This article contains some commentary that are the opinions of the author.
On Tuesday, after the publication of a report on inflation by the federal government that was greater than analysts had anticipated, investors on Wall Street fled for cover.
During the early trading session at the New York Stock Exchange, the Dow Jones Industrial Average plunged by more than 800 points, while the tech-heavy Nasdaq index fell by more than 450 points, which is equivalent to a 3.9% loss, The New York Post reports.
The S&P 500 saw a loss of more than 3 percent. On Tuesday, the financial markets responded to the most recent consumer price index data, which revealed that the prices of most goods and services increased. Despite the decline in the price of fuel, prices for most other items continued their upward trend.
The year-over-year increase in consumer prices was 8.3% in August, which is lower than the 8.5% increase seen in July but is still more than was expected. Some people have speculated that the official inflation numbers are much worse than what is being reported.
The official numbers are as follows: The Consumer Price Index for food had a year-over-year rise of 11.4%, the highest level seen since May 1979. Food costs have increased by 0.8% in just the most recent month alone. The costs of housing, medical care, brand-new automobiles, and house furnishings all went up as well. Inflation hit its highest level in forty years in the month of June, coming in at 9.1%.
Here’s what Biden has to say about it:
The annual percentage change in core prices was 6.3% higher in August than it was in July, when it was 5.9%. In August, prices increased across the board, including those for new automobiles, rent, and medical care services.
The most recent inflation numbers increase the likelihood that the Federal Reserve will proceed to hike interest rates vigorously, much to the dismay of shareholders on Wall Street, which will surely usher in further stock market losses. Over the last year, small cap stocks have seen dramatic losses, some with over 90% losses, while large caps have been holding up the “market” by a thread.
Many say that a recession is already here, and that a flat out depression may be what is coming next.
The persistently rising inflation put an end to any expectations that the Federal Reserve might achieve what is known as a “soft landing,” which would have included raising interest rates without pushing the economy further into a recession.
“Inflation is the problem, but the key lies with the labor market,” Chris Zaccarelli, the chief investment officer of Independent Advisor Alliance, which is located in Charlotte, told The Post.
“As long as unemployment is extremely low and consumers are confident in their spending, it’s hard to imagine a scenario where the inflation problem resolves itself,” he continued.
Zaccarelli does not envy Jerome Powell, the chair of the Federal Reserve, since he will be forced to make hard choices that will undoubtedly result in a significant number of Americans losing their jobs in order to bring prices under control.
“The Fed has the worst problem in the world — it’s a political problem, not an economic problem — and the only cure for the current crisis is one that is politically infeasible,” Zaccarelli told The Post.
“If the Fed thought they were criticized too much by the previous administration (and they were), wait until they see the type of criticism they will be under as they deliberately create an economic scenario where unemployment jumps significantly.”
He added: “Not only are they going to end up causing a recession, but it is going to be a bad one.”
Make no mistake about it folks, the Fed got us into this mess by printing for decades and decades, with more money printed in the last decade than there ever was, and only dismantling the Fed and fixing our broken money can solve it.
As long as there are deficits and printing, inflation will always get worse. It will just be slower pace at some times than at other times. Inflation isn’t a new thing, and as long as this continues, your money will perpetually be losing its value.
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