- 1. The 5 year inflation break even hits 3%! Far above the 2% Federal Reserve objective. The markets are challenging the Fed’s commitment to its inflation target. So why the extreme policy setting? The chart above shows that the gap between Fed Funds and the CPI is now even wider than it was in the 1970s. This does not count the massive levels of QE in place, or record fiscal stimulus. How can the Fed’s stated objective make any sense? See below.
- 2. “In spite of what they say, governments will do nothing about inflation.” The rhetoric about “transitory” inflation remains, both in governments, who are unwilling to reduce massive spending, and in central banks, who are caught between a rock and a hard place, as they have to monetize soaring deficits from highly indebted governments and at the same time defend their strategy of “price stability.” Between those two, guess what they have decided to opt for? Yes, keep printing and say some day it will pass. https://mises.org/wire/governments-love-inflation-and-they-wont-do-anything-stop-it
- 3. What P&G Said about Soaring Costs, Supply Chain Woes, Inflation, and Trying to Keep Shelves Stocked.”CFO Andre Schulten explained how the company had to jump through hoops, trying to keep the shelves stocked, including by limiting how much some retailers can buy to prevent hoarding. He complained about driver shortages. “We do not anticipate any easing of costs,” he said.” https://wolfstreet.com/2021/10/19/inflation-not-a-free-ride-pgs-profit-fell-despite-price-hikes-as-costs-soared-more-price-hikes-coming/
- 4. Manufacturing slowdown likely around the corner.https://www.isabelnet.com/u-s-ism-manufacturing-vs-philadelphia-fed-leading-lagging-parts-leading-indicator/. Eventually prices will impact demand and the growth cycle will turn and there are already signs this is in the pipeline with a 10 month lag.
- 5. My Money Show Presentation on Tuesday October 19 explains the Fed’s inflation predicament and likely Quad 2 reflation in Q4 2021. Later in the week, Bank stocks and the S&P 500 made new all time highs. The reflation cycle may continue to run longer than many expect given the scale of ongoing intervention, but don’t forget the cycle.