Will the Fed Panic on Inflation?

[00:00:00]Inflation jumped to its highest since Joe Biden's auto pen. Is it time to eat the pets or shut down Congress? Last week, the notorious Bureau of Labor Statistics released inflation numbers for the month of May, coming in at a torid half% on the month, which is over 6% annualized. Left-wing media positively cruned. The Daily Beast wrote, quote, Trump humiliated as inflation rockets to a new high. Now, the good news is inflation's down from an annualized 8% the previous month and 11% in March, the first month of the war. The bad news is this now takes us to 4.2% on the year. The highest in inflation since we escaped the clutches of Biden. The kicker is the entire inflation story is energy which has come down from 111 in March but is still grinding along at 90 bucks a barrel compared to 65 on the eve of the war and 57 in the houseian days of last December when you could run the aircon and the car radio. But inflation is not spreading outside energy. So groceries last month rose a satisfying tenth of a percent. Everything else outside food and energy, so-called non-core inflation, was at 0.2, which is a smidge above the Fed's 2% target. So, why aren't prices rising everywhere else?

[00:01:22]Because unlike the crayon eaters at Daily Beast, companies understand that inflation is temporary from energy and companies don't raise prices for temporary inflation because they lose market share. Unfortunately, there's one outfit that is stuck with the Daily Beast coloring book, and that is the Federal Reserve. Ever since the war started, I've said the war itself, and even $100 oil will not cause a recession. What will is a Fed that panics and hikes rates. Now, the Fed does this because oil inflation goes on top of the regular inflation they steal through money printing to take from the poor and give to the rich. Put oil on top of the regular siphon, and it gets awkward. Unfortunately, hikes crush the economy and jobs since they raise borrowing costs, which guts investment and bankrupts employers. You get leftover goods and leftover workers, so both get cheap. Now, you could reduce inflation by lowering money printing, so-called quantitative tightening, but instead the Fed hikes to crush jobs. The tragedy is even with $90 oil, the Fed does not need to feed workers into a wood chipper. Recent videos have argued you could drop prices economywide by 20% with policy reforms in housing, healthcare, insurance, and yes, energy.

[00:02:39]In housing, simpler zoning and environmental rules could cut prices by nearly a 100,000 according to the National Association of Realtors. Lower deficits could lower mortgage costs. in healthcare and insurance requiring price transparency cracking down on so-called chargem abuse $80 for a Tylenol and certificate of need and scope of practice rules hospitals use to cartelize let patients buy insurance across state and then energy where Trump's done a lot to free up permits and drilling which are up 55% on the year but it needs a congressional blitz to clear decades of weaponization of environmental laws and permits that keep millions of barrels in the ground So, a set brought to you by the Bitcoin way.

[00:03:21]Everybody knows inflation's temporary except the Daily Beast and the Federal Reserve. If the Fed can control itself, oil will continue bouncing off the economy. And if Congress can be stir itself to cut some red tape, we could get some good out of 4.2 inflation.

[00:03:36]Unfortunately, Democrats on the Fed and Congress will do their best to screw it up. Listen to all last week's videos in a single podcast. Search Peterson Lounge wherever you enjoy your podcast. Okay, we'll be watching. See you next time.