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BREAKING: Bidenflation Soars to Shocking New High

This morning data from the Labor Department was released showing the Consumer Price Index, the Federal Reserve’s favorite gauge of inflation, reaching an astounding 41-year high of 9.1%. This beats May’s 40-year high reading of 8.6%. Prices have continued to increase across the economy perhaps most noticeably in gasoline which increased 11.2% from May.

It’s also important to note the criticisms of CPI as it measures what a “basket of goods” would cost a consumer. This measure is indexed for selected goods and may not actually reflect the true increase in the cost of living for a consumer. This is why people are confused when their gasoline costs have risen 60%, electricity 14%, housing 20%, etc., but the CPI only suggests 9.1%. So, the inflation of your true cost of living is likely much higher.

According to Peter Schiff, CEO of Euro Pacific Capital Inc., “The government always makes changes to their methods of measuring things, whether it’s GDP, or inflation, or unemployment. And they always tweak the numbers to produce a better result as a report card,” when discussing CPI. He further elaborated, “They’re the ones that are cooking the books to pretend that inflation is lower than it really is.”

In light of this inflation, the Federal Reserve is likely to continue to hike interest rates at unprecedented levels going forward as their recent efforts have done nothing to quell the inflationary environment we are seeing. In June, the Fed raised the Federal Funds rate (a benchmark for interest rates across the economy) by 0.75%. An increase of this magnitude has not been seen for nearly 30 years. If 75 basis point hikes aren’t effective, what will be next?

The Fed is trying to pull off a challenging and rare “soft landing” where they raise borrowing costs enough to slow the growth and inflation, but not plunge the economy into a recession. However, it appears the Federal Reserve has waited too long and done too little with their interest rate increases for the possibility of such an outcome. If the Fed wants to cool inflation, it may require much higher interest rates than anticipated which would raise unemployment and significantly slow economic growth as a consequence.

For two years we have seen massive expansionary monetary policy where the Federal Funds Rate has been at 0% alongside Quantitative Easing, where securities are purchased to inject money onto the balance sheet of banks who will lend it at low interest rates, spurring economic activity. This did a great job of creating substantial economic growth during the pandemic, however, 40% of every dollar in the money supply today was printed over the last two years. Whenever the supply of money is increased at such unprecedented levels, inflation is inevitable.

Investors have responded to inflation readings as well as the Federal Reserve’s rate hikes throughout 2022. The S&P 500 and the Nasdaq are in bear market territory halfway through the year and, in recent weeks, there has been a commodity sell off for oil, copper, wheat, and corn, suggesting the expectation of slowing global economic growth. Furthermore, 70% of leading academic economists see the US tipping into a recession within the next year, according to the Financial Times.

Position yourself accordingly. Allocate your investments away from riskier assets and build up a strong emergency fund.