Bottom Line – Yes! You’re paying more!
The US just reached the highest inflation rate since 1982 in December. Inflation rose to 7% up from 6.8% the month prior in December 2021, suggesting that the economy is not on the growth pace that many economists predicted.
This means that, on average, the cost of all goods and services in the US has increased by 7% over the past 12 months. And this is just the official figure. The real figure is more like 10% because the BLS uses a bizarre historical average method to calculate inflation, which has the effect of masking the real level of inflation.
What this means is that the financial situation of the average American is deteriorating rapidly, which is exactly what you would expect when you have a rapidly growing money supply and a collapsing economy. Strangely some media outlets and the Biden Administration are trumpeting the BLS report as a sign of economic recovery. That the report is positive for the US economy because it shows that inflation is hitting the US economy as it recovers from the effects of COVID-19 and shows that the economy is working and in overdrive.
This is not true. Inflation hitting the US economy is not a good thing. It is a sign of economic failure. It is a sign that Americans are consuming more than they are producing. This means that the US economy is living on debt.
Core inflation is up 5.5%, which means that the average person is paying 5.5% more for everything they buy than they were a year ago. This means that the average person is paying higher prices for food, clothing and transportation, just to name a few things. The fact that core inflation is up 5.5% means that people are paying more for these things. This is because the economy is on a downward slide. If people were earning more, and their wages were increasing, then their cost of living would increase. But if the average person is not earning more, and their wages are not increasing, then the only way they can pay higher prices is to borrow or sell off assets.
This is inflation in a nutshell. It is a sign of economic failure. It is a sign of an economy on a downward slide. It is a sign of an economy that is living on borrowed money.
It is also a sign that the US economy is not recovering. If the economy were recovering, then prices would be rising because of increased demand for goods and services. But the truth is that inflation is rising because of economic weakness. Inflation is rising because there is too much money chasing too few goods.
The only way that inflation can be created is for the money supply to increase faster than the goods and services that the money can buy. This is what the Federal Reserve is doing. It is printing money out of thin air and using that money to buy US government bonds. It is using this money to buy US government bonds because it is afraid to raise interest rates.
Think about it. If the Federal Reserve were to raise interest rates, it would be admitting that the US government is bankrupt, and the US government would quickly collapse. But the Federal Reserve is not going to admit that the US government is bankrupt. So, it is printing money to keep interest rates as low as possible, even though this will create massive inflation. In fact, the Federal Reserve is now buying $120 billion dollars worth of US government bonds each month.
So, the question is whether the Federal Reserve has created enough inflation to keep interest rates down.
The Federal Reserve is hoping that inflation will keep interest rates down. But if inflation fails to keep interest rates down, the Federal Reserve will be forced to start raising interest rates. If interest rates rise too much, then the real estate market will collapse and the government will be unable to sell its bonds.
The Federal Reserve is playing a game of chicken with the US economy. It is hoping that inflation will hold interest rates down, so it can continue to print money. But, if inflation fails to hold interest rates down, the Federal Reserve will have to raise interest rates.
The Federal Reserve is hoping that the rest of the world will bail it out by buying US government bonds. The Federal Reserve is also hoping that foreigners will keep buying US government bonds. But, so far, foreigners have not been buying US government bonds, which means that the Federal Reserve will be forced to raise interest rates.
This is definitely a worrisome time.
