The Long Dark Winter
14th April 2022
ZMan does an eyeroll.
The government released the latest inflation data and the results were the worst we have seen in forty years. The retail number came in at 8.4% and the wholesale number clocked in at 11.2%. Of course, the retail number excludes the things that people buy, like food, fuel and housing. These numbers also rely upon the new math rather than old math used the last time inflation was an issue. By the old inflation standard, retail inflation is over 15%.
The political class is poleaxed by these numbers as they have been assured that inflation at these levels was impossible. Modern economic theory says that inflation is caused by too much money chasing too few goods. We now have top men in place to keep an eye out for this. They just need to manage the money supply to keep inflation under control. This assumption led the top men to assume inflation was transitory, the result of supply chain issues.
That should be the first red flag when looking at the economic data. Those top men that are supposed to have a handle on the money supply say they are as surprised as the rest of us that food has doubled in price. A month ago, they were talking about a series of exceedingly small rate hikes. Now they are talking about a series of substantial rate hikes to prevent inflation from going even higher. You get the sense that there is both panic and confusion among those top men.