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  • Jonathan Poyer

Inflation A Real Problem...



Consumer price inflation has taken off very quickly and has been running at four decade highs (below chart from 12/31/1999 - 4/30/2022):

It is most likely the case that the true cost of living has probably gone up higher than the official number. The CPI would be especially higher if we used the same calculation that was used in the 1980s. According to ShadowStats, CPI should be around 15% using those 1980s calculations:

Through the end of May 2022, the effective Fed Funds rate is around 0.83%. Take a look at the historical rate:

Even if the Fed raises rates another 100 bps (50bps X 2), we would still be looking at a historically low Fed Funds rate. But the question that must be asked is whether or not this would have an impact on inflation? Will the Fed even go through with this or are they trying to verbally convince the markets to move?


If the ShadowStats calculation is correct, we would need to see the Fed Funds rate rise another 14%+!!!!! in order to make an impact and "attack" inflation as the Fed is saying they want to do. That has only happened early in the 1980s for a brief period of time (see above). CPI still seems like it has a lot of room to rise and rise and rise.

What would a real attack on inflation do to markets? My guess...we will never know. A recession has to be coming.


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