CPI Blast-Off Should Come as No Surprise -- Matthew Johnson #5630
In all actuality is not a huge surprise that PPI increased.\xa0 When you consider the economy as a large heavy car, (think 1976 Lincoln Continental) this thing was completely stalled blocking the middle of the road in 2020.\xa0 That\u2019s good for no one, so the motivation is \u201cdo something!\u201d \xa0 The government starting pushing on the car to get it moving.\xa0 They print a lot of money, flooding the economy with plenty of liquidity, then interest rates get lowered to 0%, this incentivizes and stimulates spending\u2026little by little the car begins moving but then it really gets moving. \xa0 Now the car is travelling too fast and it\u2019s time to pump the brakes\u2026they\u2019re failing.\xa0 People start running in front of the car, pushing on it, trying to slow it down but remember it\u2019s a big heavy car\u2026there\u2019s a lot of mass behind it and it\u2019s hard. We can\u2019t expect what\u2019s happening right now to put an immediate stop to the rise in costs and demand.\xa0 There\u2019s lag and lots of it. At the same time, what the Fed is doing is dangerous.\xa0 It\u2019s adding to inflation and it\u2019s only treating the symptom in my opinion not the illness (supply.)