Tags: inflation | savings | gold | security | diversify

Will Inflation Ever Go Back To 'Normal'?

Will Inflation Ever Go Back To 'Normal'?

Phillip Patrick By Tuesday, 27 February 2024 02:02 PM EST Current | Bio | Archive

The end of World War II featured a 20% inflation rate, and since then, Jimmy Carter holds the postwar record (officially ~15%).

The runner-up for inflation during a presidential term in the postwar era? None other than President Joe Biden.

Biden’s entire term in office (thus far) has featured persistent inflation higher than 3%, but most of his term came with CPI at 5%+.

Now, that was tough to adapt to! See, inflation hadn’t risen above 2.5% for over a decade before Biden took office. Even the folks who remembered times of higher price increases had forgotten how disruptive they could be – and an entire generation had to learn, to their frustration, how to deal with this lack of price stability.

Let’s take a closer look at the current situation from the most-recent official update:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in January on a seasonally adjusted basis, after rising 0.2 percent in December… Over the last 12 months, the all items index increased 3.1 percent before seasonal adjustment.

The index for shelter continued to rise in January, increasing 0.6 percent and contributing over two thirds of the monthly all items increase. The food index increased 0.4 percent in January, as the food at home index increased 0.4 percent and the food away from home index rose 0.5 percent over the month. In contrast, the energy index fell 0.9 percent over the month due in large part to the decline in the gasoline index.

The good news: The pain at the pump is finally beginning to ease. You might even notice that the next time you fuel up your vehicle.

Everything else, though, just keeps getting more expensive.

But the picture looks even more dire once you factor in “real” price inflation (blue line in this chart).

In fact, the blue line uses the same methodology that was used during the Carter administration in 1976-1980 – and it reports inflation is closer to 12%!

I’m not going to take you on a deep dive into the politics of measuring inflation today. Instead we’ll ask a critical question…

How much longer will it last?

When we looked into this question back in December 2022, the answer was: It could be a few more years before the rate of consumer price inflation dips back below the Fed’s target rate of 2%.

That answer could be pretty close to reality, especially once you read what Jim Rickards had to say about the current situation:

At any rate, you can basically rule out a March rate cut. The Wall Street crowd who’s been waiting for the Fed to “pivot” will have to keep waiting.

 Having said all that, today’s report doesn’t come as a surprise to me. As I said almost a month ago, “Is inflation over? Actually, no. And it may be getting worse.”

Where do these inflation numbers leave us? Again, it appears that inflation well above the Fed’s 2% target will persist for some months.

That’s because inflation that accelerates as high as it has tends to take its time “disinflating,” which is when prices finally start coming back down to Earth.

Back in February 2023, the current Administration tried to convince the public that that was happening already, but it wasn’t (only the rate of price increases has been easing).

Janet Yellen appears to think Americans should just deal with higher prices, in a rather transparent (and grumpy) comment about the economic situation:

Treasury Secretary Janet Yellen offered a rare moment of Biden administration transparency on the economy this week.

“Well, I think most Americans know that prices are not likely to fall,” Yellen told ABC News on Sunday. “It’s not the Fed’s objective to try to push the level of prices back to where they were.”

But contrary to what Yellen thinks, it is the Federal Reserve’s job to keep price inflation under control. Isn’t that what the idea of “stable prices” implies?

Right now, it’s pretty obvious that prices are still incredibly unstable, unless you’re ultra-wealthy like Yellen is. In fact, in light of those unstable prices, a new economic term was coined by The Winston Group:

While the monthly, year-over-year rate has certainly dropped, the electorate sees this from a different perspective — by how much prices have gone up since Biden was inaugurated. That is more important to the electorate, as prices have increased by 17.3 percent, what The Winston Group has termed the Presidential Inflation Rate (PIR). In looking at the performance of the previous seven presidents at the same point in their terms, only President Jimmy Carter had a larger increase.

Biden’s “Presidential Inflation Rate” looks as though it might stick around for a while, too. That’s because upstream of the “price on the shelf” lies an economic measurement called the producer price index (PPI).

Right now, the PPI appears like it’s heating up on finished goods (again), according to Wolf Richter:

The final demand PPI for finished goods less food and energy – which weighs 19.0% in the PPI – after months of benign increases, suddenly spiked in January by 0.40% or by 4.9% annualized.

The spike is a breakout
from the prior 7 months when the core goods PPI remained in the same benign range, after the long plunge from the 2021 spike.

This is disconcerting because the whole disinflation momentum in consumer prices (CPI) last year was driven by drops in prices of durable goods (negative inflation or deflation) and the plunge in energy prices. This PPI data on finished goods is now throwing some cold water on hopes…

Put simply: Consumer price inflation on store shelves could be heating up again at some point in the near future. If that plays out, Biden is likely to finish an entire 4-year term without getting inflation back under control.

Beyond that, who knows how long “the tax no one voted for” could last?

The good news is, you still have a move to consider that could protect your retirement savings and preserve buying power well into the future…

Insulate your savings against inflation

Right now, analysts at Citi are worried that this economic turmoil could continue, and physical gold’s price will rise as a result:

There’s an off chance that gold prices could soar to $3,000 per ounce, and oil to $100 per barrel within the next 12 to 18 months, according to Citi. Central bank aggressive purchases, stagflation, and a global recession are catalysts that could drive the price of the yellow metal almost 50% higher, a Citi analyst said.

A 50% gain in the next 18 months? That’s one of the most aggressive price forecasts we’ve seen this year!

All forecasts should be taken with a grain of salt. But the facts remain:

  • Economic uncertainty dominates the economy
  • Nations around the globe are slipping into recession
  • Layoff announcements in the U.S. are coming fast and furious
  • The federal government is determined to destroy what little purchasing power the dollar has left

Times like these, it pays to learn more about inflation resistant investments. Personally, I believe just about everyone should diversify with physical gold and silver.

You can get the rest of the story behind dollars, inflation, and diversifying with precious metals like gold and silver in our free information kit.

Phillip Patrick is Birch Gold Group’s primary spokesman and educator. He was born in London and earned a politics and international relations degree at the prestigious University of Redding in Berkshire, England. Growing up in London, he saw the risks of government overreach and socialist policies first-hand. He spent years as a private wealth manager at Citigroup on Lombard Street (the Wall Street of London). He joined Birch Gold Group as a Precious Metals Specialist in 2012.

© 2024 Newsmax Finance. All rights reserved.

Recently, the rate of price increases slowed. Now they're speeding up again. After going up 17.3% already since Biden's election, how much higher will they rise, for how much longer?
inflation, savings, gold, security, diversify
Tuesday, 27 February 2024 02:02 PM
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