Highest Goods Inflation Since 1975

Breaking Down Today’s Inflation Report Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] Highest Goods Inflation Since 1975 - The experts actually get it right for once… - The highest goods inflation since 1975… - Real interest rates are much lower than you think… External Advertisement [Overheard at Apple’s Secret Meeting…]( [Read more here...]( A thousand people attended… NO CAMERAS were allowed! One invitee said every iPhone was wrapped with “tamper-proof stickers” to prevent photographs. At the event, Apple unveiled a device that “could eventually replace mobile phones.” Apple codenamed the device “N421”… But I call it “[iPhone Killer.]( To see how you could potentially profit from iPhone Killer… [Click Here Now]( Annapolis, Maryland January 12, 2022 [Brian Maher]Dear Reader, Today we are thunderstruck, lightningstruck, tonguestruck and dumbstruck… That is because — by a marvelous miracle of God — the economic experts have finally struck bull’s-eye. They had divined that December’s Consumer Price Index (CPI) would register 7% year over year. Word came issuing from the United States Department of Labor this morning. December’s CPI did in fact register 7% year over year. This 7% acceleration represents the greatest yearly consumer price inflation since 1982… 39 years distant. Reports CNBC: Inflation plowed ahead at its fastest 12-month pace in nearly 40 years during December, according to a closely watched gauge the Labor Department released Wednesday. The Consumer Price Index, a metric that measures costs across dozens of items, increased 7%, according to the department’s Bureau of Labor Statistics… Economists surveyed by Dow Jones had been expecting the gauge to increase 7% on an annual basis… The annual move was the fastest increase since June 1982 and comes amid a shortage of goods and workers and on the heels of unprecedented cash flowing through the U.S. economy from Congress and the Federal Reserve. Highest Goods Inflation Since 1975 Adds Mr. Brian Price, director of investment management at Commonwealth Financial Network: The December CPI report of a 7% increase over the last 12 months will be shocking for some investors as we haven’t seen a number that high [in nearly 40 years]. The cost of services increased 3.7% year over year. That is the highest rate since January 2007. The cost of goods — meantime — sped ahead 10.7% year over year — the liveliest pace since May 1975. Nearly 47 years! Let us now heap Pelion upon Ossa, let us sketch the scene in colors darker yet… We learn today that real average hourly earnings — that is, inflation-adjusted hourly earnings — decreased 2.4% year over year. The average man is going backward. Incidentally, this time last year 1% of small businesses claimed inflation represented their primary menace. One year later? Twenty-two percent of small businesses presently claim inflation represents their primary menace. Recommended Link [Are You Coming? (RSVP Requested)]( [Read more here...]( Multimillionaire Crypto Investor James Altucher is graciously extending an invitation for you to “virtually join” him at his private residence… So he can show you his #1 secret for making a fortune in today’s cryptocurrency market. Keep in mind: James recently grew a $25,000 investment into $3,125,000 over a 4-year period using almost the exact same investing strategy you’ll see in this free event. [Click Here To RSVP Now]( Stocks Shrugged How did the stock market take today’s news? It took the news standing up, rather easily. The Dow Jones gained 38 points on the day. The S&P 500 added 13, the Nasdaq Composite 34 points of its own. Inflation is widely considered a menace to stocks. Why weren’t stocks routed today? The aforesaid Mr. Price: However, this print was largely anticipated by many, and we can see that reaction in the bond market as longer-term interest rates are declining so far this morning. Long-term interest rates maintained their retreat clear through to closing whistle… The 10-year Treasury note yielded 1.74% at 8:30 a.m. Eastern. The identical 10-year Treasury note yielded 1.72% at 4:30 p.m. Eastern. But why? Barreling inflation generally sends bond yields jumping. A Refresher on Bonds Recall: Bond prices and bond yields represent opposing ends of a playground seesaw. If bond prices rise, bond yields fall. If bond prices fall, bond yields rise. Longer-term bonds are particularly sensitive to inflation’s corrosions. Inflation munches through the value of their bonds as a termite munches through spruce. Ten years of inflation will reduce their bonds to sawdust. Thus long-term bondholders demand a sort of insurance. That is, they demand higher bond yields to compensate them for the termite’s mischief, to keep ahead of inflation. The longer dated the bond, the more compensation they demand. A 10-year Treasury bond yielding 7% might reel you in, for example. But what if inflation averaged 8% across the same period? Inflation would gobble your 7% yield — and some more. You would require a 9% yield just to paddle ahead of inflation. Meantime, you may balk at a 10-year Treasury bond yielding 3%. But if inflation runs at 2%… then your 3% Treasury yields you 1%. A slender gain, yes. But you escape with a whole skin — and a bit of blubber into the bargain. Your 3% 10-year Treasury, under these terms, infinitely bests a 7% Treasury if inflation is 8%. With this brief reminder of bond dynamics in back of us… we must ask why 10-year Treasury yields went sliding down on today’s inflationary news. Recommended Link [Breaking: Ex-Pentagon Insider’s Disturbing Message for America]( [Read more here...]( He warned about the 2008 financial crisis a full two years in advance. He’s predicted everything from the coronavirus crash, the election of Donald Trump, Brexit, and more. And he just went live with a disturbing new warning for America. One that could have devastating consequences for anyone that’s still holding stocks, cryptocurrencies, or cash on [1/12/2022.]( If you have money in the markets, or you are worried about America’s financial future… You need to [heed his message]( now… because once this crisis hits it will already be too late. [Click Here To Learn More]( Since early December, 10-year yields had been galloping ahead at the briskest pace in 20 years. They attained a peak 1.78% on Jan. 10. These past two days they have lost their zeal. And so we wonder: Perhaps the bond market rejects the going wisdom that inflation will persist? Yet it is easier to ask the question than to answer the question. That is because the Federal Reserve’s massive mischief has distorted the bond market out of semblance. Its signals are not as true as they once were. Let us assume for the moment that inflation is up and doing, that it is up upon its legs and on the stretch. What is the Federal Reserve to do? The Lowest Real Rates Since the 1970s It cannot permit inflation to go amok — if only to salvage a rag of institutional self-respect. It is tasked, after all, with maintaining price stability. Seven of the last nine CPI reports have exceeded consensus estimates. People are beginning to talk. And so the central bank must act — appearances must be maintained. Prognosticators estimate the Federal Reserve will impose perhaps four rate increases this year. They would begin their work at a very, very low level — zero. But the true interest rate, the real rate, the inflation-adjusted rate, is far lower than zero. The real interest rate is the nominal interest rate, inflation subtracted. The federal funds rate has been riveted in at zero. Yet headline inflation goes along at 7%. Now go ahead and subtract the inflation rate from the nominal rate. You learn that the real federal funds rate is negative 7% (0% minus 7%). Not since the 1970s have real interest rates plunged to such impossible depths. Deutsche Bank’s Jim Reid, here summarized by Zero Hedge: The real fed funds rate in December was around minus 7%, which for reference is lower than at any point in the 1970s, when the lowest the fed funds rate got in real terms was around minus 5%. Negative interest rates? Here you have negative interest rates — and in heaps. Again, what will the Federal Reserve do? How many rate increases will it declare this year? How will it attack its balance sheet? We do not know. Yet this we do know: We are profoundly, resolutely, unequivocally with Rabobank’s Michael Every: “The Fed will be wrong, as usual. The only question is how bad the damage is as a result.” Regards, [Brian Maher] Brian Maher Managing Editor, The Daily Reckoning Editor’s note: Gold is the classic inflation hedge. But many people today are also [turning to cryptocurrencies to stay ahead of inflation and build their wealth.]( And if you’ve kicked yourself for not investing in cryptocurrency, fearing that you’ve missed out… [Then this might be the most important book you’ll ever read.]( It’s called The Big Book of Crypto. One of the world’s leading crypto experts argues this could be your chance to make up for missing out on Bitcoin. But don’t take his word for it. Reader Barry G. writes: I just snagged a copy of The Big Book of Crypto. Damn, you guys knocked it out of the park on this one. Why? Well, for starters, there is a hodgepodge of haphazard information all over the place about this often-confusing new industry. You guys have effectively cleaned up all this clutter, threw it in the trash and kept, and nicely organized, what really matters for anybody — newbie or seasoned crypto investor like me — to take action steps toward increasing their net worth in this binary ones-and-zeros digital economy that we are living in. For anyone who likes instantly usable information, especially the kind that is all consolidated under one contact medium, this book is a must-have. Matter of fact, I think it’s literally the only thing anybody really needs to understand the web 3.0 economy... and participate in its spectacular progress, for society overall, and the leverage it will provide to the reader personally. Again, bravo. And well done. Many other readers have given similar reviews. If you missed out on Bitcoin, or even if you didn’t miss out on Bitcoin, The Big Book of Crypto is the go-to guide for all things crypto… and how to profit from the revolution. [To claim your copy of this new blockbuster book, just click here.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Brian Maher][Brian Maher]( is the Daily Reckoning's Managing Editor. Before signing on to Agora Financial, he was an independent researcher and writer who covered economics, politics and international affairs. His work has appeared in the Asia Times and other news outlets around the world. He holds a Master's degree in Defense & Strategic Studies. Add feedback@dailyreckoning.com to your address book: [Whitelist us]( Additional Articles & Commentary: [Daily Reckoning Website]( Join the conversation! Follow us on social media: [Facebook]( [LinkedIn]( [Twitter]( [RSS Feed]( [YouTube]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press delivering daily email issues and advertisements. To end your Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [unsubscribe here.]( Please read our [Privacy Statement](. For any further comments or concerns please email us at feedback@dailyreckoning.com. If you are having trouble receiving your Daily Reckoning subscription, you can ensure its arrival in your mailbox [by whitelisting The Daily Reckoning.]( [Paradigm Press]© 2022 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Email Reference ID: 470DRED01