Producer Prices Rise 20%!

We’ve all hoped for an end to this disaster. Instead it continues. [Gilder's Daily Prophecy] September 15, 2021 [UNSUBSCRIBE]( | [ARCHIVES]( [Why is this picture a threat to your retirement?]( The Wall Street Journal reports, “When [markets] get wild, the computers at [Wall Street’s] firms start selling — helping make it wilder still.” It’s like a sick joke Wall Street is playing on your retirement… and if you don’t a way to fight back]( you’re helpless while your investments swing up and down for no reason. [Click here to see how you can take back control of your money in these crazy markets]( as soon as Thursday at 9:30am. Producer Prices Rise 20%! [Jeffrey Tucker]Dear Daily Prophecy Reader, The inflation numbers that came out were supposed to make everyone calm, and the nation’s press played along. Hey, for August prices rose less than in July, 5.3% instead of 5.4% year over year. So everyone just calm down! The “transitory” nature of this inflation is becoming obvious, can’t you see? Of course the difference is so slight as to amount to statistical noise. Another problem is that two additional factors could have made the difference. First, consumer spending fell back again as lockdown fears, more restrictions, and continued threats against freedom have generated public caution again that the crazy people in charge are going to continue their craziness. Another factor is the continued low velocity rate for the money supply itself: that creates an illusion that inflation is under control even when it is only being put off in the future. Kick that monetary can down the road! The Sufferings of the Producers The truly striking truth of it all is revealed in the Producer Price Index that chronicles what the people who make stuff have to pay to get the stuff made. Here is where the real damage of inflation shows up. Year over year, these prices are increasing at a 20% rate. As David Stockman points out, this is the highest rate of increase since the 1974 energy crisis. [Producer Price Index] Do you still think there is a reason for calm? Let’s go back to velocity for a moment here. This is a crucial factor in determining price pressure. The media never reports it because probably the subject is too complicated for reporters to understand. It’s not that at all: it measures the pace at which money changes hands. The lower the velocity, the more money is metaphorically stuffed in mattresses. The higher the velocity, the more people are out there spending. An economic crisis is almost always associated with a collapse in velocity: 1932, 1982, 2008, 2020 are all good examples. A fall in velocity puts deflationary pressures on prices, which is why so many people associate recessions with a rise in the value of money relative to goods and services. This helps mitigate against inflationary pressures that would otherwise — if all else stayed the same — appear in the wake of money and credit expansion. Check out this 20-year velocity chart: [Velocity of M2 Money Stock] Velocity is not quite at pandemic lows, but you can see that it is headed that way. The political class has somehow managed to create so much anxiety and panic in the population that people are hanging onto their money for dear life, almost to the same extent as they did in the spring and summer of 2020. This is not really about the virus either; this is about the mandates and all the other tactics they have deployed in the name of virus control, in addition to the wild spending sprees, plans for taxation, and insane money creation that has taken place over the last 19 months. All of it combines to create a feeling of risk aversion. Ironically just as Americans have become more fiscally tight, government is going the opposite direction. Former CIA and Pentagon Advisor: "Americans Should Do These 5 Things NOW" [Jim Rickards at CIA]( could be facing a catastrophe that will catch most people by surprise… And no, it’s not the coronavirus. Most Americans have no idea what’s about to hit them in the coming days. Which is why Americans should [take these 5 steps right now.]( [Click here now to see the shocking details.]( It does seem truly incredible that the political class would engage in this level of sadistic behavior. It’s really hard to follow the incentives here. One might suppose that the Biden administration would have every incentive to bring calm, open up the economy, relax the mandates, get real about its messaging, encourage more production and consumption, and be able to brag about the booming economy. Instead, they keep tightening the screws and making things ever worse. Someone asked me in an interview this morning that great question: why is all this happening to us? Sinister forces at work? The Great Reset? Pharm prophets? My answer is that all those are involved. Also, politicians are often sadistic. It’s true. At the same time, my ultimate answer is that all of this traces to stupidity. That’s another way of saying that the ideas that the ruling class holds are fundamentally wrong. They do not believe in freedom. They do not understand viruses. They do not understand prosperity. And they don’t really get the relationship between what they are doing now and the wreckage they are causing. We Are Getting Poorer In other barely noticed news, the Census data has revealed a dramatic increase in poverty and a fall in household income in 2020. Median household income was $67,500 in 2020, down 2.9%. This is a shock simply because we had been on track for the highest household income on record until the lockdowns came and devastated life as we know it. Just wait until the 2021 figures come in and are adjusted for inflation. Already early data indicated that real wages are down 0.5% in August from a year earlier. We are set to experience a continuation of a very painful economic depression that could last many years. The poverty rate, for example, rose 1% after ten years of relentless decline. Millions more suffer today than suffered last year. We’ve all hoped for an end to this disaster. We’ve hoped since March 2020. Instead it has only gotten worse. Each day. The great struggle here is not only economic, not only cultural and social; it is fundamentally psychological. No one wants to live in times in which incomes fall, money becomes worth ever less, and the opportunities for a better life fall rather than expand. That is the world in which we now live. Regards, [Jeffrey Tucker] Jeffrey Tucker P.S. As a member of Gilder’s Daily Prophecy, you have a discounted ticket to COSM reserved in your name. These tickets normally sell for $1,950 each! Today is the last day to claim this discount! 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