The Fed Waited Too Long: Here Comes Inflation

EcoMatters - TMO ^ | 2-27-2015 | EcoMatters

[blam]

EcoMatters
February 26, 2015

CPI Core Shows Inflation The drop in energy prices, had the knee jerk reaction that we were in a deflationary spiral, again markets get many things wrong on first blush. The drop in energy prices is inflationary in the overall economy, and today`s CPI report showed what a sophisticated analysis would forecast regarding inflation and the role that low energy prices play in the overall inflation equation. We are going to have a transfer from the food and energy components which rely heavily on energy costs into the core inflation reading as consumers have more money in their pockets for true discretionary spending, and all these components` prices are going to rise in the CPI Inflation Index.

Wages, Wages, Wages

What should really be worrying for the Fed is that wages have been spiking under the radar for 2014, up ahead of the overall inflation metric, and leading the way on inflation, and 2015 has seen an even greater surge in wage inflation, again you might not want what you wish for when it actually comes to fruition, with wages surging the Fed now has no choice but to raise rates, and raise them fast!

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[trebb]

What's being destroyed is a permanent middle class that accumulates wealth. Those with government jobs and a few other fortunate sectors will have assets for middle class lives and comfortable retirement, but not anything that gets carried down to the next generation. Only the very wealthy and the very financially savvy will be able to that. That's all opinion. It's what I'm seeing happening as people deal with the new economic realities.

Your read is as good as any I have seen/thought up. Both my wife and I are retired and with retirements/SS and savings,we have enough to get us comfortably through our 80s, if nothing really bad happens, and have a bit to pass on. If half of what could happen comes to pass, we might end up broke and scrimping to not outlive our assets. Because of our age, we should be OK, but I weep for our kids/grand-kids if nothing changes to undo the malfeasance the Left keeps wreaking upon us.

[CommieCutter]

I’d have to find the book but that reads like the Amity Shlaes book from a few years ago.

[arthurus]

Inflation is increaase in the money supply. Only Period. Anything else has to carry a modifier like “price inflation.” Increase in economic activity is expansion, not inflation. It is not inflationary. If the money supply increases at a greater rate than the increase in goods and services which constitutes an expansion then there is inflation. By using the term “inflation”
to mean just anything that comes to mind it loses all meaning and there can be no sensible discussion of economic activity because everyone in the discussion will have a different meaning for the word. The only legitimate use of “inflation” is the term as used by the classical economists, Friedman, Hazlitt, Von Mises, etc. Other uses of the word tend to be political uses and do not reflect actual economic speech.