Shocker! Price Inflation on the Rise

November CPI Data

This morning the Bureau of Labor Statistics (BLS) released the CPI data for the month of November and found that price inflation increased at a faster rate than in October. Predictably, market pundits, officials and state-owned economists are reporting that these figures are "in line with expectations." As if to say: all is going according to plan.

But "everything going according to plan" is only true if chronic price inflation fueled by a relentless expansion of the money supply is desired. Perhaps it is, but it certainly isn't a plan that gained the consent of everyday Americans who lack both political connections in Washington and the ability to preserve the value of the money they're forced to use.

This month's Core CPI and CPI: All Items indices both registered increases in prices (shocker), while CPI: All Items registered an increase in the rate of price inflation. Core CPI is the "official" price inflation measure of the BLS and is their chosen reporting metric because it doesn't include food and energy prices. The BLS's reason for this is that these two categories are "too volatile." In other words, food and energy prices are much more relevant to average Americans, so price increases in either of these categories would make price inflation look really, really bad! And it does...

CPI: All Items showed that the year-over-year (YOY) percentage change in price inflation was 2.7% in November, up from 2.6% in October. The rate of growth of the All Items metric has been increasing every month since September when YOY price inflation was measured at 2.4%.

On the other hand, Core CPI measured YOY price inflation for November at 3.3%––higher than the unofficial 2.7%. However, while the rate of growth of Core CPI has remained flat since August, these data report the YOY change in prices. In other words, for four consecutive months prices have been 3.3% higher than prices recorded in the corresponding month from one year ago. The reason for this lack of change in the rate of Core CPI is due to its exclusion of food and energy prices. Food prices increased by 2.4% on a YOY basis while energy prices have decreased––in particular, oil and gas. 

In July, West Texas Intermediate crude oil was $84 per barrel but is now only $70 per barrel as of December 11th. The CPI reported that total energy prices have decreased YOY by 3.2% with gasoline and fuel prices decreasing by 8.1% and 19.5%, respectively. Still, the All Items index managed to register an increase in YOY price inflation because food prices are weighted more heavily than energy prices.

Price increases, of course, are not at all surprising to those who understand that the Federal Reserve's policy is to ensure a constant increase in the quantity of money and therefore continually higher prices. The recent changes in price inflation are the result of the FED's decision to cut the Federal Funds rate in September by 50 basis points (.5%) and again in November by 25 basis points (.25%)––and increasing the money supply to do so.

What Ever Happened to "Inflation has Cooled"?

Price increases, of course, are not at all surprising to those who understand that the Federal Reserve's policy is to ensure a constant increase in the quantity of money and therefore continually higher prices. The recent changes in price inflation are the result of the FED's decision to cut the Federal Funds rate in September by 50 basis points (.5%) and again in November by 25 basis points (.25%)––all the while increasing the money supply to do so.

As of this week the money supply (M2) is $21.39 trillion, $868 billion higher than the relative low in October 2023 and as high as it was in January 2023. Monetary expansion of this sort is a tell-tale sign that the FED isn't confident in the U.S. economy and is so desperate to prevent it from imploding that they're willing to inflict even more price increases on Americans just to avoid it.

Understand that the FED's one and only power is control over the money supply. Every tool used and every policy pursued is always achieved by changing the quantity of money in circulation. So when you hear that the FED is going to "cut interest rates," "increase liquidity" or "improve access to credit," it is always a euphemism for printing money. And over the last four months the FED has done just that––they've printed money to increase liquidity to lower interest rates to increase credit to increase lending to increase spending to increase jobs to grow the economy and have, as a direct result, increased prices.

Despite serious concerns regarding recession and price increases, the FED has decided to disregard all of that and to continue down the path of central planning. It won't work. It's never worked. And it won't work because it can't work.