Read the Beforeitsnews.com story here. Advertise at Before It's News here.
Profile image
Story Views
Now:
Last hour:
Last 24 hours:
Total:

Three reasons why inflation is rising. Two of them aren’t going away

% of readers think this story is Fact. Add your two cents.


Sovereign Man provides actionable intelligence and rational solutions for personal liberty and financial prosperity. Read more at www.sovereignman.com

A remarkable thing happened yesterday that tells you everything you need to know about inflation.

In the morning, US Treasury Secretary Janet Yellen stated bluntly that “interest rates will have to rise somewhat to make sure that our economy doesn’t overheat. . .”

For economists, an ‘overheating economy’ means inflation. So she was essentially saying that rates would have to rise to prevent inflation.

Yet hours later, she completely reversed herself, saying that interest rates would NOT have to rise because “I don’t think there’s going to be an inflationary problem.”

You don’t need a PhD in economics to smell the BS.

Inflation is not some potential issue down the road. Inflation is already here.

As Warren Buffett told investors only days ago, “We’re seeing very substantial inflation.”

Plenty of companies have already announced price increases to their consumers–

Proctor & Gamble, for instance, announced price hikes across the board on just about everything from diapers to beauty creams.

Hershey’s announced in February that it would be raising prices.

Food giant General Mills complained in February about a “higher inflationary environment” and “input cost pressures” due to rising commodity prices.

Clorox, Shake Shack, Kimberly-Clark, Whirlpool, Hormel, and Woka Kola Coca Cola are among the many companies that have also announced price increases.

And according to Bank of America Global Research, the number of mentions of “inflation” on corporate earnings calls has increased 800% compared to last year.

Inflation is clearly a concern of the largest companies in the world. Investors are worried. Consumers can see it.

And in a rare moment of truth yesterday morning, a politician almost admitted that she was concerned about inflation too.

This is not some wild conspiracy. Inflation is real. It’s happening. Let’s look at three key drivers:

1) Capacity Constraints

Last year the entire world shut down. Businesses and factories everywhere closed, and plenty of companies went out of business.

Many companies who survived took radical steps to conserve cash– laying off workers, liquidating inventory, and selling equipment.

One critical consequence was that the amount of capacity in the system was greatly reduced.

Here’s an example: I’ve been in Cancun for several weeks, and as you know, this place is a major tourist destination.

Last year when tourism dried up, plenty of companies went out of business. Rental car companies, for example, had practically zero customers. Many went bankrupt. Others survived by selling off most of their vehicles, believing that it would be years before the tourists returned.

But a year later, the tourists are back.

Problem is, there are now very few cars to rent in Cancun, because rental agencies either went bankrupt or liquidated their inventories.

As a result, car rental prices in Cancun have surged; supply is scarce, yet demand is back to normal.

We’re seeing similar effects across the economy. Capacity is limited because of the extreme measures that businesses took last year. And they can’t simply flip a switch and bring capacity back to normal. It takes time.

They’ll have to invest in inventory, hire more staff, etc. Eventually, these supply/demand imbalances will stabilize. But for the foreseeable future, it’s driving prices higher.

This is the type of inflation that politicians and central bankers have been calling “transitory”. In other words, it’s temporary pressure that should subside in the future.

2) COVID lunacy

Hardly anyone talks about this… but just think about all the idiotic rules that people have to follow now.

If you own a retail store in a shopping mall, for example, you have to pay employees to stand at the door ready to hose down every customer who walks inside with hand sanitizer.

And imagine how much money businesses are spending now on PPE… masks, gloves, hand sanitizer, etc. Or companies (airlines, hotels, etc) that now employ legions of workers to chemically scrub every nook and cranny of the premises.

All of this costs money, and the extra costs eventually get passed on to consumers. Most likely, these measures are not going away… which means that COVID is extremely inflationary.

3) Trillions in money printing

This is the big one. The US federal government is hoping to spend a whopping $11 TRILLION this year, between the regular budget, COVID stimulus already passed, and all the new legislation they’re proposing.

And it’s only May.

Obviously Uncle Sam doesn’t have the money. So they have to borrow it.

Their chief remaining lender these days is the Federal Reserve, which first has to ‘print’ money before loaning it to the government.

(The actual process is more modern and complex, but that’s basically what happens in a nutshell.)

The more money the government spends, the more the Fed prints (roughly $4 trillion last year). And as this freshly created money makes its way through the economy, it typically ends up in financial markets, driving asset prices higher.

It’s not a coincidence that the Fed has created record sums of money, and the stock market is simultaneously at a record high. Ditto for real estate, cryptocurrencies, collectibles, etc.

Many commodities are also at record highs. Lumber prices have never been higher. Corn is near its all-time high. Oil prices surged from MINUS $40/barrel last year to $70 today– a difference of $110.

Higher commodity prices eventually lead to higher consumer prices.

High lumber prices, for example, mean that housing costs increase. Higher corn prices mean higher food prices. Higher fuel prices mean higher transport costs, which increases the price of almost everything.

So as long as the Federal Reserve is printing money and holding rates down to historic lows, these prices will likely keep rising.

Given the US government’s insatiable appetite to borrow money from the Fed, this inflation pressure is NOT going away.

And after what we saw yesterday, it’s clear that the government’s approach will be to ignore or dismiss inflation risks.

Source

Sovereign Man provides actionable intelligence and rational solutions for personal liberty and financial prosperity. Read more at www.sovereignman.com



Source: https://www.sovereignman.com/trends/three-reasons-why-inflation-is-rising-two-of-them-arent-going-away-32121/


Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!


Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST

Order by Phone at 888-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST

Order by Phone at 888-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST


Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)
Oxy Powder - Natural Colon Cleanser!  Cleans out toxic buildup with oxygen! 
Nascent Iodine - Promotes detoxification, mental focus and thyroid health.
Smart Meter Cover -  Reduces Smart Meter radiation by 96%!  (See Video)

Immusist Beverage Concentrate - Proprietary blend, formulated to reduce inflammation while hydrating and oxygenating the cells.

Report abuse
Loading...

    Comments

    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    MOST RECENT
    Load more ...

    SignUp

    Login

    Newsletter

    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.