Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

“Transitory” Price Increases Are Forever

  by    0   5

Prices are rising throughout the US economy. Federal Reserve Chairman Jerome Powell keeps telling us this inflationary surge is “transitory.” But transitory doesn’t mean what you think it means. The truth is higher prices are forever.

Here’s just a sampling of the price increases we’ve seen over the past few months.

Chipotle raised menu prices in June. Polaris, the company that makes Indian Chief motorcycles, snowmobiles and offroad vehicles, raised prices in May and is contemplating additional price hikes. Procter & Gamble, Coca-Cola, Kimberly-Clark, General Mills, Unilever, and other big companies have all raised prices.

Auto manufacturers are coping with skyrocketing costs another way. They are cutting back incentives, meaning the consumer ultimately pays more.

And then we have “shrinkflation” as companies sell smaller packages at the same price, or simply put less stuff in the same size box.

When Jerome Powell tells us these price increases are “transitory,” it sounds like at some point prices will drop back to “normal.” But that’s not what Powell means. Prices are never coming back down. He admitted as much during the press conference after the July FOMC meeting. Powell admitted “transitory” means that recent large price increases will stick, but that future price increases will revert back to 2% per year at some unknown point in the future. In other words, when you hear the word “transitory,” don’t think that means you’re going to get some price relief down the road. Prices will remain elevated. They’ll just go back to rising 2% a year instead of the 6 percent-plus we’re seeing today.

This is putting a tremendous drag on the economy. And not every company can simply pass costs on to their customers. Wolf Richter runs the WolfStreet website. He said he’s seen a massive rise in his costs.

In my little bailiwick, all the services I need in order to run my WOLF STREET media mogul empire have gone up in price: the costs associated with the dedicated server at a server farm, the costs of the email service that many readers subscribe to, the costs of the broadband service, which doubled  … The good thing is that WOLF STREET is supported by ads and donations and doesn’t sell anything, and so there are no price increases, and no shrinking or ballooning profit margins. I just eat the higher costs.”

Richter points out that a “buyers strike” would end the price increases. But “something big has changed.”

The whole attitude about price increases has changed. An inflationary mindset has set in. And this psychology of inflation tends to be persistent.”

That of course is the opposite of “transitory.” And it leads to an inflationary spiral. Richter said this is another reason to believe the inflationary environment we’re seeing today is anything but “transitory.”

The first bout of inflation always looks temporary. But during those first bouts of inflation, that’s when the triggers of persistent inflation, namely the inflationary mindset and inflation expectations are being unleashed.”

We’re left with two choices. As the dollar loses its purchasing power, we can either work more to maintain our standard of living, or we can work the same and sacrifice our standard of living.

Or we can just borrow more.

That’s really what the central bankers want. They keep interest rates artificially low to incentivize borrowing and spending in order to keep the economy propped up. And Americans have obliged. Consumer debt rose at a record pace in June.

Regardless of how you cope, the price hikes are here to stay. As Richter put it, “There is nothing temporary or transient in the loss of the purchasing power of the dollar, including of the labor dollar.”

Unwinding “transitory” inflation would require deflation. The Fed and the US government won’t allow that. In fact, the powers that be will tell you deflation is bad for you. So, as Powell admitted, the best we can hope for is that the inflation pace will “slow” to 2%.

Gee, thanks government!

Peter Schiff has been saying he doesn’t even think the Fed can bring the current bout of inflation under control. By the time the Fed gets around to tightening, it will be too little too late. On top of that, it will crash the fake economic recovery. The monetary policy driving inflation is the only thing holding the economy up.

Absent those monetary supports, the numbers would not be this good. They would be a lot worse if we didn’t have all the help from the Fed. And the Fed knows if they remove that help then everything is going to implode that’s been built on the foundation of artificially low interest rates and quantitative easing.”

So, if you’re waiting for prices to come down, don’t hold your breath. Transitory doesn’t mean what they want you to think it does.

Download SchiffGold's Gold vs GLD EFT's Guide Today

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Trade Deficit Grows for Second Straight Month as Dollar Weakens

A shrinking trade deficit was the primary reason GDP jumped in the third quarter. But that trade deficit relief is already reversing. The October trade deficit swelled to $78.2 billion, a 5.4% increase. It was the second straight month of trade deficit growth.

READ MORE →

Central Banks Start Q4 Buying More Gold

After adding a historically high amount of gold to reserves in the third quarter, central banks kicked off Q4 buying more gold. According to data compiled by the World Gold Council, central banks globally added another 31 tons of gold to official reserves in October.

READ MORE →

Investors Fleeing Housing Market as Bubble Deflates

In another bad sign for a housing bubble that is quickly deflating, investor purchases of single-family homes tanked in the third quarter. Meanwhile, overall home sales continue to tumble and prices are falling.

READ MORE →

Consumer Confidence Declines for Second Straight Month

The powers that be keep telling you that the economy is fine and inflation has likely peaked. But you’re not buying the story. Consumer confidence fell for the second straight month in November as worries about inflation and the trajectory of the economy persist.

READ MORE →

Recession Warning: US Small Businesses Struggling to Pay Rent

In another sign of a struggling economy, small businesses are having an increasingly hard time paying rent. According to Alignable’s November Rent Poll, 41% of US small businesses reported they couldn’t pay their rent in full and on time in November. That was a 4 percentage-point increase from the previous month.

READ MORE →

About The Author

Michael Maharrey is the managing editor of the SchiffGold blog, and the host of the Friday Gold Wrap Podcast and It's Your Dime interview series.
View all posts by

Comments are closed.

Call Now