Let’s Talk Inflation, Post-CPI | Seeking Alpha

Discussion about this thing we call “inflation” after the January CPI report

A vast majority of people see inflation as rising prices, wages, and ‘pushed’ costs within the economy. In other words, to quote a line from Full Metal Jacket, “it’s a huge s**t sandwich, and we’re all gonna have to take a bite.”

Today, we are all, to varying degrees, taking bites out of the Fed’s excrement.

The headlines blare on about CPI, but the inflation problem was created by rapid increases in money supply. That was the mechanics of inflation’s creation, with too many newly printed currency units seeking out a finite number of assets. That is inflation. Not so much today’s ‘cost effects’ headlines. This, of course, is the legacy of our dear monetary leaders, over-schooled in Keynesian theories.

Here is the continuum of the Fed’s legacy, a steadily increasing (M2) money supply that not coincidentally apes the perma-increasing CPI over the long term; the most recent report for which caused Tuesday’s market uproar amid intact confidence in (and/or submission to) the great and powerful Fed.

See the little hook upward in M2 of late? Well, consider this input, which was sent to me by NFTRH subscriber and Austrian monetary expert Michael Pollaro back in January:

The implication is that the Fed is putting messages out of both sides of its mouth. On one side pretending to be stern and hawkish, and out of the other side ensuring that a precipitous decline in inflation does not manifest in an outright liquidity crisis (the other side of the boom/bust cycle that is the product of Keynesian economics gone too far).

Do you think that maybe there is an election year political angle in play?

Aside from the hype of the day, the trend continues to be disinflationary, benefiting the Biden administration currently in power with its Goldilocks overtones, while behind the curtain the wizardly Fed regulates and adjusts its knobs and levers to try to steer the process of ‘tightening lite’ through a tricky maze of rocks just beneath the surface.

As a side note, the Fed is on the surface apolitical, as the same Fed chief oversaw the creation of the inflationary bailout under Trump. Its actions have tended to benefit power, regardless of affiliation.

Here is the MoM view of the CPI situation. To see what a liquidity crisis looks like, cast your eyes on the 2020 situation. That was the trigger that sprang the Fed into (inflationary) action. Period. We called it – and the forthcoming inflation trades – back then in real-time and sure enough, inflationary effects, so despised and fretted over to this day, also manifested out of that inflationary action.

What action, you ask? Well, the action of M2’s panicked percentage change from the previous year.

So here we are with the CPI culprits being all the stuff lagging within the economy, long after the great and powerful Fed (of Oz) has apparently (but maybe not really) shifted its focus to inflation fighting. Personally, I have lucked out! I no longer need haircuts because I shave my faulty head of hair myself. Also, I got rid of my garbage contractor because they were such a pain in the ass, service wise, that going to the dump once a week is much easier (and way cheaper). I’m on easy street, I tell you!

All joking aside, this (January CPI components) is the stuff of lag. This is the dreck that clings to the economy years after the Fed rode to the rescue of asset owners by inflating the money supply in epic and historic fashion in 2020.

I am not going to lecture or screed on. You likely already know the deal if you stay away from mainstream (academic, political and otherwise) brainwashing and simply view the indications of the truth. It’s an election year. Much noise will emanate out of the media’s orifice, just as the Fed is discharging contradictory noises out of its orifice.

Central banks (with a big assist from governments’ fiscal actions) created the post-2020 inflation problem. Period. Now, as the Fed tries to clean up its huge share of it, not all is as it appears. Not in the headlines and not in the machinations behind the curtain. That goes for the government too, obviously.

Those in power will logically want to maintain the status quo (inflation easing in its trend) in the interim, rather than what will eventually follow (liquidation of the inflated excesses or a new, and more painful phase of inflationary effects). This may drag on until the election, but in my opinion, after November 5th all bets may be off.