The post-COVID inflation surge that was supposed to be “transitory” is looking a lot more permanent. On Friday, the Bureau of Economic Analysis Friday released data on Personal Consumption Expenditures (PCE), the Federal Reserve’s preferred inflation gauge. “The PCE price index for August increased 4.3 percent from one year ago, reflecting increases in both goods and services,” according to the report. “Energy prices increased 24.9 percent and food prices increased 2.8 percent.” Those numbers reflect the biggest increase in 30 years. Even when excluding food and energy, the PCE index jumped 3.6% from one year ago – well above the Fed’s own long-term 2% objective. Fed chairman Jerome Powell has stated he is willing to tolerate above-target inflation for an
Topics:
Stefan Gleason considers the following as important: 6a) Gold & Monetary Metals, 6a.) Gold Standard, Featured, newsletter
This could be interesting, too:
Nachrichten Ticker - www.finanzen.ch writes Krypto-Ausblick 2025: Stehen Bitcoin, Ethereum & Co. vor einem Boom oder Einbruch?
Connor O'Keeffe writes The Establishment’s “Principles” Are Fake
Per Bylund writes Bitcoiners’ Guide to Austrian Economics
Ron Paul writes What Are We Doing in Syria?
The post-COVID inflation surge that was supposed to be “transitory” is looking a lot more permanent.
On Friday, the Bureau of Economic Analysis Friday released data on Personal Consumption Expenditures (PCE), the Federal Reserve’s preferred inflation gauge.
“The PCE price index for August increased 4.3 percent from one year ago, reflecting increases in both goods and services,” according to the report. “Energy prices increased 24.9 percent and food prices increased 2.8 percent.”
Those numbers reflect the biggest increase in 30 years.
Even when excluding food and energy, the PCE index jumped 3.6% from one year ago – well above the Fed’s own long-term 2% objective.
Fed chairman Jerome Powell has stated he is willing to tolerate above-target inflation for an indefinite period to make up for previous periods of below-target price rises. But recent inflation pressures have clearly been stronger than he had anticipated (or had been willing to admit).
In comments last week, Powell blamed persistently higher prices on factors other than loose monetary policy: “It’s also frustrating to see the bottlenecks and supply chain problems not getting better – in fact at the margins apparently getting a little bit worse,” he said.
“We see that continuing into next year probably and holding up inflation longer than we had thought.”
Powell seems to have little concern about record government spending. He certainly has no qualms about buying up Treasury bonds by the trillions to help enable it.
Yet this process of effectively monetizing government debt with newly created currency is the primary driver of price inflation.
It’s not just Republicans who are growing concerned. Democrat Senator Joe Manchin is holding up President Joe Biden’s $3.5 trillion spending bill because he fears it would exact a heavy “inflation tax” on American families.
“What I have made clear to the President and Democratic leaders is that spending trillions more on new and expanded government programs, when we can’t even pay for the essential social programs, like Social Security and Medicare, is the definition of fiscal insanity,” Manchin said.
“Suggesting that spending trillions more will not have an impact on inflation ignores the everyday reality that America’s families continue pay an unavoidable inflation tax.”
The inflation tax tends to hit retirees and others on fixed incomes the hardest, along with those who are living paycheck to paycheck.
Investors who hold large portfolios of financial assets are at great risk as well. Bonds and most other income-producing instruments aren’t paying enough to keep pace with inflation. And stocks are vulnerable to being repriced to reflect the inflation tax drain on corporate earnings.
The way to beat the inflation tax is to own a portfolio of assets that have a good chance of outpacing the inflation rate.
Precious metals are among the most solid, time-tested inflation hedges. Despite their recent price weakness, history shows they can move rapidly to the upside during times when stocks, bonds, and other financial assets succumb to inflation.
That’s exactly what happened in the late 1970s, with gold and silver embarking on epic bull markets. The economic, political, and monetary pressures in place today may be leading up to a repeat.
You Might Also Like
The Fed’s ‘Dangerous’ Path Toward Debt Monetization
2021-10-01
A prominent U.S. Senator just called the head of the nation’s central bank “dangerous.” Unfortunately, the true dangers of U.S. monetary and fiscal policy were lost on everyone involved.
On Tuesday, Federal Reserve Chairman Jerome Powell testified before the Senate banking committee, where Senator Elizabeth Warren led the left wing of the Democratic Party’s attack.
The Changing Role of Gold
2021-08-20
In our post on August 11 titled End of an ERA: The Bretton Woods System and Gold Standard Exchange, we discussed the significance of then-President Nixon’s action of closing the gold window thereby ending the Bretton Woods Monetary system.
Under the Bretton Woods monetary system, central banks could exchange their US dollar reserves for gold. This also ended the gold fixed price of US$35 per ounce.
This week we explore the two questions that concluded last week’s article: What role can gold serve in the international financial system in the future? And why do central banks continue to increase their gold reserves?
Starting with the latter question of why central banks continue to increase their gold reserves?
This is an important factor in the gold market and therefore
The Month in Gold and Silver: Welcome to The Scoop – 8.13.21
2021-08-13
New series. Special guest. Don’t miss the first episode of our new monthly podcast: The Scoop – digging into the market with Kam Hesari. Kam’s first guest in none other Jim Rogers. Have a listen.
You can submit your questions to [email protected]
Visit our website www.sprottmoney.com for more news.
Moving from Gold-Redeemable to Irredeemable Currency
2021-08-04
When we saw the following comment from a prominent otherwise-free-marketer, we knew it was time to write this article. “…the value of the Fed’s "liabilities"(which are so in name only) [scare quotes and parenthetic comment in original] bears only a very loose connection to the value of its assets.”
Biden’s Dangerous Inflation Denials
2021-07-25
President Joe Biden is in denial about inflation. This week he superficially addressed the problem by admitting the obvious – that prices have been rising rapidly this year – while denying that the inflation surge represents anything out of the ordinary.
Ohio House Votes to Fix Blunder, Remove Sales Tax on Sound Money
2021-04-23
The Ohio House of Representatives just approved a bill which helps Buckeye State citizens protect themselves from the loss of monetary purchasing power caused by federal money printing. Introduced by Representative Oeslager, House Bill 110 includes a provision to eliminate the sales and use tax on purchases of gold, silver, platinum, and palladium coins and bullion in Ohio.
Stefan Gleason: The Big Inflation Scam
2021-04-18
Tom welcomes Stefan Gleason, president of Money Metals Exchange, to the show. The idea of sound money is something that holds it’s value over time in contrast to fiat currencies. The market has chosen gold and silver over thousands of years as the money that sustains and preserves purchasing power.
Rising Debt Means a Weaker Dollar
2021-04-11
Americans appear to be growing more concerned about the skyrocketing national debt level – officially $28.1 trillion and counting. The Peter G. Peterson Foundation’s monthly Fiscal Confidence Index recently shed five points, dropping to a level of 47, in the wake of the Biden Administration’s latest $2 trillion stimulus package.
Tags: Featured,newsletter