Worst Inflation in 40 Years Hits the US. Only This Time It’s Far Worse.

"The dam has broken. The inflationary mindset has changed"

Editor’s note: If calculated the same way it was in 1990 then US inflation would not be 6.1%, but over 10%. If calculated the same way as in 1980 it would be over 15%.

The broadest Consumer Price Index (CPI-U) spiked by 0.8% in November from October, and by 6.8% from a year ago, the highest since June 1982, according to data released by the Bureau of Labor Statistics today.

But it gets better. The Consumer Price Index for All Urban Wage Earners and Clerical Workers (CPI-W), the index upon which the Social Security COLAs are based, spiked by 7.6% in November year-over-year — exceeding even Mexico’s soaring inflation rate — and the worst since January 1982.

But in January 1982, inflation was coming down; now inflation is surging. At the time, the Fed’s short-term interest rates were over 13%; now they’re still near 0%, and the Fed is still printing $105 billion in the current period from mid-November through mid-December, though it will reduce the money printing further.

Nearly all interest rates and yields, including on risky junk bonds, are now negative in real terms. This – the Powell Fed that unleashed this monster and has been feeding it month after month – has got to be the most reckless Fed ever.

Inflation without food and energy – OK, Americans, go ahead and try to live without food and energy – spiked by 4.9%, the most since June 1991. This shows how embedded inflation is now in the economy beyond energy, and it has started to hit services, which is hard to explain away by jabbering uselessly about “bottlenecks and shortages.”

Inflation in consumer prices is another term for the loss of the purchasing power of the consumer’s dollar. In November, the purchasing power of what was $1 in January 2000 dropped to 60.81 cents: [And that’s using the official CPI.]

Rent Factors, nearly one-third of CPI, still lag far behind reality but started to rise.

Two measures of rent make up 32% in the Consumer Price Index. In 2020 and early in 2021, these two rent factors dropped sharply and pushed down CPI, even as other prices were surging, thereby keeping CPI from spiking even more. They turned around in June and have been rising every month since then, but they’re still holding down CPI, even as market rents in the 100 largest cities have been spiking for months.

“Rent of primary residence” (makes up 7.6% of overall CPI), rose by 0.4% in November from October, and by 3.0% year-over-year but is still far below where it had been before the pandemic and far, far below the surge in market rents, which are only gradually filtering into CPI (red in the chart below).

“Owner’s equivalent rent of residences” (makes up 23.5% of overall CPI) is used as a substitute for the costs of homeownership. It is based on surveys that ask what homeowners think their home might rent for. It rose 0.4% for the month, and 3.5% year-over-year.

These rent measures are still holding down CPI (6.8% in November), but as they’re catching up little by little with reality in the market, those rent measures will continue to rise, and given their 32% weight in the index will push CPI higher, and it has nothing to do with supply chains and bottlenecks; these are services:

Actual home prices have spiked by historic amounts. According to the Case-Shiller Home Price Index – it tracks price changes of the same house over time and is therefore a measure of house price inflation – has soared by 20% year-over-year (purple line below), while “Owner’s equivalent of rent,” which is supposed to track the costs of homeownership, is just starting to ease higher (red line). Both indexes are set to 100 for January 2000:

Food costs (makes up 14% of overall CPI), jumped 0.7% for the month and 6.1% year-over-year, with the CPI for meats jumping by 16% year-over year.

Energy costs (7.5% of overall CPI) spiked by 3.5% for the month and by 33% year-over-year:

  • Gasoline +58.1% year-over-year
  • Utility natural gas to the home: +25.1% year-over-year
  • Electricity service: +6.5% year-over-year.

The CPI for used cars and trucks (makes up 3.4% in overall CPI) jumped by 2.5% for the month, and by 31.4% year-over-year.

This is going to get worse over the next couple of months because used-vehicle wholesale prices, which lead the CPI by about two months, started spiking again, after a pause, and for November were up 44% from a year ago!

The jump in used-vehicle retail prices picked up by the CPI for November reflects wholesale price gains in roughly September. But in the two months since September, wholesale prices have spiked by another 13.5%, which will hit used vehicle CPI in December and January – something to look forward to (chart shows index value, not year-over-year percent change):

The CPI for new cars and trucks (makes up 3.9% in overall CPI) spiked by 1.1% for the month and by 11.1% year-over-year.

In the history of this CPI, there were only a couple of months in 1975 when new vehicle prices rose even faster topping out at 12.7% in March 1975. We may be looking at what in a few months from now will be the worst-ever inflation in new vehicles as consumers no longer care about price and pay whatever, even thousands of dollars over sticker (chart shows the year-over-year % change):

It’s going to be a bitch to get this under control.

This inflation is spiraling out of control because consumers and businesses are now willing to pay the higher prices. The dam has broken. The inflationary mindset has changed for the first time in decades. And this is happening as nearly unlimited amounts of newly created money washing around the globe has destroyed all sense of price resistance. And the Fed is still making it worse by pouring more fuel on the raging fire.

Trying to get this under control will be tough and will take a long time. Inflation doesn’t even react to monetary tightening for a year or more, and then only gradually. And tightening hasn’t even started yet. The Fed is still repressing interest rates and it’s still printing money – which positions it as likely the most reckless Fed ever. And this inflation isn’t going away under these circumstances.

Source: Wolf Street

  1. ken says

    To give you an idea of the difference in attitude between 1970s inflation and present inflation in 1971 Nixon implemented wage and price controls when inflation was a little over 4%.

    Today they claim inflation is 6.3% but in 1971 numbers it would be over 15%, They changed how they calculated it a couple times between then and now to seem lower and they’ll probably change it again soon to bring the numbers down again. Americans love to be bullshitted.

    The real definition of inflation is an increase in the money supply. Price increases are just a symptom of inflation. Since 2000 the money supply has went from around 800 billion to 8 or 9 trillion. The reason for price increases is the devaluation of the money.

    Another problem is we have PhD’s like Krugman running the show. These guy’s are in oz.

    Bottom line IMO,,, It’s inflate or Die! There’s no way they’re going to tighten,,, if they do, it won’t be much and it won’t be for long as it will bring on a serious depression.

  2. Raptar Driver says

    They have been cooking the books not just on inflation but GDP and pretty much any economic statistics.
    The illusion of prosperity must be maintained.

  3. Mr Reynard says
  4. Pablo says

    People like Paul Krugman prove beyond a shadow of a doubt the biggest who#es out there are “Economists”. Krugman and his kind are morally bankrupt; they will promote whatever they are paid to promote. “The right leaning American Enterprise Institute”. This is the “Think Tank” that still tells everybody that Reagan created a Booming Economy, Record Job Growth. ‘Nuff said.

  5. Martillo says

    The IOU fiat filth Saudi Mercan petroscrip toilet paper dollah free lunch in Slumville, USSA is over;call mass murderer Hank Ki$$inger and see if this zombie can be brought back to “life”. Gee who could a thunk that the Wall St chosenite Ponzi sewer would blow when the “Feral Reserve” turned into Federal Expre$$ with daily deliveries of zillions of worthless scrip to the assembly of hoes, banksters and scum that own Rancho Goyim and all its impoverished livestock. Onward down the crud caked bowl of entitlement with the biggest turd humanity has ever birthed and along with it the evil anglozionazi empire of $hit.

    Thar she bloooooooooows, me hearties.

  6. nnn says

    Powell is a bloody criminal

  7. Aardvark-Gnosis says

    The small mind: Inflation I the food zone… little else resembles the illusionary dementia of consumers… Costco: Speaking with employees about the rise in prices… I purchased Adams crunchy Peanut butter in the Costco size for $8.99 back 6 months ago, and then it was raised to $9.99… I said to these employees that is a 10% increase in inflation! They said it happens all the time… BS! I am a shopper of commodities Costco style… The lie is that inflations is above 10 percent… Yet, the illusionary fulcrum of propagated propaganda is constant in the realm of lies to appease the masses… Inflation is a tax and we are all being taxed beyond our wildest delusional aspirations that out government want us to believe… Crony imperialistic capitalism rules the Babylonian precepts of a mercantile elite that can screw the masses with shortages and giant warehouse where good s are stored only to be released when they increase the controlled pricing index… The same governmental overreach is used to create sanctions on other countries to get them to conform to the matrix of the merchants of Baal and their mythological capitalistic gods like the bull on Wall Street’s New York imperialistic financial houses of fiat currency and the gold held in the elites that control the latter! Wake up world! You mean nothing to these misers of trade and inflationary wage controls!

  8. Pablo says

    Notice how all these “Economists” never advocate stopping The Federal Reserve from printing Money, the REAL cause of the problems of the Economy? Well The Fed is one of THE Main Problems. A Congress that raises the Debt Ceiling each and every year is another factor.

  9. XSFRGR says

    In 2004 I read an article that quoted a VP at Alpha Bank who stated, “Beginning in the last year of George Bush’s second term the U$ will enter a depression of heretofore unimaginable depth, and duration.” Right on time, in 2008, the depression began, and regardless of propaganda, and creative accounting it has continued to this date, and is accelerating into the future (or lack thereof).

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