Deflating Inflation

The stupidification of America proceeds apace.

Either the Biden administration thinks that we are all stupid or else it has figured out that those who take its pronouncements seriously are seriously ignorant. You choose.

Anyway, yesterday we learned that the inflation rate had dropped all the way down to 8.5%. So Joe Biden decided to take a victory lap. He declared that the inflation rate was now 0.0%. Precisely why he or his handlers imagined that anyone would embrace the subterfuge is beyond anyone’s rational capacity. Either the administration is run by a bunch of imbeciles or else it has gotten into the habit of insulting America by making things up as it goes along. Remember the time that the Democratic Party was the party of smart people? By now, you probably don't.

The Wall Street Journal editorialized this morning:

It’s a sign of how far and fast inflation has risen this year that an increase in prices of 8.5% in July on an annual basis triggered a market rally on Wednesday. That’s down from 9.1% a month ago, and the trend is in the right direction, but one month’s respite is far from the end of this punishing inflation bout.

Irony of ironies, if you thought that the American people were so stupid that they believed the administration spin, what do you make of the stock market-- it thrilled to the news and rallied.

One recommends caution over market moves. Many serious people have stated clearly that the bear market is not yet over. So, caveat emptor.

So, the numbers reflected a drop in gas prices, largely because people have been driving less. Less demand leads to lower prices. And higher interest rates have deflated the housing market, though they have had little effect on the inflated rental market.

The Journal explained that the drop in gas prices has been offset by other price increases:

Consumer shock at the gas pump may have contributed to the pullback. Gasoline inventories rose as drivers each day bought less than during the same period in 2021, according to the Energy Information Administration. And 2021 was a Covid year.

But prices continued to rise across most of the rest of the economy. Food prices rose 1.1% in July and are up 10.9% over last year. Groceries that families take home rose even faster at 1.3% for the month, or 13.1% over the past 12 months. The hope is that food prices will ebb in coming weeks following the recent decline in commodity prices, but it may take a while since inflation expectations are now built into the supply chain.

Core CPI, which excludes food and energy, rose 0.3% in the month or 5.9% for the past 12 months. That’s still about three times the Federal Reserve’s inflation target. Prices in services continued to rise (5.5% in 12 months not counting energy) and rents were again a key driver of inflation as they have been all year.

And then, the next question is: what does Larry Summers think? As you know, Summers has been right about inflation all along. Considering his long association with Democratic Party politics, we grant his thoughts special credence, especially when they deviate from the party line.

As reported by the Daily Mail, which has an extensive report on inflation:

Bill Clinton's Treasury Secretary Larry Summers has slapped down Joe Biden's victory lap over the latest inflation figures - saying 'we still have a very serious problem'.

The economist warned Americans should brace for 'some quite turbulent times ahead' and said the issue was not 'going to go away of its own volition'.

In short, we ought to be cautious before we jump on the zero-inflation bandwagon.