When Will Inflation Peak? Sooner Or Later?

Short answer: We don’t know. I know I don’t know. I know that my natural gas bill for this past year was twice as high as last year, despite running a very efficient house and putting in new insulation. For people less efficient, that increase had to have hurt.

Yet the word on the economic watch radio segments that my wife listens to were assuring listeners that inflation would soon peak. I’m a skeptic—I think it’s just up shifting.

Karl Denninger begs to differ with the official narrative. After looking at the Consumer Price Index (CPI) he took a look at the Producer Price Index (PPI), and it was UGLY.

After the preliminaries, he concludes:

That March figure, annualized, is 18%.

The PPI covers goods and such not yet available to consumers; that is, in the process of production.  Therefore it is behind the CPI and the CPI will follow it as certainly as spring follows winter.

What's much worse are the intermediate unprocessed figures less food and energy; those were up 9.5% on the month and the 12-month run-rate is 40.8%!  This is not an anomaly; the last 12 months have seen these figures at 35% or better annually every single month and there is no evidence that it is coming back in.

The foods processed good figures are now sporting three straight months of 2% increases on the month which annualizes to 26.8% and ex-food and energy they're still sporting 10% annualized across the three month rolling average.

These numbers are nasty folks and they make a short-term significant decline in the CPI -- the so-called "inflation report" impossible.

The Fed has two choices: Stomp on this with much higher rates and very strong pulls of liquidity (e.g. balance sheet reduction) or the entire social fabric of the nation is at severe risk of collapse.

Here’s a short take from Don Surber. Superficially it’s about Ukraine, but it got me wondering about inflation:

ITEM 12: Clare Daly, a member of the EU parliament, dared to call for peace.

There's something about the Irish 🔥 pic.twitter.com/3d5SNBMLEI

— Sarah Abdallah (@sahouraxo) April 9, 2022

Bravo!

ITEM 13: Conservatives are sitting this one out, much to the chagrin of the Romney-Biden coalition.

Daly is right. The way to end the suffering in Ukraine is at the peace table. Sanctions don't work.

What caught my eye was the line about “conservatives are sitting this one out, much to the chagrin of the” Zhou regime.

Call me a conspiracy theorist—I won’t take offense. It occurred to me to wonder whether the explanation for this totally irrational war against Russia could be domestic politics. Why are Dems chagrined at conservatives sitting this one out? Clearly, they thought conservatives would be forced to become reflexive anti-Russia cheerleaders for Zhou, thus transforming, against all odds, a Dr. Demento into a popular war time Resident. Not happening. That would also have lent superficial credibility, no matter how threadbare, to the Putinflation narrative. That’s not happening, either. Could the war have been ginned up with those domestic agendas specifically in mind—to shore up a collapsing coup regime? Considering everything we’ve seen in recent years, who dares dismiss this as mere conspiracy theory?

And here I’ll paste in a comment that I wrote last night:

Based on the tenor of comments on this thread, I'd like to recommend two videos, each a little over an hour long.

1. John Mearshimer: "The Great Delusion: Liberal Dreams and International Realities."

This video is more wide ranging than the title suggests. Although M. proclaims himself a good liberal (Dems and GOPers are all liberals in this philosophical sense) he also provides a trenchant critique of liberalism/libertarianism--that, contrary to its origin narrative which is founded in the Wars of Religion, it's fundamentally hegemonistic and intolerant. Be patient, but the lecture moves right along. Mearshimer isn’t totally consistent, and his philosophy only takes him so far, but it will get you thinking about both grand strategy as well as the philosophical foundations of a good human society. Lecture lasts 52 minutes before questions.

2. Scott Ritter and The Battle of the Donbas

I found the portion from about 33:00 on to be especially good, because there he's beyond the current situation and talking about broader issues for the future of Europe and Russia. He has provocative things to say about a number of topics. Things to think about if you're interested in grand strategy.