When You Find Yourself in a Hole, Stop Digging
One Foot in the Gravy
When You Find Yourself in a Hole, Stop Digging
According to today’s Washington Post, prices rose 1.3% in June compared to May. That is an annualized rate of almost 16%, a frightening number. I am 74; the last time we had an annual inflation rate higher than that was before I was born, in 1946. The US is engaged in an orgy of value destruction, with no end in sight.
Producer Price Index
The Producer Price Index (PPI), a leading indicator, is up more than 16%. Drilling down into the Bureau of Labor Statistics data, this is worse than it appears. The increase in PPI for goods is three-and-one-half times the increase for services. The PPI for services is a rough proxy for what people are being paid, while the PPI for goods is a relatively accurate proxy for what people must buy with their paychecks. When the goods PPI is far above the services PPI, this means that any wage increases are being eaten by inflation.
Lower productivity
There is a way to counter the bad news, and that is with an increase in productivity, However, the bad news gets even worse. During the first quarter 2022, US GDP dropped by 0.4%, while employment rose. That is the definition of a drop in productivity. I understand that supply-side economics was a Reagan idea, and must be rejected because he was a Republican. Where the financial health of the nation is concerned, reversion to tribalism seems petty at best.
Plans for Yet More
Meanwhile, our President is sending tens of billions of dollars to Ukraine on a recurring basis with no reason to believe it will accomplish anything worthwhile. He is continuing to push for a $1.6 trillion forgiveness of student debt. Whether we can afford it or not isn’t the most important facet of that issue. It represents both a moral hazard and gross unfairness by requiring those who never went to college to pay for those who did.
When President Biden took office, the inflation rate was 1.4%. He denies that the trillions of dollars he has spent on giving teachers a two-year vacation, and sending OPM (Other People’s Money) to Democrat interest groups is the cause of inflation. As my favorite philosopher, Larry the Cable Guy, says, “You can’t fix stupid.” At least hand the damned shovel to somebody else.
The PPI says inflation will get worse. Sadly that means the Fed must really ramp up rates with recession becoming worse. Whether the inane policies adopted to combat the pandemic will receive adequate blame is unknown. The serious under-investment in fuels over the last several years plays a big part but Biden's new rules made a bad situation worse. We are ~ 1M BBls shy of 2019 production levels. Part of that was well slowdowns as the pandemic reduced demand but Biden rules has caused no money going to restart of production. Given growth since 2019 it's clear we are shy ~ 2-3M bbls. And Russian production diversion means little given fungibility; what India/China buys means more OPEC sales elsewhere. But Russian output has been reduced by skilled workers departing Russia.
The middle has been terribly squeezed. They can't put money aside at rates better than inflation so had to depend on the market. Watching our nest egg decline now hurts particularly needing to extract the required minimum withdrawal from a previous bigger pot - double whammy. Uncle gets a bigger share as well of that. But someday that fund will be gone as will I; hopefully me before the fund.
Yep. And how long can the Biden people get away with giving hundreds of billions of the citizens’ dollars to a country that I, and I suspect 349-million other Americans, do not care about in the least. It’s an outrage. It’s criminal, as far as good sense goes. Biden should be put away. He is further bankrupting the country (by taking clues from his dope-addled, stumblebum son on how to squander other people’s money). In Europe Biden is flirting with prospects of nuclear war. Any bets on which country will be nuked first? There are plenty to choose from.