World Blog by humble servant. The CPI is telling us something far more important than whether inflation was 3.3% or 3.4%. The structure of inflation is changing. The easy post-pandemic explanation is finished. We are entering an environment where geopolitical instability, energy, sovereign debt, and declining confidence in government increasingly dictate capital flows and prices. That is precisely the environment where the old economic theories begin to fail. The Fed cannot control war. It cannot contol Congress. It cannot control the national debt. It cannot control global capital flows. Yet everyone will demand that it somehow control the consequences.
The Flawed Headline Statistic Consumer prices in the USA rose 0.4% in August, four times July’s 0.1% increase, while annual inflation remained at 3.4%. The politicians will point to that 3.4% number and pretend inflation has somehow stabilized. But look beneath the surface and you see an entirely different economy. This is precisely why reducing inflation to one government statistic is absurd. The CPI is telling us something far more important than whether inflation was 3.3% or 3.4%. Energy & Producer Costs: The Hidden Pipeline Energy rose 2.1% in a single month and 16.3% from a year ago. Gasoline jumped 3.9% in August alone and is now 27.4% higher than a year ago. Other motor fuels, including diesel, surged 9.6% in one month and 44% annually. The August Producer Price Index already rose 0.4% for the month and 5.4% annually, while processed goods for intermediate demand jumped 1.8%. Diesel prices at the producer level surged 24.1% in August. Those costs work their way through the e...