed say. On my trip to the local Wallyville yesterday, the shelves are well stocked (all around the store) and thus the supply of goods appears to be buoyant.
I recall many saying that there will be no goods from China in the stores. However, food prices are still rising. I expect my rent to go up another 10% by the end of the year. Medical services sure aren't getting cheaper. Car repairs? Give me a break. Inflation strictly depends upon the level and type of goods and services you need and consume as an individual. There is NO one size fits all.
It is inevitable those goods will also increase in cost. Manufacturers cannot eat tariffs forever as their costs are also increasing. I believe no one really knows how many goods were shipped here and on the way before tariffs were imposed, so I suspect most things in the store are from that inventory. Once that is gone, watch the prices move up.
"The only way to outrun that is grow production faster"
It's not the only way but is a good way. Keeping interest rates elevated will crush demand which will lower inflation. If the FED lowers rates it will reignite inflation.
They really painted themes selves in a corner. Like someone going out and maxing there credit card, this has been years in the making and has been dumped in Trump's lap.
I voted for Trump 3 times, my biggest complaint on Trump is his hard on for low interest rates and cheap money. That cheap money crushes the poor and middle class, they are the ones who pay through inflation.
"In a recent interview with Larry Kudlow, Treasury Secretary Bessent claimed tariffs "cannot be inflationary."
Because unless you're printing money, when the price of one thing goes up the price of everything else goes down since people have less money to spend on the other stuff. "
Americans will be poorer, in other words. It is all theoretical for the rich like Bessent because their choices won't be affected. When prices go up, the effect for most Americans is no different than inflation. The Chinese make many items no one else can make as cheaply, so they can increase the price and Americans become poorer. Pretending other affected industries or businesses are going to cut prices anywhere near the price increases is an illusion.
Lastly, tariffs were never designed to bring in industry but to protect existing American industries. The 2018 examples do not work because those were not so broad or deep and didn't affect every country. We are also shooting ourselves in the foot. We have a trade surplus with Brazil, but this is likely to evaporate given Trump's idea of using tariffs to affect their internal political processes. Brazil will, no doubt start buying their goods and services elsewhere. Is this winning?
Peter, also just read in interesting article on the tariffs from a writer, Gerry O'Neill in Ireland that I follow as well who usually doesn't write about economics much. It has to do with the stockpiling of goods - "153% increase in Irish Exports to US indicate the end is nigh." - https://westawake.substack.com/p/153-increase-in-irish-exports-to
Interesting insight and angle that you don't always hear about in the tariff discussion.
It may be true that tariffs won't cause M2 to increase, driving an increase in CPI (a GENERAL increase in prices). But they certainly will cause specific prices to increase; that's their very purpose. So they distort the market. That's bad overall.
Tariffs also divert funds away from the market and to the gov't. Again, bad overall.
Net result is a worse economy and poorer Americans.
The only "way out" is drastic spending cuts, a la Milei. The rest is musical chairs.
Services inflation is out of control. The haircut that was 25 last July is now 35. The acupuncture session that was 42 last July is now 50. The deductible at the Chiropractor is now 20, last July it was 15. The $100 oil change is now $120. The list is endless.
It’s all crap. Actual inflation, the real destruction of purchasing power that people feel at the end of the month is running 8-12% per year. And has been since 2019.
Whether they are retired or not, 90% live on an income that is fixed. And the actual purchasing power of that income has been literally and figuratively obliterated over the past 5 years. The fact that the 15,000 Viking stove your wife covers is the same price as a year ago is irrelevant to the rest of us.
Interest rates need to go up. Not down. Govt measured inflation has now been above the 2% target for nearly 5 straight years. Every month of those years.
Oh. And BTW. The amended Fed Reserve Act of 1977 mandates “stable prices”. To every person with an IQ above 50 (except bureaucrats and academics) stable prices means zero. Not 2%
Powell should be fired. But not for his ‘failure’ to
Lower rates.
I respect your work. But you are not dealing in reality.
1000% "Interest rates need to go up. Not down."
Depends on how inflation is measured. We cannot trust what the government says or what the goons at the Fed say. On my trip to the local Wallyville yesterday, the shelves are well stocked (all around the store) and thus the supply of goods appears to be buoyant.
I recall many saying that there will be no goods from China in the stores. However, food prices are still rising. I expect my rent to go up another 10% by the end of the year. Medical services sure aren't getting cheaper. Car repairs? Give me a break. Inflation strictly depends upon the level and type of goods and services you need and consume as an individual. There is NO one size fits all.
It is inevitable those goods will also increase in cost. Manufacturers cannot eat tariffs forever as their costs are also increasing. I believe no one really knows how many goods were shipped here and on the way before tariffs were imposed, so I suspect most things in the store are from that inventory. Once that is gone, watch the prices move up.
"The only way to outrun that is grow production faster"
It's not the only way but is a good way. Keeping interest rates elevated will crush demand which will lower inflation. If the FED lowers rates it will reignite inflation.
They really painted themes selves in a corner. Like someone going out and maxing there credit card, this has been years in the making and has been dumped in Trump's lap.
I voted for Trump 3 times, my biggest complaint on Trump is his hard on for low interest rates and cheap money. That cheap money crushes the poor and middle class, they are the ones who pay through inflation.
"In a recent interview with Larry Kudlow, Treasury Secretary Bessent claimed tariffs "cannot be inflationary."
Because unless you're printing money, when the price of one thing goes up the price of everything else goes down since people have less money to spend on the other stuff. "
Americans will be poorer, in other words. It is all theoretical for the rich like Bessent because their choices won't be affected. When prices go up, the effect for most Americans is no different than inflation. The Chinese make many items no one else can make as cheaply, so they can increase the price and Americans become poorer. Pretending other affected industries or businesses are going to cut prices anywhere near the price increases is an illusion.
Lastly, tariffs were never designed to bring in industry but to protect existing American industries. The 2018 examples do not work because those were not so broad or deep and didn't affect every country. We are also shooting ourselves in the foot. We have a trade surplus with Brazil, but this is likely to evaporate given Trump's idea of using tariffs to affect their internal political processes. Brazil will, no doubt start buying their goods and services elsewhere. Is this winning?
Probably won't know the full effect until the 90 day pause end on July 31. Plus they seem to change all the time.
Peter, also just read in interesting article on the tariffs from a writer, Gerry O'Neill in Ireland that I follow as well who usually doesn't write about economics much. It has to do with the stockpiling of goods - "153% increase in Irish Exports to US indicate the end is nigh." - https://westawake.substack.com/p/153-increase-in-irish-exports-to
Interesting insight and angle that you don't always hear about in the tariff discussion.
Inflation v. Tariffs is the wrong framework..
It may be true that tariffs won't cause M2 to increase, driving an increase in CPI (a GENERAL increase in prices). But they certainly will cause specific prices to increase; that's their very purpose. So they distort the market. That's bad overall.
Tariffs also divert funds away from the market and to the gov't. Again, bad overall.
Net result is a worse economy and poorer Americans.
The only "way out" is drastic spending cuts, a la Milei. The rest is musical chairs.