Inflation Hits 13 Year High – With More To Come

In the greatest jump since the 2008 economic crash, consumer prices have hit inflation rates that have reached up to the highest point in 13 years. According to Newsmax, the consumer price index increased by 0.9% in June alone. That is a 5.4% increase from this time last year. 

Chief economic advisor at Brean Capital John Ryding said, “We are told the story is transitory but the increases are going faster and for longer. We just had a monthly increase that was about double what was expected.”

Following the release of the inflation data from the Labor Department and the Federal Reserve, treasury yields climbed up. Meanwhile, the dollar rose and S&P 500 futures fell. Household spending has increased due to stimulus over the past year. But businesses continue to face hardships completing orders due to labor and material shortages. With governments lifting pandemic restrictions, consumers are going out again and spending on purchases of travel and transportation. With this, prices on goods such as foods, gas and hard materials are continuing to rise. The cost of food away from home alone is at its highest point since 1981. On top of all of this, the cost of housing and shelter are experiencing the largest increases since 2005. 

Chairman of the Fed Jerome Powell says, “Bottlenecks, hiring difficulties and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect.”

Secretary of Treasury Janet Yellen and Jerome Powell both have high hopes that this inflation is only temporary. They believe it will pass in due time. Some disagree with that assessment though, like Steve Forbes, editor and chief of Forbes magazine. He was recently featured in a Fox News Business interview. 

Forbes says, “Inflation is here for a while, we’re getting the whirlwind of what was done last year and the year before. Even before covid, the Fed was printing too much money. They went on a binge last year, perhaps for understandable reasons, but they overdid it. And I think everyone has underestimated the huge disruptions of supply chain disruptions when we shut down the global economy. It’s not like a light switch. I think some people at the Fed, even if the chairman remains happily oblivious, are beginning to realize that the party is over.”

“This year the Fed has not created new money. Yes, they are buying 120 billion dollars of new bonds each month, but they are sterilizing it. They are withdrawing it from the banking system through a device called reverse repos, which just means they’re borrowing money. So it’s like taking a bucket of water, pouring it in one end of the pool, then going to the other end and taking the water out… in recent months from zero to 800 billion dollars. The Fed, I think, is realizing that bad things are coming and they are trying to find desperate ways to stem the leaks in the dam. But with all of those spending bills coming through, when they go through, watch out. The dam will break,” he continued during the interview discussing inflation.

Forbes was then asked what the best kind of stimulus would actually be. Forbes responded, “the traditional kind – no new taxes, no new spending, no new entitlements, no increasing the power and the intrusiveness of the IRS. And the Fed behaving itself. That would stimulate the economy, but this crowd in Washington doesn’t get it at all. They want to do just the opposite, perk the economy while we have these huge disruptions coming from bad monetary policy and what happened last year.”

Finally, Forbes was asked what happens if we do continue with the wrong type of stimulus. Forbes replied, “More rising prices. You’re going to get the kind of inflation that afflicted us in the 1970’s. Interest rates will go up whether the Federal Reserve likes it or not and it will be overwhelmed by the markets. That’s going to lead to huge political problems, not to mention national security problems. Bad for the world… as an economy that cannot manage itself, it seems to be going down instead of up and if it goes up, it’s for all of the wrong reasons – printing too much money… the consequences are going to be ugly.”