Thursday, June 10, 2021

Bad numbers for consumer prices show that inflation is likely.

 

The Hill/Getty.

Bad numbers for consumer prices show that inflation is a real concern. The Hill. In the past year the consumer price index (CPI) went up 5%, which is the worst number since 2008. Minus the food and energy prices, which are more volatile, the CPI rose 3.8%. Most of this is due to high demand on the market and a shortage of goods, such as used cars, consumer goods. Republicans worry that the massive influx of cash due to the Coronavirus bailout and other government grants has caused inflation. 

My Comment:

I am no economists but even I can tell that prices are going up across the board, with gasoline, food and rent being the biggest problems. Gasoline is partially due to increased demand but I blame much of the rest on the Biden administration's crusade against cheap gas. They have canceled pipeline projects and canceled drilling and that has had the predictable result in rising prices. 

Food prices are going up too. Some of that was due to the JBS hack, but that was a temporary disruption, even without it prices were increasing. Food tends to be pretty variable and prices were probably messed up due to the long term effects of the pandemic. 

I do think that prices have gone up across the board. Everything seems more expensive these days, including lumber, rent and soda. Why is this happening? I think it's the predictable result of giving everyone thousands of dollars for free. The intent was to help people that needed to make rent and buy food, but pretty much everyone except the very rich got a ton of money from the government. A lot of people didn't use that money for rent or for paying bills, they bought all kinds of things they needed. 

Lumber is a good example of this as a ton of people decided to update their houses or build a new one. This has caused the cost of lumber to skyrocket and it hasn't come down now that the pandemic is mostly over. 

Real estate and rent has gone up too and I think we can safely blame this partially on Biden. I wrote yesterday about how big firms buying up real estate but that's only part of the picture. With the borders totally open now immigrants are flowing into the country and they almost always rent, increasing demand and then increasing prices. 

I don't know what can be done to reduce inflation. I think stopping spending like the money was free would be a good start. We should be cutting spending at this point instead of increasing it, we can't keep printing money if we expect inflation to slow down. Raising interest rates a bit might help things as well, they have been at historic lows for a long time. 

But I don't think that anything good will happen. I have zero faith in the Biden administration or congress to do anything to deal with this problem until it's way too late. I think the next couple of years are going to be extremely painful economically. 

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