re: Runaway hyperinflation now at 3% YoY

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sharply higher insurance premiums

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I live in Baton Rouge and my homeowner's has went from $1,400 a year to $3,400 a year in only two years. My mortgage has gone up $200 a month and I consider myself lucky so far. A lot of people's mortgage is probably going up well over $500 a month.

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Longer term, hyperinflation may be in the cards.

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Hyperinflation is in the cards, but it's still a very long way off. The big culprit there will likely be debt servicing finally reaching a point where it takes up too much of revenues. As an example, debt servicing reportedly made up ~10% of revenues ($475B in servicing, $4.8T in total revenues).

The CBO has estimated that debt servicing will take over Medicaid and Defense spending as the 2nd single largest cost in federal spending within the next 10 years. IF that happens, it will likely mean there's simply too much debt momentum for Congress to pull back from. At that point, debt servicing becoming the biggest single expense would be likely. After that, hyperinflation would be inevitable as the idiots in Congress wouldn't be willing to sacrifice their political careers to make the spending cuts necessary to change course (just like they aren't willing to do so now).

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My company announced a reorg today.

Laying off about 370 jobs (50,000 employees).

Focus on cost cutting and expenses per the presser.

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There's a lot of that going around.

Employee Cost Index:


Labor Productivity:


The brunt of jobs which have been created this year have been service-related, mainly hospitality/leisure and government jobs. The former are generally low-paying jobs, the latter can be all over the place (and haven't dug into the average pay of the government jobs).

The LFPR has been flat since March as have both initial and continued jobless claims.

So new people aren't entering the job market, we're seeing story after story of hundreds (sometimes thousands) of people being laid off, yet jobless claims aren't rising (nor falling) yet Unemployment has both risen and fallen during this. Something is missing from this picture, unless that many of those being laid off are taking under-paying jobs, but then if that's the case then we should see retail sales dropping instead of growing (would love to see what the units amount is instead of dollar figure, but my Google-Fu isn't that advanced).

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Food is up more, energy is down nearly 17%, and the combined food and energy impacts are substantially LOWERING the headline inflation number. Also, food has moderated quite a bit year to date.

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As long as food and energy continues to moderate even if slightly above normal I’ll continue to easily adjust.

If gas and food are like March of last year I’m cussing people out

It’s called the birth-death assumption I’m trying to find literature I’ll post it if I find it

I’m not sure you can trust any of the numbers put out on CPI or PPI or unemployment etc etc. What I do trust is the eye test and it seems as though most items purchased from food to homes to vehicles and other consumables are up around 30% from the end of 2019. That’s a large increase over that time. I also think the wage increases we’ve been told are happening have occurred mostly in the lower economic sector contributing to the increases mentioned above. I’m all for people making more money but a person should be paid what they’re worth. The trophy for everyone sentiment is the same thing we’ve done with minimum wage workers. Perhaps I’m wrong, but I would suspect most regular folks are depleting their savings and maximizing credit card debt.

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I’m not sure you can trust any of the numbers put out on CPI or PPI or unemployment etc etc. What I do trust is the eye test and it seems as though most items purchased from food to homes to vehicles and other consumables are up around 30% from the end of 2019.

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Hmm, so what you're saying is like a running yoy rate of 7 to 9% for over 3 years? Where do I sign up for your eye test monthly email?

SVOL?

WSJ: Measure It Differently And Inflation Is Behind Us

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If core in­fla­tion came in be­low 3%, the Fed­eral Re­serve would breathe a huge sigh of re­lief, stocks would head to the races and con­sumers could re­lax about the ris­ing cost of liv­ing. 

It isn’t merely a dream: Mea­sure U.S. price changes the way Eu­rope does, and in­fla­tion was al­ready there in May—and dropped fur­ther in June. Mea­sure them as the U.S. does, and on Wednes­day new fig­ures showed core in­fla­tion far higher, at 4.8% for June.

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The main rea­son is that Eu­rope’s mea­sure, known as HICP, doesn’t in­clude the imag­i­nary cost of what a home­owner would pay to rent their house, which makes up about a third of the U.S. core CPI. Known as “own­ers’ equiv­a­lent rent” or im­puted rent, the mea­sure has long had its crit­ics.

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I found this article interesting and can see the argument both ways. The author later points out that it would obviously be politically messy for the Fed to consider this way of looking at it now, even if they wanted to. But I’ve often thought about how many Americans homeowners are locked into low interest rate mortgages and thus, very much insulated from the housing cost component of inflation.