Inflation Leaves You Holding The Bag

Today, we have a big consumer price number out, and everyone is looking at it with all eyes on the Fed this afternoon. The number is unchanged for May but up 3.3% from a year ago. It’s important to note that inflation measurement has changed over the years, so comparisons aren’t always straightforward.

Some people are excited because this is the first time since 2022 that inflation hasn’t increased over the month. However, it’s not decreasing either. The narrative is shifting, as seen in various publications, suggesting that 3-4% inflation might not be so bad. The idea is to get the American public accustomed to higher inflation rates, reminiscent of past decades.

The setup seems clear: the Fed is likely to cut rates in September or October, possibly November after the election. This would allow Joe Biden to highlight economic improvements, claiming victory over inflation and promoting Bidenomics. Whether the public buys into this narrative remains to be seen.

Now, let’s talk about inflation, our national debt, and the debt spiral we’re in. The current inflation is largely due to excessive government spending. Some people ask, “Does anyone benefit from inflation?” The answer is yes—debtors, including debtor nations like the U.S., benefit.

How? When inflation rises, the value of the currency depreciates, meaning debt is repaid with money that is worth less. This reduces the real value of the debt. However, for prudent individuals trying to manage their finances responsibly, inflation is detrimental. It keeps us on a perpetual treadmill, constantly working harder as prices rise, making it difficult to keep up.

This has been the sentiment in the country for a while. The narrative might shift, and attempts to sell this new perspective on inflation will continue. Hopefully, Americans will be smarter and see through these tactics this time around.

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