Fed Chairman Jerome Powell’s Presser Should Alarm Everyone on Main Street


Posted originally on the conservative tree house on December 15, 2021 | Sundance | 112 Comments

To me, this is just jaw-dropping.  The Federal Reserve Chairman Jerome Powell made statements today akin to saying the emperor is wearing a beautiful coat.  I can share examples, but to really encapsulate the issues, it’s actually easier to start by sharing a chart he presented when discussing inflation.

Do you notice anything missing in this chart?   Look at it carefully.

If you look at it and say: “hey, where’s the actual 2021 data he is talking about“, give yourself a cookie.

The guy is talking about the issue of 2021 inflation and expressing his empathy that inflation is running “far ahead” of the federal reserve projections.  Yet, the graphic Powell uses doesn’t even show the 2021 rate of inflation that he is expressing his concern about.

Why wouldn’t the graphic show the rate of inflation for 2021?   Well, take one look at what the graph would look like, and you realize immediately why he would not want to put it in front of people.

This is in essence what the graphic would look like if Powell included the 2021 inflation he is concerned about:

The 6.8% inflation rate is just about where the dot in the “j” of the word projection would be located.   That’s where we are currently.

Now, do you really think that scale of inflation is going to drop in a dramatic inverted V formation to where the Fed projects it will end up next year (the little red line in the thing that looks like a battery)?  Pro Tip: It won’t.

The chairman even said he anticipates “strong inflation throughout next year” into 2023.

Worse still, are his remarks leading into the segment where he talks about inflation:

(1) Powell claims the Fed “can see no signs of weakening consumer demand“.   Who in the Sam-hell is he talking to, and how can they not see a drop in consumer demand?

(2) Perhaps worse, the Fed Chairman says almost nothing about the largest ever drop in productivity last quarter (-5%), and instead is only slightly worried that the drop in productivity is larger than the increase in wages (+3%).   Whiskey – Tango – Foxtrot.  Does this guy not have anyone on Main Street who talks to him?  If I’m an employer paying three percent more and generating five percent less, what do you think I’m about to do?

Watch his remarks from 03:23 to 05:13 of the video below (prompted), and you will see what I mean:

The key takeaway is this….

…. Take care of your family, this is only going to get worse.

San Francisco Mayor Says a Law Abiding Peaceful City Will “Make a Lot of People Uncomfortable”, But They Gotta Do It Because Elections


Posted originally on the conservative tree house on December 15, 2021 | Sundance | 154 Comments

Apparently living amid a city that is fraught with crime is comfortable for a lot of people in San Francisco, at least according to one of the most leftist Mayors in the nation.  You know things are bad when the Mayor of San Francisco, who ran on a platform to remove cops from the streets, starts shouting about the “bull**it that has destroyed the city”, and proclaiming that rampant lawlessness needs to stop.

San Francisco Mayor London Breed delivered a statement yesterday that is the exact opposition of her social program message from the past few years.  Apparently, the rise in random gangs of looters destroying the city and organized retail theft has become problematic for the politicians who hold power over the city.

Quite a remarkable shift in position, however, the transparency of motive is clear.  Breed’s faux anger and conveniently new frustration over the crime surge in the city were on full display at her noon news conference where she changed the rules of the safari park.   WATCH:

Democrats are worried about how their anti-police position has brought the criminal chickens home to roost.  Politically, Democrats -writ large- are trying to distance themselves from the crime their policies have created.  National polls show voters are correctly attributing the rise in crime to Democrats.  Thus, they need to change direction quickly.

SAN FRANCISCO – After months of viral videos showing deteriorating conditions on the streets of San Francisco, including smash-and-grab robberies and open-air drug use, the city’s mayor has moved to implement a new public safety approach to curb criminal behavior. Her move could signal a recognition by the Democratic establishment that crime may prove a potent issue in upcoming elections.

Speaking at City Hall on Tuesday, San Francisco Mayor London Breed lamented “all the bullshit that has destroyed our city,” including thefts at high-end stores like Louis Vuitton, rampant vehicle break-ins and a seeming flood of the potent drug fentanyl. All of it has been captured on video, making for regular Fox News segments and rising consternation among Democrats who see crime as a potential weakness in next year’s midterm elections. (read more)

That last bullet point is a little funny, no?…

I mean what good were the city CCTV cameras if the police were not allowed to use them?

Were the cameras installed so the city could just randomly document criminals running amok for posterity?

Florida Governor Ron DeSantis Introduces Anti-WOKE Legislation


Posted originally on the conservative tree house December 15, 2021 | Sundance | 89 Comments

WILDWOOD, Fla. – Today, Governor Ron DeSantis announced the Stop the Wrongs to Our Kids and Employees (W.O.K.E.) Act, a legislative proposal that will give businesses, employees, children and families tools to fight back against woke indoctrination.

The Stop W.O.K.E. Act will be the strongest legislation of its kind in the nation and will take on both corporate wokeness and Critical Race Theory. Today’s proposal builds on actions Governor DeSantis has already taken to ban Critical Race Theory and the New York Times’ 1619 project in Florida’s schools. For more information about the Stop W.O.K.E. Act, click here.

“In Florida we are taking a stand against the state-sanctioned racism that is critical race theory,” said Governor Ron DeSantis. “We won’t allow Florida tax dollars to be spent teaching kids to hate our country or to hate each other. We also have a responsibility to ensure that parents have the means to vindicate their rights when it comes to enforcing state standards. Finally, we must protect Florida workers against the hostile work environment that is created when large corporations force their employees to endure CRT-inspired ‘training’ and indoctrination.” (read more)

Lower Than Expected November Retail Sales Shows Inflation Impact and Reduction in Consumer Spending


Posted originally on the conservative tree house on December 15, 2021 | Sundance | 77 Comments

The Commerce Department November retail sales data was release today [DATA HERE] – [DETAIL pdf HERE].  The top line issue is a shocking drop in retail sales for November in key categories that align with previous discussion of inflation spending priorities for all U.S. consumers.

Before getting to the data, one point is critical to remember.  The commerce department sales figures are based on dollars spent. This point is important, because the items being purchased have inflation within them.  When prices are higher due to inflation, sales figures should be higher due to higher prices.  Ex. If there is an 8% increase in retail price, but only a 4% increase in retail sales, that means less stuff is being sold.  [Less units sold at a higher price gives the illusion of an increase in sales.]

Despite the start of the traditional holiday sales and shopping period, the total sales growth in November was 0.3% over October [Column A].  Factoring in inflation during the same month to month comparison at 0.9%, you can tell that overall in November there was a drop in units sold across the total of retail sales outlets.

A drop in sales at a time when holiday shopping should be taking place is concerning.  However, the sales reality aligns with the employment data last week showing a drop of 20,000 workers in the retail sector for November.  Put them together, and the picture shows retailers did not need employees, because consumers are not spending.

If we look deeper into the November sales figures, we can see that a contraction in discretionary spending is the primary issue. Electronics (-4.6%), Department Stores (-5.4%) and even online sales at ZERO.  We can also see a direct correlation in comparative inflation impact within the sales data for November 2021 when compared to November 2020 [Column B].

You will note that column B is an almost identical data set to the rate of inflation in those categories.  Example: the November 2021 sales data is showing an increase in gasoline station sales of 52.3% over November 2020.  That’s because gas prices have gone up 58.1% over the same time period.  The increase in sales at gas stations is because inflation is driving sales.   [Remember, these comparisons are in dollars being spent.]

A comparison to 2020 for sales dollars in 2021 is useless when you look at the rate of inflation in those categories.

However, to see electronics, department stores, general merchandise and even online sales (Nonstore retailers) showing declines in sales over October, tells us that consumer spending is being squeezed and contracting.

In the electronic sector, sales dropped 4.6 percent versus October.   However, the issue is larger.  With inflation within the electronics sector around 8 percent (BLS Table-2),  a contraction in overall sales of items that cost more means a lot less electronic units are being sold.

(Bloomberg) “U.S. retail sales rose by less than forecast in November, suggesting that consumers are tempering purchases against a backdrop of the fastest inflation in decades” (more)

Similarly, vehicles overall (new and used) are 20% higher in price this year {BLS DATA} and only achieved a net 13% increase in consumer sales for Nov 2021 -vs- Nov 2020.   Far fewer vehicle units are selling.

This data should not be surprising to anyone who has been paying attention.  Consumers overall, specifically the middle class and working class, are being squeezed hard by food, fuel, housing and energy inflation, and are cutting back their spending this Christmas.   The media are blaming the soft sales on COVID and supply chains again, but that’s not really the issue.

WASHINGTON, Dec 15 (Reuters) – U.S. retail sales increased less than expected in November, likely payback after surging in the prior month as Americans started their holiday shopping early to avoid empty shelves.

[…] The modest retail sales gain did not change views that the economy was regaining steam after a slowdown in the third quarter that was triggered by the COVID-19 Delta variant and rampant shortages.

[…] Retail sales rose 0.3% last month after surging 1.8% in October. Sales have now risen for four straight months. They increased 18.2% year-on-year in November. Economists polled by Reuters had forecast retail sales rising 0.8%. Estimates ranged from as low as being unchanged to as high as a 1.5% increase.

[…] The moderation in retail sales, which are mostly goods, was in part due to shortages and higher prices. Receipts at auto dealerships dipped 0.1% after accelerating 1.7% in October. Automobiles remain scarce because of a global semiconductor shortage. Sales at electronics and appliance stores fell 4.6%.

But sales at service stations increased 1.7%, lifted by higher gasoline prices. Receipts at food and beverage stores rose 1.3%, also reflecting rising inflation.

“Food and gas are forcing hard choices for consumers in other areas this holiday season,” said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina. “Consumers are no longer the price-takers they were when they were flush with cash from stimulus checks.”  (read more)

Stunning Stupidity – The Salvation Army Discovers Meaning of Get Woke, Go Broke


Posted originally on the conservative tree house on December 15, 2021 | Sundance | 573 Comments

At first blush, this story seemed too bizarre to be true; alas it is not.  [h/t Gateway Pundit]  As noted by Jim Hoft at Gateway Pundit, a few weeks ago the Salvation Army stepped into the social justice arena and began promoting the premise of white guilt.

According to an “internal study guide” from the charitable organization intended to “foster positive conversations and grace-filled reflection among Salvationists“, the white members and donors to the Salvation Army were requested to reflect on their inherent racism.  According to the Salvation Army’s “International Social Justice Commission“, this was presumably of some charitable value.

Obviously, this request stirred up some controversy.  In an era where the toxic issues around Critical Race Theory being taught in schools has been in the headlines, there is likely not a worse time for a charitable group to join the social justice cause and push CRT toward the aggregate public.

Many people were surprised by the decision of the Salvation Army to push the divisive issue of racism in what appeared to be an effort by the organization to enter the orbit of wokeism.

Quite frankly, I cannot reference a more ridiculous organizational decision than this example in recent memory.  However, that said, while the original decision was nuts, the effort to clean up the mess they created for themselves is exponentially more nuts.  Amid the backlash, the Salvation Army released the following statement:

[LINK]

The first thought of ‘what were they thinking‘, becomes compounded by realizing the Salvation Army is a partner with something called the “International Social Justice Commission.”  I mean, seriously, what the heck is this all about?

Mistake one might be taking the intent of a historic organization away from charitable giving and into the toxic and divisive world of racial politics.  Mistake number two is doubling down on the decision to engage with race in some ill-fated effort to establish politically correct bona fides.

If you wanted to completely destroy the guiding mission of a charity, the Salvation Army is showing everyone exactly how to do it.

I’m not sure what qualifications or prisms others use, but myself, as a donor, I want to see my money used by a charity in such a way as to care for people who are in the most need – and that has absolutely nothing to do with race or any other qualification.  I am literally stunned by the intent of the Salvation Army in this mess, and their cleanup effort is even worse.

This is one of the biggest disappointments of the year, and yet, again shows that organizations can lose their entire purpose by following leadership making stupid decisions.

Jim Hoft follows up the issue with a highlight showing the Salvation Army is in a crisis now, because people are not giving to the charity at the time of year when the Christmas Season Salvation Army kettles usually raise a lot of money.

(Fox-13) […] Not only is the nonprofit organization short on donations, they also are in desperate need of bell ringers to staff the red kettles seen at businesses around the country. (read more)

Well, DUH!  What exactly did The Salvation Army expect to happen?

US Producer Price Index Reaches 11-Year High


Armstrong Economics Blog/Inflation Re-Posted Dec 15, 2021 by Martin Armstrong

The US Producer Price Index (PPI) for November reached an 11-year high, according to the Labor Department. The PPI for final demand rose 0.8% in November, the index for final demand services increased 0.7%, and prices for final demand goods moved up 1.2%. Alarmingly, the final demand PPI soared 9.6% for the 12 months ending in November, marking the fastest 12-month advance since November 2020 when that data was first collected. Core PPI advanced 6.9%, marking the largest spike since August 2014. As a reminder, this measures the average price movement established by domestic producers for goods and services sold both domestically and internationally.

Companies are facing higher costs, and that cost is passed on to the consumer. As a result, the Consumer Price Index rose 0.8% in November, marking a 6.8% increase in inflation on an annual basis. The Labor Department noted that this was the fastest pace of inflation since June 1982.

These levels are unsustainable. The Fed’s 2% inflation target seems laughable considering prices in every area continuously rise with no end in sight. Fed Chairman Jerome Powell has stated that the central bank would step in with a more aggressive policy if they saw runaway inflation. How high do prices need to rise for the central bank to take action?

EUREKA, Someone Finally Points Out The Obvious


Posted originally on the conservative tree house on December 14, 2021 | Sundance | 142 Comments

Finally!  Good grief, it’s been a long wait to see someone on the TV pointing out the obvious.

CNBC’s Steve Liesman points out what all the financial pundits keep ignoring.

The price of raw material at origination is still climbing…. which means the prices of intermediate manufacturing goods will keep climbing… which means the prices of finished goods (to wholesalers) will keep climbing…..  which means consumer prices will keep climbing.   WATCH:

♦Here’s the kicker.  The rate of raw material price increases are still higher than the rate of intermediate price increases, which are still higher than the rate of price increases in finished goods, which are still higher than the rate of price increases in consumer goods (retail).

As long as the rate of price increase for raw material, the very first step in the supply chain, remains higher than the rate of the price increase for the next step in the process, then you can guarantee future prices will go up.  It’s a simple and commonsense way to look forward when evaluating inflation.

If the stuff starts at a higher price (day one), the end product at day 90 will be at a higher price than today.  This is how you can tell that inflation is not slowing down.  The first sign of inflation easing is when the rate of inflation for raw material is lower than the rate of inflation in the next step.

Scientists Identify Young Vaccinated People as Source for Omicron Variant


Posted originally on the conservative tree house on December 14, 2021 | Sundance | 280 Comments

This is a little interesting.  According to The Telegraph [Tweet Link], the ‘scientific data’ is showing that young vaccinated people are the source carriers for the latest Omicron variant.  {Telegraph Article, Paywall}

What makes this interesting is both the timing and sequence.

The “Delta” variant surfaced and spread during the vaccination program for people over 40 years old.

The “Omicron” variant surfaced and spread during the vaccination program for people under 40 years old.

It’s almost as if… the vaccination and boosters are what creates the variant.

November Producer Prices Rise Record Breaking 9.6 Percent Year Over Year, Biggest Single Month in History, as Massive Inflation Builds Within The Supply Chain – Again, No Signs of Slowing Down


Posted originally on the conservative tree house on December 14, 2021 | Sundance | 280 Comments

We said it was happening {Go Deep}, and it is.  Last month CTH put the preparation window at 60 days +/- depending on region.  That window is now around 30 days before the next spike in inflation shows up from cumulative costs snowballing throughout the supply chain. The “producer price index” is essentially the tracking of wholesale prices at three stages: Origination (commodity), Intermediate and Final.

The final product inflation rate in July (reported in August) was alarming at 7.8%. However, we warned it would get worse. The Bureau of Labor and Statistics (BLS) then released stunning price data for October [DATA Here], showing an even more dramatic 8.6% price increase in final demand. More intense warnings shared.

Today, we get the November BLS Result [DATA Here], and unfortunately the results are showing what was expected.  The cumulative costs of massive increases in energy prices are building into the supply at an astonishing rate.  The November data shows a rate of wholesale final goods inflation at 9.6%, the largest single month comparative rate increase in history.

The bureau even went back and revised/increased the August price index from 7.8 to 8.4 percent, and revised/increased the October figure from 8.6 to 8.8 percent.  The average monthly price increase is almost a full percent… every month.  It looks like the BLS backward revisions are an attempt to smooth down the rate of increase.

(BLS) – “The Producer Price Index for final demand increased 0.8 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.6 percent in each of the 3 prior months. (See table A.) On an unadjusted basis, the final demand index rose 9.6 percent for the 12 months ended in November, the largest advance since 12-month data were first calculated in November 2010.” (more)

I modified Table A (final demand product pricing), taking out some of the noise to make it a little easier to see the big picture of what is happening.

When you see the wholesale level of prices almost double the increase in consumer level inflation rate, you can predict that consumer prices will likely go even higher.  Future finished goods, at a retail level, will carry the current wholesale price increase.

Stuff costs a lot now… and because the inbound stuff to make the finished goods is still climbing in price…. stuff is about to cost even more.   You can see this in the inflation rate of intermediate goods which I have highlighted below.

You can see from Table A (above) that finished good prices are still climbing.  That’s the higher price inflation you are feeling when you buy a product.

More alarming is to look at the “intermediate demand” products [Table B below] as they flow through the manufacturing system.  Two types of products are at the intermediate wholesale level:  Processed Goods, and Unprocessed goods.

I have again modified Table B (above) to remove the noise.  Notice two key aspects:

(1) Prices for both types of products are still climbing in the manufacturing process.  Compare August, Sept., Oct., and now November, noticing how the prices are still climbing.  Some of that has to do with energy and fuel costs still climbing.  The increasing price for gasoline is built into each part of the transportation process.

(2) Notice the scale of the increase in the prices from prior months.  The trend line is not leveling off, instead it’s doing the opposite.  The rate of inflationary climb (price increase), at the intermediate level of goods coming into the system, is getting even more steep.  The stuff coming into the manufacturing process is not only costing more, it is costing much more than before.

The wholesale prices of products into the system that end up at the retail level are still through the roof. In a major way, this is being driven by massive increases in energy costs throughout the entire supply chain.

This is going to get even uglier. Even if wages jumped in price 5% overnight (single month), which would be a large increase in wages, those wage increases are nowhere near enough to deal with this level of price increase at a consumer level. A nickel more per dollar earned is futile against a loaf of bread costing $1 more, or gasoline at $4.00/gal.

Do what you can now to start preparing your weekly budget in ways you may not have thought about before. Shop sales, use coupons, look for discounts and products that can be reformulated into multiple meals or multiple uses. Shelf-stable food products that can be muti-purposed with proteins is a good start.

Consider purchasing the raw materials for cleaning products, and reformulate them yourself to avoid these massive increases in petroleum costs.

Remember, when inflation hits like this, you can NATURALLY expect an eventual demand side response.  People will stop purchasing things, because those things are just too expensive.  When that happens, the inflationary spike can/will start to level off as the demand slows and excess inventory builds, albeit with higher prices built into the unaffordable existing inventory.

Unfortunately this drop in demand, a contraction in the economy, is what’s known as a recession. That leads to layoffs and unemployment, which only exacerbates the problems and puts downward pressure on wages – while the prices remain high.

Joe Biden spending more to try and subsidize people through this inflationary economic cycle only makes things worse for the middle class.  More spending results in more inflation, which requires more subsidy, which requires more spending, which creases more inflation.

Your goal is to prepare yourself and your family for that moment when the economy starts contracting – yet prices remain high.   If you can avoid future expenses by taking action before the highest prices hit, you will be in a better position.  Be proactive with your household maintenance, and think about things that normally hit your monthly budget unexpectedly.

Try to avoid any unexpected expenses your memory provides you, by doing what you can do now.

Act or be acted upon.

Protect your family.  Even if, heck, especially if, your kids or grandkids cannot see what is coming.  Prepare yourself to help them even if they don’t know, or won’t admit, they will need the help. Be wise in your counsel, but do not alarm.  Do not distress yourself with dark imaginings. Fellowship is not only needed, it is critical.

It is empowering to be prepared for the storms of life, just as it is to be prepared in advance of storms from weather.

Afghanistan Poised to Become Largest Distributor of Crystal Methamphetamine


Armstrong Economics Blog/Middle East Re-Posted Dec 14, 2021 by Martin Armstrong

The Taliban has sadly revived Afghanistan’s booming drug business and now poses a stark threat to the rest of the world. According to a BBC report, the country has expanded from opiates to producing crystal methamphetamine. Estimates say the nation produces an average of 3,000 kg per day at 500 separate laboratories. The herb ephedra grows naturally in the nation and can be used to create ephedrine, a key ingredient in the highly addictive drug crystal meth.

The Taliban recently eliminated the tax on ephedra by simply banning it from public production. The ban has allegedly caused prices on ephedra to double among the region, where it is sold openly at markets. Dr. David Mansfield, a researcher who tracks Afghanistan’s drug trade using satellite imagery, said that the ephedra ban came after cultivation, and the full effect of the ban will not be felt until next July when the harvest is due. Dr. Mansfield believes that the amount being produced could become the Taliban’s most lucrative drug.

Effectively cut off from international trade and the broader world economy, the Taliban is likely to allow the drug trade to flourish. Around 80% of the world’s supply of opium comes from Afghanistan, and numerous farmers have told reporters that drug-related harvests are the only lucrative crops for them to plant. An informant told the BBC that a kilogram of heroin, produced from opium, would cost around $66,000 in Britain. Bilal Karimi, a Taliban spokesman, told the BBC that they could not take away opium cultivation from the Afghans until they found “an alternative.”

Domestic sales of the drug are also on the rise due to the low cost. Afghanistan’s drug trade has overshadowed Iran’s as well, with one user claiming a gram of meth that previously sold for $15 now sells for around $0.31 to $0.41. The last time the Taliban took over, they waited six years before publicly banning the drug trade. As a result, the Taliban will continue to illegally export drugs such as crystal meth and heroin worldwide, which is an actual threat to international security.