CPI Drops 0.2%, Core CPI Up 0.3% | MishTalk
. . . it is fun to watch the dog chase the car, but what does he do with it once he catches it?
The Fed will be bewildered by this outcome, but will make every attempt to look like it was expected. Here is what to expect:
Janet Yellen and the Fed
The problem we are seeing in inflation is due to health care, education, and rents, all due primarily to bad government policies. Each of these items should be undergoing serious creative destruction resulting in lower prices, and higher quality, but each is trapped in amber.
Medicine is trapped by local insurance rules, federal tax, and business rules which have created a separation between what people pay for their medical treatments (about 10% of the bill), and what other people pay for the bill (about 90%). This makes the customer disinterested in costs, or cost reduction, and so costs simply rise.
Education is trapped by huge federal subsidies, and loans/grants to students, and smaller but significant state subsidies, and loans/grants to students. This also allows the price of tuition to continue its unchecked and disastrous rise.
The costs of rentals is driven primarily by local zoning, land use, growth boundary, service boundary restrictions, and federal income tax subsidies. Limiting land for housing, and subsidies all have lead to high housing costs in many localities.
There is a downside to all of this beyond the inflationary pressure it creates.
HURDLING THE OBSTACLES TO MILLENNIAL HOME OWNERSHIP
Boomers will be loath to address these problems, they mostly do not fall on the Boomers shoulders, except for the medical issues, and those they have addressed by shifting the costs for the privately insured Boomers increasingly to Millennials through Obamacare. The wealthiest generation in history, is mining money from the generation having the most economic troubles navigating all of the looted areas left behind by the Boomers. Worst generation in history.
Mish ends, "This is a case of the Fed wanting price inflation, and finally getting it. Yet “strong arguing points” are imaginary. Price increases in Obamacare and rents will dampen, not spur consumer spending."
Yes, and the continued decimation of the finances of the largest generation in history, the Millennials, for the benefit of the worst generation in history, the Boomers, is the worst idea ever from the worst generation ever. What more could we expect.