Mirage Of ‘Lower Inflation’ Is Fooling Nobody

Inflation continues to consume our purchasing power, month after month. Here’s why just about everyone, including the Federal Reserve, is concerned…

Bullion.Directory precious metals analysis 24 May, 2024
By Peter Reagan
Financial Market Strategist at Birch Gold Group

Here are just a few examples of many:

• The Washington Post published a headline: “Inflation Eased in October 2023”
• The Wall Street Journal couldn’t help but claim that inflation easing meant “the Fed would start cutting rates,” back in November. (But they didn’t cut rates.)
• The AP claimed “more goods, workers, and housing” was “pushing inflation down” in November 2023. (But the inflation rate remained above 3.1%.)
• Just a couple of weeks ago, CNBC hurried to publish that April’s easing inflation rate was “providing some relief for consumers.”

But any small “victories” are equivalent to squeezing a fire hose so less water comes out. Unfortunately, the liquidity is still coming out at high pressure.

To use a different metaphor, inflation has been a raging fire since 2021, and every bit of government spending has fueled that fire while consumers have watched their hard-earned dollars burn up (most noticeably at the cash register).

You can see the reality of this on the official bar graph below. Also note how the supposedly “easing” rate of inflation over the last few months is still running higher than any rate from 2014-2020:

via TradingEconomics

According to Alpha News, Treasury Secretary Janet Yellen has even more bad news about the price increases that Americans have had to deal with for the last four years:

“Well, I think most Americans know that prices are not likely to fall,” Ms. Yellen replied. “It’s not the Fed’s objective to try to push the level of prices back to where they were.”

Fox News quoted Yellen’s warning that prices are going to stay right where they are. It’s a warning that doesn’t bode well for anyone who thinks Bidenomics is doing anything positive for the consumer:

“I don’t expect the level of prices to go down. Some prices will be higher than they were before the pandemic, and will stay higher,” Yellen said…

Except the Fed is supposed to maintain stable prices, according to its dual mandate. Otherwise, what is the point of having a centrally-controlled banking system?

Unfortunately, at this point, it appears the Fed is fighting a losing battle.

Why we don’t expect inflation to ease anytime soon

In a recent article, Mike Shedlock (Mish) provided a short explanation of why he thinks the current inflation rate is going to persist, whether Trump or Biden are re-elected in November.

The rather salient (and dire) point he explains succinctly, is this:

[…] the Fed assumes no recessions and the Fed assumes no matter what Congress does that it will hold inflation to two percent over the long term.

In other words, the Fed assumes that it is in control when history suggests that it isn’t. The Fed has never forecast a recession, nor has the Fed spotted one in real time.

The deficit is now over $34 trillion with debt held by the public at $27 trillion. Interest on the national debt is over $1 trillion. Money that would go for investment instead goes to creditors.

Neither party will fix deficit spending. Nor will the Fed.

That could explain why every time the media claims that Biden’s economy is “strong,” the polls say otherwise.

Two reasons Americans are sick of “Bidenomics”

Even though the current Administration continues to claim that “inflation is easing,” the reality is people think the economy is heading south.

This recent City Journal article summarized the situation:

“Americans aren’t happy with the economy. Around three-quarters of respondents to a recent Wall Street Journal poll said that they believed inflation had moved “in the wrong direction” over the last year. Similarly, the University of Michigan consumer sentiment index showed in early May that Americans feel their economic standing has declined through the first half of 2024.

These findings arrive despite inflation being lower than a year ago and well below its recent peak of 9 percent in 2022. Lower doesn’t mean solved, though. Inflation remains above the Federal Reserve Bank’s 2 percent target, and Americans continue to grapple with its effects. According to the University of Michigan index, they expect inflation to run at 3.5 percent for years to come.”

This recent article contained a handful of quotes from hard-working Americans that illustrate the real-world economic impact inflation is having on consumers. Here are a couple of examples:

“I keep hearing some things are coming down but I haven’t seen it,” Mary Joe, 66, told AFP.

“Things have been expensive in general for a while now,” said Gavi, a professional DJ and former US Marine Corps employee, who declined to give his last name. Gavi, who is vegan, says he has seen his weekly shop double, from around $100 a week to $200.

“I don’t really look at whether it’s the bread, the sugar or the milk,” he added. “I just see that it’s all very inflated.”

They’re not wrong…

Here is a look at the official price increases since 2021 on common food items, as reported by the Bureau of Labor Statistics:

But it’s not just food prices that remain high for most consumers, they have also been feeling the impact on their energy bills and at the pump, too:

So even if some prices are coming down from time to time, the overall impact of increasing prices over Biden’s first term is still a big burden for most Americans.

The silver lining to this dark economic cloud is this: You still have options if you’re planning to enjoy a comfortable retirement in your golden years.

Inflation fatigue? Now’s a good time to consider an alternative

Just because inflation is devouring your hard-earned dollars and wrecking your buying power doesn’t mean you are out of options.

We can’t control the Federal Reserve. There’s not much we can do about absurd government spending, or the spiraling national debt. That doesn’t mean we have to sit on our hands and watch our purchasing power go up in smoke.

The good news is physical precious metals like gold and silver have historically provided a reliably inflation-resistant store of value. That means you have an opportunity to protect your savings against the economic madness that hasn’t let up since 2021.

So I hope you’ll take a few minutes to learn more about the benefits of owning physical precious metals.

That way, you could put yourself in a better financial position for the future through proper diversification of your hard-earned assets.

This article was originally published here

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