Inflation raged on in February, driving consumer price increases to a place we haven’t been to in four decades.
The latest numbers include a paucity of signs that inflation us leveling off, muchless subsiding.
What’s more, they largely exclude the impact of Russia’s invasion on oil, gas and other global commodity prices.
Most economists and WallStreeters, the Biden administration and members of Congress—especially Democrats—have been counting on inflation peaking early this year.
Unfortunately for them—not to mention consumers and businesses—the numbers are suggesting persistently high inflation for the foreseeable future.
By Dave Allen for Discount Gold & Silver
Inflation raged on in February, driving consumer price increases to a place we haven’t been to in four decades.
The latest numbers include a paucity of signs that inflation us leveling off, muchless subsiding.
What’s more, they largely exclude the impact of Russia’s invasion on oil, gas and other global commodity prices.
Most economists and WallStreeters, the Biden administration and members of Congress—especially Democrats—have been counting on inflation peaking early this year.
Unfortunately for them—not to mention consumers and businesses—the numbers are suggesting persistently high inflation for the foreseeable future.
The CPI-U rose 0.8% in February and was up 7.9% over a year earlier—the steepest annual rise since 1982. Over the last three months, prices are up 8.4%.
The steepest monthly increases were for gasoline (6.6%) and fuel oil (7.7%). But there were price surges for many non-energy items, too, such as airfare (5.2%) and fruits and vegetables (2.3%).
Rents were up 0.6%, and the equivalent rent on homes people own rose 0.4%, which reflect very large jumps for some of the biggest pieces of consumer spending.
Prices for oil, wheat, and many other key commodities have surged since the Russian invasion of Ukraine began February 24th—pointing to higher prices in the coming months.
High Inflation Adding to Debt
To make matters worse, Americans are going into debt to deal with it after increasing their savings in the heart of the pandemic when federal stimulus funds were flowing.
Low-income people are particularly affected by inflation, particularly the rising cost of rent, gas and food.
According to LendingTree, about one-third of Americans have added credit card debt during the pandemic—and of those, about half say inflation was the biggest reason.
Inflation was a bigger reason than job loss, pay cuts, medical bills or childcare.
Despite impressive wage gains over the past year, about 3 in 5 banking customers say "the price of goods they buy are increasing faster than their income," according to J.D. Power.
Rising inflation is coming with rising interest rates, as the Federal Reserve will start its tightening in the coming week—making the cost of all sorts of debt increase even further.
At the same time, the surging cost of gasoline this month hasn't even yet factored into the government's CPI numbers.
That’s why many economists expect March numbers to hit or exceed 9% annually, with April numbers approaching 10%.
(John Williams of ShadowStats.com, applying government methodologies used in 1990 and 1980, believes CPI inflation is already between 13% and 16%.)
Prices at the gas pump reached another all-time high last Thursday at a national average of $4.32 per gallon, up $1.50 or 53% from a year ago, according to AAA.
Their rule of thumb is that every $1.00 increase in the price of gas costs about $1,200 per household per year.
That could put a big crimp in many middle class and poorer Americans’ vacation and savings plans, coming out of what appears to be a long-awaited break in pandemic woes.
How to Ease the Impact
Economists and politicians alike are talking about what steps to take to ease the impact of soaring gas prices on consumers.
California Gov. Gavin Newsom has said he would be floating “a proposal to put money back in the pockets of Californians to address rising gas prices.”
Several economists have floated the idea of lawmakers sending out “gasoline vouchers,” potentially targeted at low-income citizens.
Democrats who want to tackle climate change will have to decide whether they’re willing to hand over money for people to spend on the fossil fuels they’re trying to wean off of.
And Republicans will have to decide whether they're OK with the government borrowing more after close to $6 trillion in stimulus spending over the past few years (not including the Fed’s ballooning balance sheet).
Notably, the November midterms are coming fast. It’s an election year, and consumers have literally been stunned by gasoline prices.
In the age of almost anything goes, it’s a perfect storm for rebates or vouchers—and big changes in Congress and state houses.
Bottom line…it looks like high inflation is here to stay—at least for awhile. And that will have profound impacts across the country…and globe.
Spot Gold finished the week just shy of $2,000, rising another $20, from $1,971 last Friday to $1,991 today—after hitting an all-time high of $2,052 and change on Tuesday.
For the first 10 weeks of the year, gold is up 9.2% (silver is up 11.2%). Don’t wait for gold and silver to surge to the next level; consider adding more to your portfolio now to lock into today’s prices.