Core Final Demand Finished Goods PPI has led CPI and PCE inflation for 3 years. It has been skyrocketing, and hit +5.7% y/y in November. That’s core, folks. None of that flashy food, energy, and rent stuff. Just things you buy in retail stores. What the stores pay.
The purple line is total Fed system credit. The other lines are various measures of inflation. PPI core finished goods final demand is the dark red line, updated December 14 for November. CPI is the green line, updated as of December 10 for November. The blue PCE is October data, most recent available. Fed Assets are as of December 8.
They always tell us that monetary policy works with a lag. Who am I to argue. They’re the experts. Sure seems to apply to inflation.
However, economists and central bankers suffer selective memory loss.
“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” – Milton Friedman
The Fed and its Wall Street psychophants (new word) said it will only hurt for a little while.
I say the genie is out of the bottle. If the lag is stable, prices will continue rising for a year after the Fed flattens the balance sheet… When it flattens… If it flattens.
Chances are the Fed has finally created a problem so big, that it’s a Catch 22 for them. They can’t fix it.
Prepare for Market Doom, the Moment of Truth Is Here
