Tag: inflation

Inflation and Energy Crisis Barreling Towards Each Other

Stansberry Research – August 24, 2022

The following content is sponsored content by Stansberry Research.

The last time we had an energy crisis coupled with inflation (like we have right now) was the 1970s.

Back then, President Lyndon Johnson had begun massive spending and took on huge budget deficits to pay for the Vietnam war and his “Great Society” benefits: Medicare, Medicaid, Head Start, urban renewal, environmental issues, and new immigration policies, just to name a few.

Sure sounds a lot like today, doesn’t it?

Then…OPEC banned oil exports to the U.S. in October of 1973.

Gas prices quickly shot up 37 percent. Gas was rationed. Many stations ran out. Others locked up their pumps at night.

The ban on exporting oil to the U.S. lasted only five months—a tiny problem compared to what’s going on in the energy markets today—but by then the wheels of crisis were already in motion.

By 1974, inflation hit more than 11 percent, and the stock market (as measured by the Dow Jones Industrial Average) was plummeting.

After a few months, however, it seemed like the worst was over. Stocks soared about 48 percent starting in November of 1974.

But the bear market rally did not last.

It wasn’t long before stocks would collapse again, this time by more than 50 percent.

In total, this bear market would take the stock market down more than 72 percent.

Everyone wants to know what’s going to happen next in the markets and our economy. But few are looking at what happens historically when you pair inflation with an energy crisis—which is exactly what we are looking at right now.

Bill Bonner, co-founder of the world’s largest independent financial research firm, successful entrepreneur, owner of real estate on four continents, and business interests across the globe in over 12 countries, has prepared an analysis looking at the history and parallels of today in a unique forward-facing way.

In his nearly 50-year career, Bonner has made three big macroeconomic predictions.

Each one has ultimately turned out to be exactly right—although he was mocked each time.

And now, he’s making what he calls his: “Fourth and Final Prediction.”

It’s about two enormous trends (inflation and an energy crisis), which are barreling towards each other in America, like two runaway freight trains on the same track.

Bonner says: “The collision of these two inevitable trends will bring about some of the most difficult years in American history.”

https://www.breitbart.com

Global economy on the brink of recession as investors are now less tolerant of monetary policy tightening

Strange Sounds – May 20, 2022

The global economy is “teetering on the brink of recession” as the war in Ukraine, Covid-19 lock downs in China and a hawkish US Federal Reserve weigh on activity worldwide, the Institute of International Finance said in a report.

In its latest forecast, the IIF estimates global gross domestic product to grow 2.2 per cent this year, with activities slowing to 0.5 per cent in the fourth quarter. The Euro area as well as emerging markets, excluding China, are anticipated to go into a recession by the end of the year.

“Since the statistical carryover from 2021 is 2.3 per cent, this is a de facto flatlining of global GDP,” the report said.

The IIF’s estimates are below the latest prediction from the International Monetary Fund, which has also lowered its growth forecast this year, due to the Ukraine war and inflation stoked by soaring commodity prices.

The IMF projects global growth at 3.6 per cent this year and next, down 0.8 and 0.2 percentage points from its January forecast, respectively.

With the possibility of a recession, market regulators must approach policy normalisation more cautiously, the IIF said.

“In the past, rising uncertainty and mounting recession risk have had important effects on investor psychology, making markets less tolerant of monetary policy tightening that is seen as no longer warranted,” the institute said.

It cited the Fed’s last rate hiking cycle in December 2018, which it was forced to end abruptly after the S&P 500 index fell sharply. Markets judged that hike to be “unwarranted”, given the escalating trade war between the US and China at the time, the report said.

https://strangesounds.org

US Inflation Soared 7.5 Percent Over Past 12 Months, Biggest Spike Since 1982

Newsmax – February 10, 2022

Inflation soared over the past year at its highest rate in four decades, hammering America’s consumers, wiping out pay raises and reinforcing the Federal Reserve’s decision to begin raising borrowing rates across the economy.

The Labor Department said Thursday that consumer prices jumped 7.5% last month compared with 12 months earlier, the steepest year-over-year increase since February 1982. Shortages of supplies and workers, heavy doses of federal aid, ultra-low interest rates and robust consumer spending combined to send inflation accelerating in the past year.

When measured from December to January, inflation was 0.6%, the same as the previous month and more than economists had expected. Prices had risen 0.7% from October to November and 0.9% from September to October.

Inflation to Continue

There are few signs that inflation will slow significantly anytime soon. Most of the factors that have forced up prices since last spring remain in place: Wages are rising at the fastest pace in at least 20 years. Ports and warehouses are overwhelmed, with hundreds of workers at the ports of Los Angeles and Long Beach, the nation’s busiest, out sick last month. Many products and parts remain in short supply as a result.

The steady surge in prices has left many Americans less able to afford food, gas, rent, child care and other necessities. More broadly, inflation has emerged as the biggest risk factor for the economy and as a serious threat to President Joe Biden and congressional Democrats as midterm elections loom later this year

https://www.newsmax.com

In Early 2022, Prices Will Be Going Up 20 To 25 Percent On Thousands Of Different Products

– November 23, 2021

If you think that inflation is bad now, just wait until we get into early next year.  As you will see below, some of the biggest corporations in the entire country have just announced major price increases which will take effect during the first few months of 2022.  So if there are some things that you want to stock up on, you may want to do it now, because your money won’t stretch as far once we get a few months down the road.  I really wish that I had better news for you.  I really wish that I could tell you that prices are going to level off and that economic conditions will return to normal soon.  Unfortunately, the truth is that it appears that our problems will soon be accelerating.

Earlier today, I was stunned to learn that General Mills has announced that prices on “hundreds of items” will be jacked up dramatically in early 2022.  In some cases, prices “will go up by around 20%”…

General Mills (GIS) notified retail customers that it’s raising prices in mid-January on hundreds of items across dozens of brands. They include Annie’s, Progresso, Yoplait, Fruit Roll-Ups, Betty Crocker, Pillsbury, Cheerios, Cinnamon Toast Crunch, Lucky Charm’s, Wheaties, Reese’s Puffs, Trix and more, according to letters General Mills sent to at least one major regional wholesale supplier last week.

For some items, prices will go up by around 20% beginning next year.

Ouch.

When you go to the grocery store after the holiday season is over, get ready for a case of severe sticker shock.

Of course General Mills is not the only large corporation that will be doing this.

According to CNN, Tyson Foods, the Kraft Heinz Company, Procter & Gamble, and Kimberly Clark have all announced significant price increases for 2022…

General Mills’ plans are the latest evidence that rising prices won’t be going away anytime soon for some of the most recognizable food and household brands. The company is the latest consumer manufacturer to announce price hikes beginning next year, joining Tyson (TSN), Kraft Heinz (KHC), Mondelez (MDLZ), Procter & Gamble (PG), Kimberly Clark (KMB) and others.

In my entire lifetime, I have never seen anything like this.

https://theeconomiccollapseblog.com

The Inflation Train Is Still Gaining Speed

Peter Reagan – September 2021

Federal Reserve Chairman Powell and other members of the Fed have been using the term “transitory” to downplay the threat that the last 16 months of skyrocketing inflation would last.

But inflation has been sharply on the rise since March 2020, with only a minor pause toward the end of last year before rising even more sharply since January 2021. Two Fed officials dissented in June of this year, but Powell’s money-printing habit hasn’t slowed.

The “light at the end of the tunnel” for the Fed? A miniscule .1% (one tenth of one percent) down tick in the official monthly inflation report this August.

You can almost hear the relief in the Fed’s chatter… “See, we were right! It was only transitory inflation, and it’s already going down! There’s nothing to see here, move along, buy more stocks.”

Don’t crack open the champagne just yet.

Unfortunately for us, the Fed’s optimism seems misplaced. That 0.1% reduction in monthly official inflation leaves us with a 5.3% annual inflation rate, more than 2 1/2 times higher than the Fed’s official inflation target.

And if you think everyday folks have it rough, small businesses have taken a major hit:

Inflation for businesses reached a year-over-year rate of 8.3% — the metric’s highest level since at least 2010.

On top of that, consumers are waking up to the reality that inflation won’t be “transitory,” but instead will likely stick around for a few years.

https://www.newsmax.com

This “Temporary” Inflation Is Turning into an Inflation Spiral

Wolf Richter- July 11, 2021

This year, inflation blasted off with a vengeance, and the last four months have seen the hottest pace of inflation since the 1980s.

The consumer price index – the CPI – rose 5% year-over-year for May. The June reading will come out in a couple of days [update: June CPI came in at 5.4%]. 5% of annual inflation is bad enough. But the pace of inflation over the past four months has been much higher, clocking in at over 8% annualized.

Surely, some inflation measures will tick down in the near future, giving everyone false hopes, before rising again. The first bout of inflation always looks temporary. But during those first bouts of inflation, that’s when the triggers of “persistent” inflation – namely the inflationary mindset and inflation expectations – are being unleashed.

So now the Fed keeps repeating time after time that this is temporary and that it will go away on its own because it was caused by temporary factors, namely a demand shock that occurred because the government spread $5 trillion in borrowed stimulus money since March last year; and because the Fed printed $4 trillion over the same period and repressed interest rates to 0%.

This moolah stimulated consumption, in a huge way, and it caused a historic spike in demand for goods, and there are now cascading shortages from ammo to semiconductors, made worse by container shortages and transportation bottlenecks.

But the fiscal and monetary stimuli are still ongoing. The government and the Fed still have the foot fully on the accelerator.

https://wolfstreet.com