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The Inflation is Over Myth

The fake news media and financial bubblevision media have settled on their theme to promote any chance of the Democrats having a salvageable election:

Inflation is winding down, so invest in the markets and all is well.

Reality, however, is a totally different thing.

As I have been pointing out in the Atlanta Federal Reserve Flex/Sticky inflation indicator, there is no sign of inflation abating any time soon:

Higher for longer is the new reality for the moment.

Is this new falsehood promoted by the elites and their propaganda outlets something new?

No, it is a recycling of an old tactic that has been tried throughout history. For example, check out this January 1, 1976 New York Times headline:

1975: Start of Recovery, Easing of Inflation and U.S. Tax Cuts

That worked out swimmingly as everyone knows how that turned out by 1981. The decade of stagflation that was the 1970’s was full of stories, promotions, political nonsense and a Fed living in their own universe totally disconnected from the reality of the common citizen.

The CBO (Congressional Budget Office) report from June 30, 1975 clearly indicates that nothing has been learned from the mistakes of that era in the current Fed thinking. From page 7 of their report on Inflation and the Economy:

Expansionary policies by the Federal Reserve System make funds more available and interest rates lower. Businesses and households are thereby in­duced to spend more on both investment and consumption. This spending, like that in­duced by expansionary fiscal policy, is likely to increase both employment and prices, with the employment effect relatively large in a slack economy and the price effect relatively large in a tight economy.

The emphasis is mine as the truth is that the elites knew in the 1970’s that the expansionary policies would create inflation for longer yet they persisted in continuing to expand the money supply and spending in light of the warnings; just like both political parties and the Federal Reserve have done and continue to do now.

A question the Fed never answered under Chairman Arthur Burns nor the economic elites on Wall Street or Washington was why inflation never declined to normal, or nominal levels, after the end of the 1973-1975 recession. Why didn’t they answer the question?

Because they had no clue what they were doing after the United States left the hard peg of the gold standard. The chart of CPI-U calculated “old style” where actual consumable goods were priced illustrates the cycle of stagflationary recessions and blistering long duration inflation experienced during that era:

According to the media of the era and expert economists, inflation peaked more times than John Holmes in a grainy 8 mm film of the era.

And what is the American public hearing now(via CNBC)?

The Not Jim Cramer Hedge Fund hereby declares this:

Buy a shitload of gold and silver because if he says “peak inflation is here” then we are going to the fake CPI-U above 15% at light-speed. Hell beyond light-speed, at Plaid speed!

Of course reality is worse. Way, way back on April 13th of this year, Federal Reserve Governor Christopher Waller started the theme of “peak inflation” just like they did in the 1970’s (via CNBC):

The Federal Reserve, Wall Street, and desperate political elites all tried for a decade to talk down inflation with “Whip Inflation Now” and the proclamation that inflation had finally peaked over, and over, and over again. How did that work out?

The problem for financial bubblevision television, online pump and dumpers of equities, and the political economists within our elites is that they have zero, I repeat, ZERO, historical data to rely on for the inflationary disaster America and the Western economies have just embarked on.

For the sake of using historical data, let’s take a look at the 1968-1982 inflationary/stagflationary bear from hell:

The first two peaks in inflation during the 1970’s set in ahead of peaks in the US Treasury 10 year yield as displayed above.

Reflect on that graphic above as you ponder the next chart:

Think about it.

The United States has not experienced long duration inflation for over 40 years, yet suddenly “inflation is peaking” or “has peaked” is the mantra of the elites. The reality is that commodity prices fluctuate on demand and supply, just like inflation fluctuates and economic growth does also.

However, in the history of “modern” economics, no nation has ever assumed the role of manager of the world reserve currency, printed monetary reserves in excess of the annual GDP of that nation, nor deliberately used central bank policy to manipulate not just domestic, but global equity and credit markets. This entire system in its current state of evolution is nothing more than a modern variation of religious belief of “it can’t happen here” and “it’s different this time” with the official policy of the Central Banking Lord’s prayer “please God, tell me I didn’t fuck up.”

No expert, no Federal Reserve Governor, no Jim Cramer, Bob Cramer, or Cramer and Cramer can advise, predict or tell anyone what will happen next.

The best historical map however, which is all we have as a guide, is that we are in the early 1970’s but a thousand times worse. The era of the United States as the global superpower is over, and with that, the dominance over the financial systems which are owned by that superpower status.

Prepare for impact.

Oh, and prepare for a lot worse inflation as the United States is only in the first inning of what looks to become a nightmare which causes the global order to change as the global reserve currency begins to crash and burn as American assets are shunned in two thirds of the globe.

Is a “great reset” in the offing perhaps?

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  1. Graeme Wong Graeme Wong 07/05/2022

    Thoughts on Cleveland Fed’s inflation Nowcast? They’re showing 8.67% for June

    • John Galt John Galt Post author | 07/05/2022

      I prefer the Atlanta Fed methodology. 8.67% would not surprise me, but the BLS will massage the number slightly lower, IMHO, to a “reasonable” 8.2% reading. The reality is that we are still cooking in 1980 terms at a 18%+ rate.

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