Enjoying the Inflation? Have Some More...

Producer Prices have risen to their highest level on record. Were you forwarded this email? [Sign-up to Rude Awakening here.]( [The Rude Awakening] August 12, 2022 [WEBSITE]( | [UNSUBSCRIBE]( Enjoying the Inflation? Have Some More… - Just when I was going to write on something else, the PPI came out. - The Producer Price Index measures what wholesalers pay for their products. - The PPI rose a whopping 9.8%, but that was less than last month. Recommended Link [Space Ad Subhead](link) “The largest, fastest change” we’ve seen… Tiger 21, a club of 800 ultra-rich investors, recently started hoarding cash. “We see no easy way out,” warns Bank of America. Jeff Bezos—the second richest man—recently dumped $4.3 billion in stock. What is going on? The alarm bells are ringing. And what you do NOW will determine your future. Click Here To Learn More Sean Ring Editor, Rude Awakening Happy Friday! I hope you have a wonderful weekend once you’ve had your cup of joe this morning. Yesterday morning, the PPI number came out. This Rude was first written on December 14, 2021. But it mirrors perfectly what’s going on today. I know newsletter writers are prone to hyperbole and exaggeration, but to say this PPI reading is a disaster is an understatement. I’ll go through the Producer Price Index, so you understand what it’s calculating. But more importantly, you must understand why it’s such an important reading. Of course, one can argue that its measurement is as flawed as the CPI’s. Let’s get into it. Wholesale Prices Matter to Consumers, Too First, let’s define wholesale prices. Wholesale prices are the prices producers get paid for their products. This is usually the “first commercial transaction” for the product. According to the Bureau of Labor Statistics, the same organization that calculates the CPI: The Producer Price Index is a family of indexes that measures the average change over time in the selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. This contrasts with other measures, such as the Consumer Price Index (CPI), that measures price change from the purchaser's perspective. For example, a woodworker makes miniature Trojan Horses in Athens. He may sell those Trojan Horses to his nephew, who runs a market stall next to the Acropolis in Athens. The price the nephew pays to his uncle per wooden horse is the “wholesale price.” The price an American tourist pays the nephew for a wooden horse is the “consumer price.” The rate of change of the wholesale price would factor into a PPI measure. Of course, this is a simple example. The PPI, like the CPI, considers many thousands of products. So What Happened? Since PPI measures the costs of producing goods, and commodity and food prices directly affect consumer pricing, PPI is a good indicator of inflationary pressures. Credit: [The Wall Street Journal]( Or, in this case, the PPI can be seen as a confirmation of heavy inflation already underway. Recommended Link [Space Ad Subhead](link) “The largest, fastest change” we’ve seen… Tiger 21, a club of 800 ultra-rich investors, recently started hoarding cash. “We see no easy way out,” warns Bank of America. Jeff Bezos—the second richest man—recently dumped $4.3 billion in stock. What is going on? The alarm bells are ringing. And what you do NOW will determine your future. Click Here To Learn More What Gives? That producer prices spiked isn’t much of a surprise. That they rocketed higher than consumer prices may rattle some. The usual culprits were to blame: food, energy, transportation, and warehousing. None of those is a big surprise. Sure, we’ve got supply chain issues. We also have a central bank financing most of the Treasury’s bond issuances and belaying raising rates too quickly to fight inflation. But wage inflation will be one thing the PPI will pick up sooner than the CPI. It costs more to hire people nowadays. And I think this trend will continue. Funnily enough, the Fight for $15 is not helping on this front. Before you think I’m against low-income earners getting pay raises, I’m not. But what I won’t do is buy a $5 cup of coffee when I can make it in my house for $0.50 per cup. Some will still go to Starbucks - [which now has its first union]( - a bit less. Maybe they’ll only buy two cups there instead of their usual 3 cups. Those flush with cash and love Starbucks will eat the rising cost. We can’t predict these sorts of things. But we can predict that producers will try to pass on some of these rising costs to consumers. Ultimately it’s up to consumers to decide whether they’ll continue to pay. In his masterpiece, [The Theory of Money and Credit]( Ludwig von Mises wrote the following: Governments without any hesitation have embarked upon vast inflation and government economists have proclaimed deficit spending and 'expansionist' monetary and credit management as the surest way towards prosperity, steady progress, and economic improvement. But the same governments and their henchmen have indicted business for the inevitable consequences of inflation. While advocating high prices and wage rates as a panacea and praising the Administration for having raised the “national income” (of course, expressed in terms of a depreciating currency) to an unprecedented height, they blamed private enterprise for charging outrageous prices and profiteering. While deliberately restricting the output of agricultural products in order to raise prices, statesmen have had the audacity to contend that capitalism creates scarcity and that but for the sinister machinations of big business there would be plenty of everything. And millions of voters have swallowed all this. There is need to realize that the economic policies of self-styled progressives cannot do without inflation. They cannot and never will accept a policy of sound money. They can abandon neither their policies of deficit spending nor the help their anti-capitalist propaganda receives from the inevitable consequences of inflation. It is true they talk about the necessity of doing away with inflation. But what they mean is not to end the policy of increasing the quantity of money in circulation but to establish price control, i.e. futile schemes to escape the emergency arising inevitably from their policies. Yes, Mises used the term “progressives” in 1953. They were a nuisance back then, too. The simple truth is that inflation not only raises prices and wages but it also raises costs as well. That’s why it’s ultimately a futile endeavor for the whole. The good news is that you’ll be driving a $500,000 car pretty soon. The bad news is that it’s going to be a Chevy Spark. Now forget that thought and have a fantastic weekend! All the best, Sean Ring Editor, Rude Awakening [ARCHIVE]( | [ABOUT]( | [CONTACT US]( Rude Awakening 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 Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [unsubscribe](. 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