Inflation nation

Consumer prices are on fire [Click to view in browser](. Good afternoon, We’re supposed to take the Fed at their word everything is fine. Inflation is under control. [tim curry dont panic GIF] It must be fun in that fantasy world. Because they certainly aren’t living in reality. The consumer price index (CPI), which measures inflation for retail goods, increased at its fastest pace since 2008. What happened Pent-up pandemic demand, coupled with supply chain disruptions hit the economy with a one-two whammy. And in case you’re rusty on economic theory, here’s what that looks like. This graph represents how supply and demand changes create inflation. - Supply is represented by the blue lines. - Demand is represented by the orange lines - E1 was our equilibrium price and quantity pre-pandemic. - E4 is our equilibrium price and quantity post-pandemic. When supply disruptions are represented by the shift in the blue line to the left. That moves the equilibrium of lower quantity and higher price represented by E2. Demand increases (pent-up) shift the orange demand line to the right. That moves the equilibrium to E3. When you combine the two, it puts us at a new equilibrium E4. What you’ll notice is that our new equilibrium is the same quantity but higher prices. If your mind can’t handle that, just keep this in mind: - Higher demand = higher prices - Lower supply = higher prices Breaking down the numbers Headline numbers came in at 4.2% over prior year versus estimates of 3.6%. Monthly gains landed at 0.8% versus 0.2% estimates. CPI excluding food and energy landed at 3% year over year and 0.9% month over month versus expectations of 2.3% and 0.3% respectively. Some of the biggest drivers year over year include: - Energy up 25% - Gasoline up 49.6% - Used cars and trucks up 21% (10% in April) - Transport services up 5.6% - Gas utility up 12.1% In fact, the only decline was medical care commodities of -1.7%. Otherwise, the lowest readings were food at home up 1.2% and apparel up 1.9%. We already know lumber prices are through the roof. And the shutdown of the Colonial Pipeline looks to create even more problems. Our hot take The Federal Reserve claims these inflationary pressures are transitory. Granted, some of that makes sense from the demand side. But, economics theory contains two components. And the Fed has zero control oversupply. We don’t think they fully appreciate the magnitude of the supply challenges. They seem to be fine allowing prices to rise. Yet, we’re the ones who bear the weight of their decisions. The Federal Reserve and the U.S. government need to rethink the way they approach the next two years. Otherwise, we’re in for higher prices and a stagnant market. With problems comes opportunity. And there’s no better way to spot them than staying informed. To that end, we collected articles from our publishers to help you identify what’s most important to you. 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Corn Prices Up Roughly 50% In 2021, Americans Brace For Years Of Horrific Food Inflation]( Our leaders are literally committing economic malpractice, and if most Americans truly understood what was going on they would be out in the streets protesting against it… [Read More]( [Pandemic Divergence: The Social and Economic Costs of Covid-19]( The long-term social and economic consequences of Covid-19 are uncertain. This column provides a preliminary assessment of the variation in costs across countries and regions, and suggests that developing economies will suffer the most lasting damage. [Read More]( [INFLATION SURGES to 13-Year High; 1000+ STATIONS RUN DRY; GAS TOPS $3/GALLON]( Inflation accelerated at its fastest pace in more than 12 years for April as the U.S. economic recovery kicked into gear and energy prices jumped higher, the Labor Department reported Wednesday. [Read More]( [Jason Burack: Central Banks Pulling Dollar Liquidity Out? 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The anti-pipeline crowd just received a lesson in the vital importance of pipelines to the economy and our well-being when hackers took the Colonial Pipeline, the country’s largest fuel pipeline, hostage causing gas shortages and panic. Now we are hearing complaints that ask the question, why are we so dependent on just one pipeline. [Read More]( You are subscribed to email updates from [InvestingChannel](. To stop receiving these emails, you may [unsubscribe]( now. InvestingChannel, Inc., P.O. Box 118 New York, NY 10018. Disclaimer: This is not investment advice. This InvestingChannel, Inc. newsletter is for information purposes only and opinion-based. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or against losses. 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