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2022-05-11 08:46 by Karl Denninger
in Macro Factors , 950 references Ignore this thread
Honey, What's That Smell?
[Comments enabled]

It might be the dog.... but do check the curtains -- they may be on fire.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in April on a seasonally adjusted basis after rising 1.2 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.3 percent before seasonal adjustment.

The 900lb Gorilla in the room is the food index, which was up 0.9% on the month, and 1% for food at home.  Much worse, all items less food and energy was up 0.6% which was double the same index for last month.  This is the much-watched "core" inflation number and it is smoking hot, as I expected to both occur and continue since while everyone loves to claim fuel is "transitory" it matters not what you think since everything moves by truck for the last miles, and often for all the miles.  Stick diesel north of $5, in some places materially so, and the price of literally everything rises.

A lot.

Food is up 9.4% for the last 12 months, a figure last eclipsed in April 1981.  We all know what was going on then, right?

Yeah.

50 bips increases?  We should have an emergency 100bips right now, but you know they won't.  And just like it took a year for Trump's Congressional crazy from the pandemic "credit shower" to show up in wild price acceleration it will take 12-18 months for it to stop if and when Congress does stop it, and that is after The Fed stomps it.

Which they have to, because at this rate of acceleration people starve in relatively short order.

Again, to remind you -- you can't give away more welfare of whatever form to "help" because the sequestration mechanism of the last 30 years, which is international trade where the clearing is in dollars, has been permanently shut down by the Russian sanctions related to the Ukraine war.  This is not reversible in the short term and, in all probability, will never be restored at all, with the most-likely outcome over the intermediate term that sanity comes back (that is, international trade clears in the currency of the producing entity) since that is the one the producer ultimately needs to spend for the next order to be produced.

Looking through the table all manner of things completely unrelated to food and energy, and unrelated to Russia/Ukraine, so everyone thinks, are up double-digits.  Floor coverings, curtains, furniture, major appliances, clocks, tools and hardware, outdoor equipment (e.g. lawn mowers and weed whackers), tires, vehicle parts, oil, coolant and other vehicle fluids and even stationary.  Want to take a trip?  Lodging (e.g. motels, hotels and similar) is up 22.6% over the last 12 months.  Maybe a six-pack on the back porch will do instead.

Oh, and lest you think insurance is not in the game, health insurance is up 10% too.  Gee, I wonder why.

The other Gorilla in the room, fuel oil aka diesel fuel, is up 80% from last year.  Until and unless that is stopped and the price comes back downwhich will only happen if and when the government ceases its war on fossil fuels, there is no way for the general upward pressure on prices to be reversed.  Every piece of farm equipment forward to the delivery of the food to your store runs on diesel.  Every single item you buy travels at least the last part of its journey moved by diesel.  I do not care how you "feel" about the issues related to the use of fossil fuels, the simple reality is that without them you have no fertilizer, no food and nothing in the store so all of the claims of virtue you issue will make you broke or even cause you to starve.

That's your choice America.  Either be broke or not, but stop thinking that's not what the cause of this comes down to.  It does, and anyone who fails to appreciate that trade sequestration is why we got away with credit emission for 20 years without it instantly blowing up in our face -- and that this is permanently gone as a direct result of our own actions with regard to the Russia/Ukraine conflict -- adds wild-eyed crazy to go along with being broke.

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Ktrosper
Posts: 5469
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ft collins co
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Pain focuses the mind.
Are we paying attention yet?

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The unexamined life is not worth living.-Socrates
The only stable state is the one in which all men are equal before the law.-Aristotle
Liberty exists now in the spaces government has not yet chosen to occupy.-Doc Zero
I anticipate that 10 Dallas Cowboys Cheerleaders will blow me this evening.-K.D.
Quietrally
Posts: 66
Incept: 2009-06-10

USA
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Ive been reading you since around 2008 Karl, and what is happening now is what I thought was going to happen then. Its amazing to finally see the chickens coming home to roost after all these years of shaking my head in disbelief. Finally, reality and the truth can no longer be ignored.

The millennials and younger people who dont remember are getting their heads chopped off by crypto and stocks. Adjustable rate mortgages are now the hot thing. Gold and silver bugs will once again watch their PRECIOUS tumble, along with all other assets when deflation finally arrives.

Given the actions of Congress and the White House of late, civil unrest seems almost inevitable.

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D+(R/Tea Party ) = Same Outcome
Jack_crabb
Posts: 14095
Incept: 2010-06-25

Peoples' Republik of Maryland
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Quote:
Are we paying attention yet?


BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA [gasp...gasp] BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

On another note, I just paid $5.9999 a gallon for diesel.

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Molon Labe
Where is Henry Bowman when you need him?
How many are willing to pledge this? We mutually pledge to each other our Lives, our Fortunes, and our Sacred Honor
Ocdawg
Posts: 251
Incept: 2019-03-14

Let's go Brandon, WI
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Trip to store yesterday for razors, deodorant, conditioner, gel, shaving cream, and body wash...

$47.00=
I-N-S-A-N-I-T-Y!!!
smiley

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"I have certain rules I live by... my first rule...
I don't believe anything the government says. The government doesn't lie; it engages in disinformation"
-George Carlin smileysmileysmiley
Orangecrush
Posts: 13
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United States
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The cognitive dissonance is just too high off the charts for most Americans and Westerners it seems. They will come close to starvation before they begin to think 'gee, maybe this green virtue signaling isn't a good idea after all'. FWIW, My personal observations are a few acquaintances that are beginning to have their blinders come off, but the vast majority march merrily along with tweets and instagrams glorifying their idiocracy.

Has there every been another time in history when a culture willing committed suicide because they refused to access the God-given natural resources of their land? A collective insanity appears to grip our national mood -- green = good, fossil fuels = Satan incarnate.
Ihsmta
Posts: 754
Incept: 2008-04-10

Midwest, USA
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87 octane E-10 passed $4.09/gallon here. I can never remember gas that high in my nearly 60 years.

Based on my experience on the farm back during the 1970's Fuel Crisis, the local ag cooperative had contingency plans for rationing fuel to farmers based on past purchases. Don't think that isn't quietly being drawn up again behind the scenes.

While inflation is a bitch, scarcity is a nasty bitch.

IMHO, we are nowhere near the deflationary tipping point yet. Rates are still too low, too much credit has been emitted (and is still available), and the asset price trajectory is still upward.

My experience in the ag sector indicates that, based on the C19 fiscal/monetary shenanigans, banks are still stuffed with capital and desperate to lend. Gas being thrown on the fire (at north of $4/gal, of course...).

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"Economists are no different than the prophets of ancient Pompeii who reassured that Mt Vesuvius would never blow. After all, it never had before." Baxter Black, DVM and Cowboy Poet

"You can avoid reality, but you cannot avoid the consequences of avoiding reality." Ayn Rand
Winesorbet
Posts: 377
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Diesel is $6.55 here
Shadowmask
Posts: 2721
Incept: 2021-05-24

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Boobus americanus won't pay attention until they are unable to pay the minimum on their credit cards along with a bill or three. Too late at that point, the time to act was months ago.
Greenacr
Posts: 481
Incept: 2016-03-15

Northern Ohio
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LMAO

Biden can't get out of his own way on any subject. Has a special news conference to tell us that inflation is his number one priority and that he will fix it my helping with childcare, etc.

I don't see this getting any better and it feels like the price of everything has a compounding nature to it.

The Fed's unwillingness to do any type of an emergency rate cut just tells you that we are still behind the curve on this thing.
Eoinw
Posts: 78
Incept: 2021-07-14

Canada
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I wanted to thank TG and the commenters for all the information on what's going on elsewhere.

Things continue to be mostly quiet here. A 4L bag of milk jumped from $4.49 to $5.39 in every grocery store the end of last year. Plus I filled my gas can last spring for $1.20 a litre and this spring it was $1.80! However they've been the only price rises I've seen. Yes real estate is still insane but that's nothing new.

Now I've basic shopping habits, buy the sales and stock up. Also I own my own house, paid off, and with no debts. I'm not a normal barometer for what most people are experiencing. I certainly fear for the younger ones as they've never been given a chance...and things are about to get impossible for them.

Despite the "calm before storm" feel to things, I'm expecting everything to be from 20% to 50% more expensive a year from now. Suddenly regular prices look like sale prices!
Smacktle
Posts: 6817
Incept: 2009-01-20

Texas
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Somebody here has said multiple times that they want to kill us all. If you don't understand that, then you are hopeless.

$60 to fill up my little car. All these friends with these big trucks having to use 2 credit cards to fill them up.

My urge to buy more ammo is strong this morning. Looking for the best deal and 5.56 is what I need at this point. Gonna need that rifle soon.

Thank God I followed Karl's advice, got serious and lost the weight.

Get your house in order. Prepare, prepare, prepare.

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YES! **** TWITTER
Spaceace
Posts: 135
Incept: 2019-05-09

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A great follow-up to the RLA interview. I am starting to notice a lot of discretionary items staying on the shelves that used to be scooped up. But then that should be expected when gas goes from $3.69 to $4.29 in a day. My kids always asked me what it was like to grow up in the 70's. Well, they're learning now, except the music sucks this time. I am curious as to when demand destruction really kicks in. In the meantime, I moved a 401k into an IRA to get out of the casino. Sure it went down, but it was still up from two years ago. Oh well, time to go out and plant the peas in the garden. Thank goodness, I bought a lot of Ten Ten Ten to fertilize last year. My neighbor bought his fertilizer a week and a half ago and his cost tripled! The captain has turned on the Fasten Seat Belts sign. Enjoy the ride.
Mjeff87
Posts: 335
Incept: 2021-11-22

Richmond, VA
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I took a mental health day from work yesterday. Got a bunch of little things done around the house, and was then planning to go to the range for a bit of stress relief. Decided not to, because the drive is 30+ minutes each way and just like Smacktle says, it cost me $50 to fill up my little econo-****-box daily driver. I'll plan a range trip later on this week when I'm in the area for other reasons.

One of the local supermarkets marks down most all of their proteins in the fresh counter on Thursdays (marks them as "Manager's Specials") to get ready to put all new out for the weekend shopping crew. I've been loading up on beef/pork/chicken/sausages and vacuum sealing them in 2-person portions. I need more 5.56 but refuse to pay .45-.50/round. A local place was selling Xtac for $8.99/box awhile back, I need to see if they still are.

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Si Vis Pacem, para Bellum
Synopsis
Posts: 32
Incept: 2010-02-05

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At some point, for any given product, you are going to quit buying stuff. If your wages are $20 per hr and bacon is $20 per pound, is it worth 1/8 of your day for the bacon. The notion that prices can keep rising are ludicrous.

Unless wages keep up with prices it just isnt sustainable - period. Either prices will have to come back down or we all get 25% raises.
Kirklandguy
Posts: 8
Incept: 2022-02-14

Ohio
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Quote:
Ive been reading you since around 2008 Karl, and what is happening now is what I thought was going to happen then. Its amazing to finally see the chickens coming home to roost after all these years of shaking my head in disbelief. Finally, reality and the truth can no longer be ignored.


This is exactly my thoughts as well, and I've been reading Karl since around the same time period. Our warmongers in DC might have finally found a way to stop kicking the can down the road. These CPI (and likely PPI) prints are just brutal, and the Fed is derelict in their duty by not having done multiple emergency intermeeting rate hikes already by now.
Not that the Fed being derelict in their duty is anything new...
Tickerguy
Posts: 183871
Incept: 2007-06-26
A True American Patriot!
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You WON'T get the raises.

Indeed major corporations have spent the last 20+ years figuring out how NOT to pay even federally mandated minimums on a wage and hour basis. I know exactly how some of them are doing it, their executives should be tossed in prison for it as a deliberate evasion of the law, but of course since its "big business" they won't do it because it would take what is already a ruin in stock prices and make it exponentially worse.

Here's the problem: That's why the stock price went up, in many cases, in the first place. That which can't be funded won't be, even if it looks ok for a short while.

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Civil Society requires 99%+ consent.
Stop consenting and it is forced to stop. Always.
No violence required.

Tappedout
Posts: 82
Incept: 2020-09-21

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"Boobus americanus won't pay attention until they are unable to pay the minimum on their credit cards along with a bill or three. Too late at that point, the time to act was months ago."

I once told people "If you ran your business or household like the people that represent you run this country, you'd be headed for jail."

Not anymore.

What's the natural reaction and behavior to what people see? They see their gov spend what they don't have. Print money, give it away, and kick all cans down the road that obviously leads to insolvency.

What I see is that people are already waking up and running their lives in the same manner. They are maxing out every line of credit possible/using their own printing press. Then they plan on going to cash only off the grid, and/or hope for another round of free money/debt forgiveness by the gov.

I'm not saying that will happen. I'm saying people don't care anymore. This country has never been more "I only care about what I can get" than ever before. That's what happens when gov stops paying attention to the people. They realize they are on their own, and do exactly the same as they see others doing, and getting away with.

And I'm just as guilty as anyone. I could have walked away from employer after they tried to control what goes into my body. I decided to fight back, and now I'm roasting them over coals, doing 50% of what I did before. And Monday I'm asking for a raise because of inflation.......

The sooner this plays out the better.
Jc3
Posts: 325
Incept: 2020-03-02

South Texas 93 miles from Houston
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Recall reading article after article by our host here about "the can being kicked down the road" since coming here in the early 2000's "until it became too full of bricks or cement and could not be kicked any further". Here we are, again.

Never knew "sniping" on FleaBay in the last decades would be useful now but here we are, actually watching and waiting for online retailers to screw up and post something we NEED(i.e. food, oil for vehicles, oil filters, supplements, ammo, everything that is a NEED) for lowest price or wrong lowest price....and BOOM...buy a case or two.

@Smacktle there will be a huge market for used/repo'ed pickup trucks and large SUV's once food becomes a priority and the credit runs out. That Toyota Corolla wifey got at retirement in 2016 is now the primary drive for my 43 miles per day work commute.
Pavolley
Posts: 105
Incept: 2016-05-25

PA - Wolf's lair :-(
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The other stench came out of DC last night. $40B to Ukraine (10% to the big guys) brought to the floor 3pm with immediate vote sans reading. Why, we know why. They knew it wouldn't look all rosy today with the inflation, so they rushed it through last night. Spend, spend, spend. Got a problem over there, we'll throw more money at it (midterms coming up and need to fund it). Just one Vlad, just one, right up the tailpipe.
Lizardqueen
Posts: 4341
Incept: 2008-04-01
A True American Patriot!
Upper Moonbatistan
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I honestly don't know how working families with kids are managing this mess, especially those with teenage boys who eat a fridge full of food in a day.

I was in Trader Joe's on Sunday and noticed there wasn't a single item other than maybe candy bars that were under $2 and anything that was was 1.99.
We've been doing grocery pickup of a standard list of perishables for awhile and I hadn't been physically in a store for awhile so the prices were shocking to me. I knew our weekly pickup was going up but hadn't seen what other items on the shelves were doing. Holy crap.

I tended in the past to overbuy if I saw something non-perishable at a really good price (and my favorite "retail therapy" store was a crash-n-dent railroad salvage type place). This paid off for me as now as I can "shop the basement" until I run out down there.
Hubby always balked but now he's not complaining that there are 12 sticks of deodorant and 10 jugs of laundry detergent down there LOL.

What worries me the most is the scarcity potential. Like you said, no (or too expensive) diesel means no anything as the entire country runs on it. I'm personally lucky in that I live in a rural food-producing area so we will have local small-scale options that other areas of the country won't, but it's not just food that will start to vanish. High-priced is bad enough but Not There is a whole other issue.

The Greentards are not going to be happy until we're sitting frozen in the dark eating locally produced twigs.

A few other things I have noticed that to me are tells that the wheels are coming off:
I'm starting to see more online sales and promos on discretionary items, likely because people are diverting their money towards necessities.
A lot of bare building lots are coming onto the market locally that I've never seen before. This to me tells me that with the cost of building materials rising into a softening housing market the builders are throwing in the towel and getting out.

LQ


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"Pull your pants up, turn your hat around, and get a job"
---P.J. O'Rourke
Blanca
Posts: 422
Incept: 2020-07-25

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The CPI is still running over 8%. Even with a 10% raise (did anyone get one of those?), you are behind the CPI increase after you pay your taxes on the increased income.

The dummies are being distracted from the terrible economic news with yet another huge gift to Ukraine to buy weapons. $40B. No one's talking about how we are going to pay for all the increased war spending. Other than minuscule increases in the FED rates, nothing is being done at the federal level to lower inflation.

For a family of two, I am now spending about $200/mo more than I spent on groceries just one year ago. A family of four may be double that. How many Americans have that kind of spare cash laying around? Charging up the credit cards to eat isn't sustainable!
Aquapura
Posts: 2954
Incept: 2012-04-19

45th parallel
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One thing I always look at when I fuel up is what the last guy paid. There have always been a lot of $10 even, or other even dollar amounts under $20. Who does that other than people without any extra cash to pay? People have always been broke and living on that perpetual edge. The difference now is that last $10 or $20 in your pocket doesn't get you much. Woo-hoo, two gallons of gas. Depending on where you live and what you drive that might cover one day of commuting.

And my anecdotal evidence doesn't come from a poor area. Decidedly upper middle class. On the weekends the Costco parking lot is like a used car lot of luxury German and Japanese vehicles and you see people spending lots and lots of money on total discretionary things like decorative flower pots and stuff...but if I look beyond that bubble there are a lot of people living on the edge and likely ready to fall off into the abyss given some more pressure.

Oh, look at that, gasoline popped 10 cents overnight and staple food items like milk, bread, eggs are up again. This-does-not-end-well.
Tickerguy
Posts: 183871
Incept: 2007-06-26
A True American Patriot!
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The only time I do that is when I'm on fumes and wherever I am is trying to******me up the ******* on price -- and I know down the road 10 or 20 miles is better.

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Civil Society requires 99%+ consent.
Stop consenting and it is forced to stop. Always.
No violence required.
Rufust445
Posts: 917
Incept: 2007-08-11

Emerald City
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Ocdawg wrote..
Trip to store yesterday for razors, deodorant, conditioner, gel, shaving cream, and body wash...
Razors? You mean those plastic things, disposable or cartridge, that have been selling for outrageous prices even before this wave of inflation? Ditched those not long after I found tickerforum. I rediscovered double edge razors, using double edge blades, $16 for 100, over a year's supply, 3-4 shaves per blade. Takes a bit longer, but the shave is better and lasts longer.

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"The stock market isn't bullish, it's bull$hit." -- Alan King
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