GOVERNMENT REPORT SERIES
The only thing that saves us from the bureaucracy is its inefficiency
Public bureaucracies are less efficient than private organizations in most all of their activities. This is attributed to the absence of competition and of the profit motive.
Now, back on Topic
- Inflation is still picking up pace
The media focuses on the 12-month change, that’s 8.6 percent overall, 6.0 for core. If you look at the monthly numbers, and in particular the monthly core number was an 8 percent annual rate of inflation went at this pace.
- The increase in services inflation may signal a normalization of the economy
If you look at the three-month inflation rate, it’s very clear that core goods inflation was historically high in the second half of 2021 and at beginning of 2022, and it has come down since then as people have pivoted away from buying goods. Good news as it suggests that there might be a pivot where the economy is normalizing, the bad news is where we’re really seeing inflation is in the services sector. Last year, goods inflation was high, services inflation was low. So in fact we’re seeing the normalization, and core inflation, which was running at 7 percent last year and is running at six and half percent now over the last three months, has not really changed.
- Inflation isn’t just about prices “8 percent headline CPI”
The underlying inflation rate may be around 4 percent, rather than the 8 percent headline CPI we’ve had over the last year. The Fed has work to do, but it’s not quite the crisis as the press is playing up.
- Fiscal and monetary policymakers are making progress
Monetary policy is effecting the housing sector; the raise in mortgage rates will slow demand for purchasing homes. In terms of fiscal policy the easing of supply chain constraints to releasing oil reserves has helped.
Not a big fan of efficiencies of Government as it relates to the market but the president has a strong team at the Fed. They will need to keep raising rates into next year.
- High prices will hurt consumers, as prices rise which no can control
High gas and food prices will yield additional economic consequences. The perceived inflation is probably worse than the reality. The press should have the responsibility to report fact and not play off fear and emotion.
Conclusion
Prices will outpace wages and reduce purchasing power, the inflation rate does not determine what real wages will be going past 18 Months. “There will probably be 15-18 months of pain, but it’s all short run.”
