Stefan Gleason Blog | What The Fed DOESN’T Want You To Know About Inflation | Talkmarkets
President at Money Metals Exchange
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Gleason is president of Money Metals Exchange, a national precious metals investment company and news service with over 450,000 readers, 35,000 paid customers, and $120 million in annual sales. He launched the company while president of a national newsletter publishing ... more

What The Fed DOESN’T Want You To Know About Inflation

Date: Thursday, May 6, 2021 11:05 PM EDT

Is it a temporary blip… or the beginning of a long-term trend? That’s the key question facing consumers, investors, and retirees when it comes to inflation.

There’s no denying that inflation pressures have picked up dramatically over the past 12 months. Price spikes in commodities including copper, grains, gasoline, and lumber tell the story – as do the raging bull markets in equities and housing.

 

Rapidly rising prices across an array of asset classes are a symptom of excess currency creation.

 

As economist Milton Friedman famously noted, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

 

Friedman wasn’t a gold standard or hard money proponent. Instead, he hoped to persuade monetary authorities to act responsibly!

 

Given the reckless policies undertaken recently by central bankers at the Fed – zero interest rates, Quantitative Easing to infinity, and “symmetric” (above 2%) inflation targeting – Friedman’s hope was misplaced.

 

Billionaire Warren Buffett, chairman of Berkshire Hathaway, warned at his company’s shareholder meeting last weekend, “We are seeing very substantial inflation.”

 

Home buyers are feeling it. Lumber prices are at an all-time record high after months of relentless rises, helping push home building costs higher by double digits.

 

So are motorists. The national average price of gasoline at the pump is up more than $1 per gallon compared to a year ago.

The Consumer Price Index surged 0.6% in March, the biggest monthly increase in nearly a decade. An imperfect measure of inflation, the CPI tends to understate real-world cost increases.

 

Federal Reserve officials insist these extant inflation pressures are “transitory” – a consequence of the rise off the extreme lows in asset markets seen during last year’s pandemic panic. According to the Fed, the economy is merely returning to normal – and as it does inflation will moderate toward Chairman Jerome Powell’s target of about 2% annually.

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