From Peter Reagan for Birch Gold Group
One thing is certain in these strange times: The rate of Bidenflation just doesn’t seem to be cooling off by any stretch of the imagination.
In fact, it’s likely to outlast Biden’s entire four-year presidential term.
Keeping an eye on the latest inflation rate is important because any lost purchasing power doesn’t come back once it’s been taken from you.
So let’s take a deeper look…
According to the latest official CPI update, consumer prices are starting to heat up yet again, much like they did between June-September of last year:
Over the last 12 months, the all items index increased 3.5 percent before seasonal adjustment.
The index for shelter rose in March, as did the index for gasoline. Combined, these two indexes contributed over half of the monthly increase in the index for all items. The energy index rose 1.1 percent over the month. The food index rose 0.1 percent in March. The food at home index was unchanged, while the food away from home index rose 0.3 percent over the month.
Prices for necessities like shelter, motor vehicle insurance, medical care, apparel, and personal care also increased. The only major categories that saw any notable relief from year-over-year price increases were vehicles and natural gas.
The situation remains dire even if you were to analyze the current rate of inflation like some media talking heads and economists do, when they report “it isn’t that bad.”
They pull off that trick by removing the items that every household in America needs from the calculation (things like food, energy, shelter, and rent).
According to a recent report, even that weaker measure of inflation is heating up:
Along with the overall inflation measure, economists also look at the core CPI, which excludes volatile food and energy prices, to find the true trend. The supercore gauge, which also excludes shelter and rent costs from its services reading, takes it even a step further. Fed officials say it is useful in the current climate as they see elevated housing inflation as a temporary problem and not as good a measure of underlying prices.
Supercore accelerated to a 4.8% pace year over year in March, the highest in 11 months.
The same Fed that predicted inflation would only be “transitory” in 2021 is now predicting that skyrocketing housing costs will only be a “temporary problem.”
Unfortunately for the Federal Reserve and the Biden Administration, overall inflation (including housing) is likely to stick around. Here’s one of many reasons why…
Upstream of consumer price inflation lies something called producer price inflation, which also increased “2.1% year-on-year in March 2024, the most since April 2023, after 1.6% rise in February.”
Here are a few other potential reasons inflation has been so persistent…
Why interest rate increases might not be enough
Like other large financial company executives, JPMorgan Chase CEO Jamie Dimon publishes an annual letter to shareholders.
Over at Schiff Sovereign, they offered their take on Dimon’s letter. It revealed a potential gap between what economists are thinking and what the future holds for inflation:
Dimon finds that there is “too much emphasis on short-term, monthly data and too little on long-term trends”, and he talks about inflation as a great example.
Economists and investors tend to be almost singularly focused on monthly inflation reports in an effort to divine if and when the Federal Reserve will cut interest rates.
They’re entirely missing the point, Dimon writes. Month by month, and even year by year, inflation numbers could vary wildly. But if you look at the big picture, you’ll see substantial evidence for future inflation.
Wolf Richter also reported on Dimon’s letter, and pointed out specific inflationary concerns:
- Ongoing government spending “…occurring in boom times – not as the result of a recession – and they have been supported by quantitative easing, which was never done before the great financial crisis”
- Remilitarization of the world (and the required budgets and expenditures)
- Restructuring of global trade
- Capital needs of the new green economy
- Rising healthcare costs as global populations age
- Possibly higher energy costs in the future due to a lack of investment in the energy grid and production facilities (drills, refineries and so on)
Wolf finished by sharing Dimon’s thoughts on how any future rate changes would affect the current pace of inflation:
Interest rates looking out a year or two may be predetermined by all of the factors I mentioned above. Small changes in interest rates today may have less impact on inflation in the future than many people believe.
Now, this is a very good point! Dimon’s pointing out that the Federal Reserve only has so much control over the economy – and that any number of other pressures, like those listed above, can drive prices higher regardless of the Fed’s interest rate policies.
After all, the Fed can’t control Congressional defense budgets, or upgrade the nation’s electrical grid. For all the time we spend on talking about Jerome Powell and his leadership of the Fed, he isn’t a magician.
Lots of talk above that refers to more spending, more expenditures, and more costs. Most of which the Federal Reserve simply can’t control! And all of them lead to higher prices.
Are your savings keeping up with the surging cost of living?
The U.S. economy could be heading for a dangerous tipping point, where Chairman Powell and the rest of the Fed are likely to get caught between a rock and a hard place.
The Fed might try raising rates again to continue easing inflation, while hopefully keeping better track of the real job market. But that could also cause a recession, and it probably won’t be the “soft landing” that media talking heads keep preaching about.
At this point, any rate cuts don’t appear like a good plan of action for the Fed, but who knows if they will change course under pressure from the current Administration?
Or the Fed could even try to “save it all” and potentially destroy the dollar in the process, like Bill Bonner reported at Daily Reckoning:
Will it be another “golden era” when the Clintons come back? Or a final, inflationary blowout bubble in the world’s markets? Or will it be the comeback of tougher times…like the stagflation of the pre-Volcker years?
The big question is probably this: can the Fed now save housing and the economy by destroying the dollar? We’re not sure, but we think that gold is probably the answer to at least one of those questions.
The good news is: Physical precious metals like gold and silver have historically provided a hedge against economic turmoil. They could be a good asset to consider, no matter what the Fed tries to do.
In fact, the price of gold has soared more than 25% since October of last year (as of April 11th, 2024). For an updated number, here’s the gold price today.
Are you and your family prepared for the tough times ahead? Would diversifying your savings with physical precious metals help? If so, we’re standing by to assist you.
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