So-Called Transitory Inflation Soars!

May 13, 2021

* Currencies & metals get sold in a move to protect the dollar

* Markets believe that the Fed will hike rates to combat inflation? 

Good Day… And a Tub Thumpin’ Thursday to one and all! Well, besides the pain in my stomach from the pulled muscle, I do believe I’m through with the cold… A strange reaction to the inflation data has me really full of you know what and vinegar this morning! My beloved Cardinals couldn’t find their bats last night and lost, but our Blues played well and won their next to last reg. season game last night.  So it was a win one, lose one night… The Eagles greet me this morning with a song from their first album: On The Border…  Not a radio hit song, and not on their greatest hits, but a song that I always liked, and so it’s on my iPod!

Well, what have we here? A sign that the BLS is finally coming on board that inflation is roaring like a lion in our faces? In April, the Consumer Price Index for All Urban Consumers rose 0.8 percent on a seasonally adjusted basis; rising 4.2 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.9 percent in April (SA); up 3.0 percent over the year…  So, if you don’t drive, or eat, then your inflation rate is lower…  I still don’t get the reasoning behind taking food and energy out of the equation… Sure they can be volatile, but it’s not like people don’t use them!

That’s right 4.2% rise in the last 12 months…  Of course the BLS has a long way to go to catch up with John Williams’ Shadow stats, where he shows that CPI is actually 8% if we calculated it like we used to before Clinton and Greenspan implemented hedonic adjustments to the index…  Now, 8% kind of feels about correct, don’t you think?  And what do you think Gold did after this data print yesterday?

Well, it was scrambling to stay afloat, that’s what! The price manipulators made sure of that, as they showed up at the COMEX’s opening with arms full of short Gold (& Silver) paper trades… These no good varmints knew, like I did, that CPI was going to show a rise in inflation, so they made sure that there was no chance that the Gold bugs would be able to push Gold’s price higher on the data print…

So… here was the mindset of traders and investors yesterday… “Hey, let’s buy dollars, because they are going to come with runaway inflation!”  I say hogwash, this selling of currencies and metals had the PPT’s finger prints all over it… There’s just no way, that an intelligent trader, or investor saw the inflation data yesterday, and said, “Ooohhh, boy a buying opportunity for dollars”….  

I will say that one of the reasons given for the dollar run up yesterday was that with inflation soaring, the Fed will have to address this very soon with rate hikes…  And to that I say, Balderdash!  The Fed isn’t raising rates for at least another year, folks… Their Chairman said as much when last asked about inflation rising…  The Fed truly believes like  some economists that this inflation is only “transitory”…  Yeah, like income taxes, and removing Gold from backing the dollar were only temporary measures… 

So, the currencies got sold, Gold got sold, Silver got sold, bonds got sold, stocks got sold, shoot Rudy, even Bitcoin got sold, hmmm, Oh we did have a winner, winner Chicken dinner rising asset class yesterday, and it was… drum roll please… the price of Oil….  But that has been corrected in the overnight markets and now the price of Oil is under pressure too… What were Oil traders thinking, having the audacity to move the price of Oil higher, when everything else was getting the snot kicked out of it? They should have known better… But now they do! 

The price manipulators sold Gold down $22.50 to close the day at $1,1816.40, and Silver got sold down $64-cents, to close the day at $27.08….  The BBDX rose on the day from 1,120 in the morning to 1,126.68 at the end of the day…  As I looked at the currencies last night, I didn’t see one currency that held its ground yesterday, even the Steady Eddie Chinese renminbi/ yuan, lost ground on the day…

What to make of all this is confusing… The dollar bugs think the Fed is going raise rates to combat rising inflation, and Chuck thinks they are so wrong, they’re almost right!  That’s one of my fave sayings through the years, and I haven’t used it in a very long time! I think that this type of inflation, which, as I’ve explained previously, is systemic inflation, that’s created with fake money, stimmy checks, and more fake money…  An economist that I truly admire and follow, Dave Rosenberg, doesn’t see it this way and continues to say that the rise in inflation is only transitory…

Of course I never heard what he had to say about the rise in Wages that were reported a week or so ago…. But que sera sera….  I guess only time will tell, who’s right about this inflation and who’s wrong…  Bill Bonner had a great line in his letter yesterday, He asked if “inflation had brought its big pillow and suitcase to stay awhile”?  

In the overnight markets there was more dollar buying, as this totally incorrect theory, of the Fed needed to hike rates is permeating through the Global markets. The BBDXY is up to 1,127 this morning, and all the currencies, including the Aussie dollar (A$) and N.Z. dollar / kiwi, which had previously defied the dollar buying have finally succumbed and have lost major ground in the last two trading days.  

Well this is the day that Dennis Miller’s letter on the loss of the reserve currency status for the dollar comes out, and to add salt and pepper to the sauce, one of my fave economists, Danielle Di Martino Booth, had this to say over at, “U.S. dollar’s status as reserve currency is in jeopardy, ‘I’m bold gold, silver & platinum.”  

It must pain here to see what the price manipulators do to these metals from time to time, don’t you think? I say that, because it pains me… Now, I’m not one to worry about the actual price of Gold because I know I’m not selling my Gold or Silver, but I worry about short term Gold & Silver holders, and how they think these store’s of wealth metals are a commodity that gets traded daily…  Oh, well… it is what it is… and there’s nothing I can do about it, so I’ll move along here for these are not the droids we’re looking for… 

In other news yesterday the St. Louis Post Dispatch reported that Missouri Gov. Mike Parson followed several other Republican governors Tuesday in announcing plans to exclude Missouri from federal pandemic unemployment aid — ending a $300-per-week boost and extra weeks of unemployment pay, and chopping all benefits for gig workers and the self-employed, starting June 12th.

As you may know the Gov’t extended the unemployment benefits to Sept, but Parsons said that he thought the benefits were keeping people from looking for a job…  He’s probably right on that, for the most part, as thee would certainly be some unemployed people out there actively looking but not finding what they need… Because as I said about a year ago, some of those jobs aren’t coming back… And now we’re seeing that in living color… 

So, this will certainly cause some people some major problems… Just like when they also get the notice that they need to start paying rent or their mortgage payment again, and they look around to see if the Gov’t is handing out more fake cash, but…. Uh-Oh… There’s none to be had…  I feel for these people in this predicament, I don’t want to make it sound like I’m Mr. Freeze, with a cold heart to them… Just pointing out that there will be troubles ahead for the economy, and not all will be wine and roses going forward.

Today’s Data Cupboard will have the usual Thursday fare of weekly Initial Jobless Claims, which have really fallen in numbers in recent weeks… And again there will be a slew of Fed Head speakers out spreading lies… (My opinion)

To recap… Well inflation according to the BLS is soaring higher, to the tune of 4.2% in the past 12 months, or 3% less food and energy.  So, like I said above, as long as you don’t drive or use gas to heat your house or pool, and don’t eat, then you’re golden! Chuck thinks that the reason to buy dollars yesterday is hogwash, and the selling of the currencies and metals was all due to the PPT, protecting the dollar once again… here’s a memo for you dollar bugs… One of these days, your protection  isn’t going to be able to come to your aid, and then whatcha gonna do?

For What It’s Worth…  Since today’s edition of the Pfennig is all about inflation, I thought the FWIW article needed to be a good follow up, and I think I have one for you… Longtime well thought of and king of economists, James Grant, gives us his thoughts on inflation and the Fed’s ability to contain it…and it first appeared on Peter Shiff’s website… And it can be found here: Jim Grant: The Fed Can’t Control Inflation | ZeroHedge

Or, here’s your snippet: “In a recent talk, Jim Grant, investment guru and founder of Grant’s Interest Rate Observer, echoed Peter, saying the Fed can’t control inflation.

During a webcast sponsored by State Street SPDR ETFs, Grant said he thinks “there’s a gale of inflation of all kinds in progress,” adding that he believes it will take the Fed by surprise and “overwhelm our monetary masters.” Grant said, inflation is “clear and present and will manifest itself in our everyday lives.”

That sounds like the exact opposite of Powell’s “transitory” mantra.

Peter has said that once the Fed is forced to admit that inflation isn’t transitory, it will be too late to take action. Grant made a similar prediction, saying inflation will “catch the Fed flatfooted. In response it will “prevaricate” – meaning speak or act in an evasive way. In fact, that already seems to be the central bank’s strategy.

The question is can the Fed actually control inflation. Grant doesn’t think so.

I think the Fed is under the misconception that it controls events. Sometimes, events control the Fed, and I wouldn’t be surprised if this was one of those times. The Fed thinks that not only can it control events, but it can measure them. It believes it can pinpoint the rate of inflation.”

Grant believes that the economy can only tolerate 2.5% real rates. If that is breached, he thinks the Fed will have to resort to yield-curve control. If it does actually try to shrink its balance sheet and sell bonds, it will drive bond yields even higher. Fed bond-buying is the only thing propping up the bond market right now.”

Chuck again… Well, one of the many things that I learned from Frank Trotter was to listen to what Jim Grant says… And I always have… And Jim Grant is correct that the Fed only has so many arrows in its quiver to use for rate hikes, before all hell breaks loose in the financial system…

Market Prices 5/13/2021: American Style: A$ .7710,  kiwi .7158,  C$ .8248, euro 1.2070, sterling 1.4034, Swiss $1.1012, European Style: rand 14.1040, krone 8.3826, SEK 8.4354,  forint 295.69,  zloty 3.7640,  koruna 21.1848, RUB 74.32, yen 109.56, sing 1.3350, HKD 7.7672, INR 73.59, China 6.4444, peso 20.13, BRL 5.2454,  BBDXY 1,117.17,  Oil $64.43,    10-year 1.70%, Silver $26.90, Platinum $1,208.00, Palladium $2,902.00, Copper $4.74, and Gold… $1,814.10

That’s it for today… What a way to lose a game last night for my beloved Cardinals… strike out a guy with a 101 mph heater, and he reaches base because the catcher couldn’t handle the pitch… That runner came around to score the winning run…  UGH!  I was just looking over my picture board here that looks at me at my writing desk, and noticed that I have a slew of pictures of Alex, four of Andrew, and three of Dawn, a lot of Delaney, a couple of Everett and Braden, and the rest is hodge podge of pictures, with only one with little Evie. It’s a picture of me holding her when she was just hours old, and you can already tell I’m smitten with her! Don’t know why I went through that, but I did… Cat Stevens takes us to the finish line today with this song: Moonshadow… “I’m being followed by a moonshadow, moonshadow, moon shadow”…  Now, if you’re like me (heaven help you!) that song will be an earworm for you all day!  I hope you have a Tub Thumpin’ Thursday today, and please Be Good To Yourself!

Chuck Butler