As Inflation Soars, Biden Claims It’s Gone

As Inflation Soars, Biden Claims It’s Gone
President Joe Biden attends a signing ceremony for the CHIPS and Science Act of 2022 on the South Lawn of the White House in Washington on Aug. 9, 2022. (Chip Somodevilla/Getty Images)
Jeffrey A. Tucker
8/10/2022
Updated:
12/21/2023
0:00
Commentary

It was another month of devaluation of the dollar for Americans, another month of stealth taxation through monetary debasement. This one matters not only because it shows that “very bad” is not getting better, it also reveals that nothing the Fed is doing is yet working genuinely to tame the disaster. The dollar’s purchasing power is falling dramatically in real time.

We should all shudder to think what the producer price index released on Aug. 11 will look like. The Aug. 10 consumer price index looks terrible enough.

The Department of Labor report reveals an overall annualized rate of 8.5 percent in July, slightly slower than last month’s pace of 9.1 percent. Why did the falling gas price not affect the overall rate, as so many had expected? Well, inflation is a kind of virus that can gradually become endemic in one sector (with demand shifts) and enter another as a pandemic.

That’s precisely what happened. The previous month’s report showed gasoline soaring 11 percent in one month. That’s grim. That pace pulled back in July, only to push the price pressure elsewhere. The boom in the price of electricity made up some of the difference. Meanwhile gas prices are still up 44 percent over 12 months!

Something similar happened with food prices. Some of the biggest increases this month hit food at home. You slowed down your restaurant purchases to hit the grocery store and watch cooking videos. Make the best of it, you thought. But grocery stores can increase prices much more easily than restaurants can. The shift in demand and the willingness of customers to keep consuming despite price increases accounts for the difference.

The Biden administration is trying to spin this as good news. Indeed, The New York Times already tried with its headline: “Inflation Slows as Economy Cools, Offering a Reprieve.” Headlines such as this are written for stupid people at the White House to let them know what to say.

As per usual, Biden’s statements were even more preposterous. He actually claimed that inflation is zero.

“Today we received news that our economy had zero percent inflation,” he said.

In a word: gag. How does he get this number? He’s deploying a disreputable math trick. Instead of annualizing, as economists have done for a century, he chose to report only the number from July.

The index number is built from many different sectors, only one of which was down in one month in a big way—gas, fuel oil, energy—and that’s after it was up so much in previous months. Everything else is up in July, some by annualized double digits.

Consumer price index (CPI). (Data: Bureau of Labor Statistics; Chart: Jeffrey A. Tucker)
Consumer price index (CPI). (Data: Bureau of Labor Statistics; Chart: Jeffrey A. Tucker)

Using Biden’s bogus methodology here, we could also say that electricity is up by 19.2 percent in July—because that is the crude annualization of the one-month increase of 1.6 percent! Of course we wouldn’t claim this because that’s stupid. The real number is 15.2 percent. But Biden has no problem with stupid.

In reality, things are getting worse at an ever so slightly slowing pace than the same pace as last month. And that’s the best you get. It’s still centering on a 40-year high.

My friend Doug Rudisch habitually calculates the two-year stack within minutes of these reports and sends them to me. Here’s what he came up with:

22-January: 8.9 percent 22-February: 9.6 percent 22-March: 11.1 percent 22-April: 12.5 percent 22-May: 13.6 percent 22-June: 14.5 percent 22-July: 13.9 percent

What you will notice here is that the July two-year stack is still much higher than March. That isn’t an improvement. It’s a costly mess.

So what caused the overall index not to budge in a more positive direction? Here’s a list of stuff you purchase and the year-over-year increase of each, directly from the July report. Yes, the price of low-grade gasoline settled, but the difference was made up everywhere else. Also, it’s been a grim 12 months overall. Hence, improvement is nowhere visible in year-over-year data.
  • Fuel oil: 75.6 percent
  • Energy commodities: 44.9 percent
  • Gasoline (all types): 44 percent
  • Energy: 32.9 percent
  • Natural gas (piped): 30.5 percent
  • Airline fares: 27.7 percent
  • Energy services: 18.8 percent
  • Electricity: 15.2 percent
  • Cereals and bakery products: 15 percent
  • Dairy and related products: 14.9 percent
  • Food at home: 13.1 percent
  • Motor vehicle maintenance and repair: 8.1 percent
So where is the supposed good news? In physician services. You can still go to the doctor, wear a mask, and get a shot for only 0.8 percent more than you paid last year. Medical services in general are rising in price at a slower pace than anything else you can buy. Why might that be? Two reasons: First, despite widespread ill-health, people’s willingness to trust the system is falling, so demand is falling with it. Second, the prices in this sector are stickier because they aren’t really normal market prices.
What’s even more interesting is the report on labor productivity from Aug. 9. Here, we see an annualized rate decline of 4.6 percent, following the previous quarter’s report of the worst decline in 74 years. Meanwhile, labor costs increased at a 10.8 percent pace from the previous quarter. These are very dramatic numbers, further underscoring the reality of inflationary recession.

In the postwar period, 12 recessions have been declared at times that labor productivity hadn’t been this grim. Sometimes, recessions are declared when labor productivity isn’t falling at all. If this weren’t a sign of economic weakness, I don’t know what would be.

(Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker)
(Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker)

Meanwhile, the cost of labor to employers is hitting new highs, partly due to inflation that’s affecting wages and partly due to sector-specific shortages that affect retail especially.

The divergence between high labor costs and real wages looks like nothing we’ve ever seen. It’s easily the worst in 20 years. This is a way of saying that employers are beginning to be squeezed with labor costs as never before, even as workers themselves are losing purchasing power. The right visual here is of walls closing in.

(Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker)
(Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker)

But let’s return to prices to finish off here. We should be very concerned about the gaslighting from the media and the Biden administration. Right now, they’re telling you to relax and that everything is fine, things are getting better, there’s a reprieve, and we should be happy about that. Inflation is zero!

Memory is so short term these days, and the public so grossly innumerate, that I worry that among some cohort of the population, people could believe it.

As a result, we need to look realistically at the beast we’re dealing with today, over a 40-year period. This is a life-defining moment for most people today. We’ve never seen anything like this. It affects everyone—producers and consumers alike.

(Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker)
(Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker)

How do we get back to normal, to civilized prices and a functioning economy? These tiny moves up or down will not get the job done. The domestic value of the U.S. dollar has already lost 11.5 cents since Biden took office.

Think about that. Your $10 bill is now worth $8.85 just since the inauguration. That doesn’t necessarily mean that Biden has caused this, but his policies certainly haven’t mitigated against it as they might have. And nothing going on today stands a chance of stopping, much less repairing, the damage.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Jeffrey A. Tucker is the founder and president of the Brownstone Institute, and the author of many thousands of articles in the scholarly and popular press, as well as 10 books in five languages, most recently “Liberty or Lockdown.” He is also the editor of The Best of Mises. He writes a daily column on economics for The Epoch Times and speaks widely on the topics of economics, technology, social philosophy, and culture.
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