In a Nutshell: The Current Administration’s Inflation Is No Aberration

Capital Markets are still reeling from the shock of the recent 0.94% CPI increase. This jump was shocking! The last time CPI rose more was in June 2008, when oil spiked to $145 a barrel. Assuming this October inflation increase might be sustained for a year it would produce a disastrous 11.9% annual inflation increase!

Inflation is certainly looking anything but “transitory” after CPI figures released last Wednesday showed annualized consumer prices jumping 6.2%.  A fifth straight month with inflation higher than 5% also confirmed the fastest price increase since 1990.  While this growing inflation threat should cause worry in the general population, Wall Street appears to be discounting the effects.  Many continue to argue that the Fed won’t get too aggressive and inflation could moderate next year, while some think stocks could even benefit from inflation created increases in asset prices.
 
While the chattering class is still making the case that this round of inflation is transitory, they’re having a challenging time defending not addressing the problem. Ignoring the current CPI reading is especially troubling since the majority in Congress seems determined to create still more demand-side inflation by injecting another huge new dose of stimulus.  And, while the President keeps insisting that his Build Back Better bill will cure inflation, he is either very delusional or just overselling his extremely bad spending as well as economic system changing proposal.  While the already passed infrastructure bill should help ease some bottlenecks, it is also likely to stoke inflation (before possibly easing it longer term).
 
Out of necessity businesses are passing on higher costs to consumers, with 60% of small business owners raising prices in the previous 90 days (according to a November survey of 560 firms by Vistage Worldwide).  Companies are struggling to get materials and are delaying production, adding to demand pressures while a labor shortage is putting upward pressure on wages.  Some feel the need for a shift in U.S. economic strategy to jolt pandemic demand through unprecedented fiscal stimulus, while others say supply logjams are at the heart of the issue and only more targeted spending is needed to ease those problems.
 
“Inflation hurts American’s pocketbooks, and reversing this trend is a top priority for me. With the [infrastructure] bill we passed last week, and the steps we’re taking to reduce bottlenecks at home and abroad, we’re set to make significant progress,” President Biden said recently. “Very soon we’re gonna see the supply chain start catching up with demand, so not only will we see more record-breaking job growth, we’ll see lower prices, faster deliveries as well. This work is going to be critical as we implement the infrastructure bill and as we continue to build the economy from the bottom up and the middle out by passing the Build Back Better plan.” 
 
If you have hopes of Biden’s plans actually creating positive change you may also think the border crisis will work out, the Keystone Pipeline will reopen and America will soon become energy independent again.  You probably also hope that all of the other ridiculous action points this President is considering might be beneficial for all of us.
 
Fortunately inflation continues to worry West Virginia Sen. Joe Manchin, who has been warning of fiscal spending and serious price pressures since last summer.  Hopefully a few brave patriots will block the insane economic agenda of this White House.  “From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day,” tweeted Manchin, who must vote for the coming $1.75T social spending package if it has any chance of passing the Senate.
 
And, while differing opinions exist on the COVID vaccination issue, we all should be concerned when Biden states, “get vaccinated or lose your job”!  Has anyone heard him say get vaccinated or lose your welfare, or get the shots or lose your food stamps?  Seems this President has his priorities all wrong, again.  Why would Biden weaken our national and personal security by firing those who protect us, while ignoring others who are not vaccinated?  Hopefully Courts will block his vaccinate or be fired policy indefinitely.