Inflation Hiding

Chart of the Day: Inflation Report Shows Inflation Still Lurking Just Below the Surface – Is it About to Reaccelerate?

The consensus forecast for the Consumer Price Index (CPI) was for +0.5% MoM in January, and that is what was reported despite hopes for better numbers. If you carry the numbers out to an extra decimal point on a YoY basis, the CPI would be 6.41%, down from 6.45% from the previous month. Hence, US inflation still remains at sticky highs. See this in the chart below and learn more here.

CPI 2023-02-14

The rise in Americans’ cost of living outpaced their income gains for the 22nd month in a row (weekly earnings -1.5% YoY). See this in the chart below.

Wage Growth 2023-02-14These are the Top 5 contributors to headline CPI (rising shelter costs stand out). See here the actual report from the BLS, which gives a further breakdown.

Inflation Contributors 202302-14It should be noted that prior to this inflation report, the BLS made its annual revisions. They made huge CPI revisions. If you thought prices were rising faster than the BLS said, you were right – learn more here and here.

So where do we go from here concerning forecast inflation?

If prices stay at current levels over time, MoM (month on month) and YoY (year on year) will eventually go to zero. But that would mean prices would not come down – they merely will not be continuing to advance. So let’s take a look at where we go from here by looking at our Money Value formula.

The two key determinates of how the value of money is doing are GDP and the Monetary Base of the currency regime. Monetary Base can be grown or shrunk via Central Bank policy (amount of money printing, i.e., currency debasement) and government fiscal policy. Inflation is a by-product of Money Value. Below is a simplified formula to understand Money Value.

Money Value = GDP / Monetary Base

Let’s look at the denominator of this formula – the Monetary Base. It is marginally starting to cool off. See the Fed’s Monetary Base M2 measure in the chart below and learn more here.

Fed M2 2023-01

Looking at alternative data, we can see this slight decline in the Monetary Base as well. See this in the chart below and learn more here.

Shadow Stats Money Supply 2023-01

Let’s also look at the numerator of this formula – GDP. Most forecasters show the GDP is near zero to slightly negative growth. See this in the chart below and learn more here.

GDP Forecast 2023-02This means that the current trend shows that prices will level out at current levels, and the economy will have zero growth. However, though the current job numbers are not horrible today, they are beginning to trend down – see here. Other indicators, such as real estate, retail sales, PMIs, and trade balance, to name a few, are also trending down. This current stagnant economy has largely been engineered by Fed policy (higher interest rates and quantitative tightening) to cover up much of the Biden administration’s poor economic performance.

As the economy continues to sink in the first half of 2023, the Fed will be forced to pivot and reverse its current policy at some point. The alternative will be a stagnant economy heading to a recession – perhaps a deep recession. How deep the recession will be dependent on how soon the Fed pivots. The point is that the Fed (government control) is what is driving the economy – and it is a largely political decision. Below is a fairly good summary video of what is happening to the global economy.

Inflation is still very much a part of our economy. It lurks just below the surface. The more politically expedient move will be to print even more money, as many governments have done in history.

Hence, this author believes that the next Fed move will be to pivot and turn back on the printing presses and expand the Monetary Base even further. Inflation starting at a rate that is at a higher level (i.e., the slope of increases that can go exponential) will make the next surge in inflation go even higher in 2023 than it did in 2022.

Put your seat belts on …

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 RWR original article syndication source.

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  1. I see this every time I grocery shop, product quantity gets smaller while prices goes up.
    Xiden has been very successful in being the worst, most criminal and anti American person to ever live in the White House, considering we have had the likes of Klinton and Barry S., among other crooks live there this is his biggest accomplishment in his almost 40 years grifting in politics…..
    Oh and Trump won in 2020……

  2. If its just below the surface you are obviously in a trance. I clearly see it everyday no matter how much BS this WOKE government tries to feed me along with trying to keep me in the dark.

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Written by Tom Williams

Born down on the farm in America's Midwest, my early life was spent climbing the ladder via a long career in information technology. Starting as a technician, and after earning a degree going to night school, I eventually found a place working at ATT Bell Laboratories as a software engineer.

Later moving into management and then a long stint in a major management consulting firm working with major banking, telecommunications, and retail companies. Working in various states in America, I also spent considerable time living and working in several European countries - currently expat in France. As a side career, I was heavily involved in real estate development and an avid futures trader. This experience can give one a unique view of the world.

The storm clouds of dark change are near. Today America is at a crossroads. Will it maintain its prowess as a national leader in the free modern advancing world, or will it backtrack in the abyss of the envy identity politics of tyrannical socialism, and the loss of individual freedoms. The 2020 election may have decided this. Join the Right Wire Report team and make a stand.

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