Take a close look at this official chart…
What you’re seeing is the latest Consumer Price Index data published by the U.S. Bureau of Labor Statistics.
And at first blush, it looks like inflation is falling fast.
President Biden chalked it up to his “Inflation Reduction Act” and the miraculous powers of “Bidenomics.” Mainstream news broadcast the “win.” And Lael Brainard, director of the White House National Economic Council, said, “We have seen a very large reduction in inflation, by more than 50 percent.”
But what does CPI data actually reveal?
The CPI tracks the prices of goods and services across multiple sectors. And the data shows prices rose only .2% in July.
So, the annual rate was apparently down to 3.2% from its 41-year peak of 9.1% in June 2022.
This means consumer prices are still rising… just not quite as fast as they have been.
In other words, despite what looks like encouraging data…
Inflation is still sky high… and the Fed’s fight continues
Forbes agrees and says, “Inflation is not over, and the Federal Reserve will tighten again, despite the latest Consumer Price Index reading.”
The Economist says, “Lots of investors think inflation is under control. Not so fast.”
Harvard economist Jason Furman says, “People have been so crazily premature to keep declaring victory on inflation.”
Even the White House’s Council of Economic Advisers Chair Jared Bernstein knows the score and says, “No victory laps. No mission accomplished. Our work is not done.”
It may be a head fake…
According to Ed Butowsky of Chapwood Investments, the CPI data is riddled with bias and statistical manipulation:
He says since 1983 “The government has been artificially deflating the CPI to keep figures as low as possible. The readings you see published today no longer represent the real out-of-pocket expenditures incurred by most Americans.”
Furthermore, “Americans that rely on this statistic are falling behind [financially] more and more every year. Individual purchasing power is sinking in quicksand, and people are unable to maintain their current lifestyle.
Butowsky is the creator of the robust CPI alternative called The Chapwood Index.
And his calculations show real inflation may be over 14% in some US states.
Ultimately, he says, “The Chapwood Index is our attempt to help people understand why they feel like they aren’t keeping up and why, as they get older, they feel as though their money does not go as far — even when they’re following the rules, working hard and supposedly beating inflation.”
But Americans don’t need charts and figures to know this is happening…
We can all see and feel the financial pain in our lightened wallets… at the pump, the grocery, for housing, insurance… you name it.
And I’m sorry to say we may be stuck with high inflation for some time. Because the problems that created the highest inflation in more than 40 years still exist.
Including inflation’s primary cause:
Runaway money printing.
As the Fed’s M2 Money Supply data shows…
Our country’s money supply exploded 40% in two years.
This happened, in part, as the Fed injected tens of trillions of dollars into the economy. Including more than $8 trillion during the pandemic and almost $400 billion to stabilize the financial system after three massive bank failures in March 2023.
This rapid increase in money supply created too many dollars chasing too few goods and services — pushing the basic costs of living up.
And we’re still experiencing the aftereffects.
Another reason inflation isn’t cooling off much?
Global de-dollarization.
As you may recall, the US credit rating was recently downgraded by Fitch. And now, spooked foreign creditors are actively dumping the US dollar as the world’s reserve currency.
This de-dollarization dilemma comes on the heels of the BRICS (Brazil, Russia, India, China and South) nations ditching the dollar as the world’s reserve currency following the US sanctions against Russia.
But eventually, all those dumped dollars will come back home to the US.
This flood of dollars will increase the money supply even further. And this means we’ll see even more money chasing fewer goods... which leads to higher inflation — with or without more money printing.
But make no mistake… the Fed’s printing presses are still churning out dollars…
In no small part because the government is now close to $33 trillion in national debt and needs the cash.
The federal government isn’t collecting enough tax revenue to pay down the unpayable bill. And printing less dollars certainly won’t help cover the tab.
For this and many other reasons, money printing will likely continue.
Which will increase the money supply even further.
Which will lead to even more inflation.
In fact, according to a client note by Citigroup economist Andrew Hollenhorst, in inflation will not only continue in 2023… but it “may reaccelerate in early 2024.”
If so, the Fed won’t be lowering interest rates… they’ll likely keep raising interest rates to cool the overheating economy.
The question is, how high will they hike interest rates?
Without reliable data, there is no reliable answer.
But based on the Fed’s track record, it’s easy to see how the central bank could easily make an overcorrection.
And an overcorrection, as USA Today warns, “… could lead the economy into a recession.”
Bankrate agrees and says, “The Fed’s inflation battle could send the US economy into recession, which would weigh on demand and, consequently, price increases even more.”
So, it seems… no matter what the Fed does next…
No matter how far the CPI reports may skew the data…
We’re still facing the highest inflation we’ve faced in a decade.
And it looks like it’s here to stay for a good while.
It’s truly unfortunate
Because inflation’s “hidden tax” on your purchasing power isn’t transitory…
It’s cumulative and permanent.
As long as inflation continues, the losses will keep accumulating.
And the dollars you’ve saved will keep losing ground.
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Good news! As inflation soars and the value of the dollar falls, the price of gold rises. This is why thousands of Americans are parking a portion of their wealth in gold right now. If you’d like to find out more about shifting savings into gold, you can access a FREE copy of our Gold Information Kit or dial 888-529-0399 to speak with a Gold Specialist now.
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