The Over-Hyped Inflation Panic
Author: Greg Valliere
November 23, 2021
THIS CITY IS GRIPPED by an inflation panic, fueled by pervasive media hysteria that even extends to the weather. It’s going to be cold !! There could be major rainstorms !! We never underestimate the media’s desire to boost ratings and sell newspapers.
INFLATION WILL BEGIN TO SUBSIDE BY SPRING: Oil prices already are falling, and clogged ports are beginning to loosen up. But the over-reaction may persist today as Joe Biden delivers a speech on inflation and may announce an opening of the Strategic Petroleum Reserve, a relatively meaningless gesture that might knock a few cents off the price of gasoline.
BIDEN APPARENTLY WILL INTENSIFY his populist bashing of big business for its alleged collusion and price-gouging, but the collusion seems more apparent by dockworkers in Long Beach, California.
AFTER YEARS OF TRANQUIL PRICES — despite weekly fear-mongering by the Wall Street Journal editorial page — the Cassandras finally got some inflation, just as a broken clock is correct twice a day. The irony with this panic is that the economy is indisputably strong.
MOST PRIVATE FORECASTERS expect about 5% GDP growth this quarter; the Atlanta Fed GDP forecast, admittedly on the high side, is for an 8.2% rise. And growth in the first half of 2022 — lubricated by two years of monetary and fiscal stimulus — should be solid.
REPUBLICANS ARE LOOKING FOR AN ISSUE — any issue — to divert attention away from the Donald Trump train wreck, so they have gained traction with an argument that the economy is terrible. It’s not. The unemployment rate continues to plunge and could be close to 4% by the end of winter, a tremendous boost for real disposable income.
IN THE TWO MOST REPUBLICAN STATES IN THE UNION — Nebraska and Utah — the jobless rates are 1.9% and 2.2%, respectively.
YET INFLATION HAS SPOOKED Washington and the media, even though we’re tempted to offer this bit of heresy: there’s some upside to inflation. People have gotten raises — a 5.9% hike in Social Security benefits, generous new labor contracts, etc. — and virtually everyone who owns a house has enjoyed significant appreciation.
PRESIDENT BIDEN NEEDS BETTER MESSANGING: Like most Democrats, he’s afraid to boast that the stock market seems to finish at record highs every few days. The markets anticipate a future of decent economic growth, full employment, solid earnings, remarkably low interest rates and inflation that will level off.
AND LEST WE FORGET, these solid fundamentals should persist despite the worst global pandemic in 100 years. There was no template for dealing with it; policymakers were in totally uncharted waters.
SO AS THE MEDIA RANTS about inflation, huge storms, and clogged airports,
we suggest that everyone needs to take it down a notch. The economy is solid, a
remarkable Thanksgiving gift considering where we were just one year ago.
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