Personal Economics 101

If you’ve traveled to New York or San Francisco recently, you’ve likely noticed the price of your Starbucks order change from terminal to terminal. The difference is due to price level variation throughout the United States. The Bureau of Economic Analysis (BEA) recently released data detailing the disparities in spending power across metropolitan and nonmetropolitan areas of each state for calendar year 2021. Using the data, we can compare how much $100 buys across the country. The differences can be large and they have significant implications for the relative impact of economic and tax policies across the United States. $100 tends to buy the least in large cities in the Northeast, California, and the Pacific Northwest. On the other hand, $100 goes the furthest in rural areas in the Southeast and Midwest. Prices can vary significantly within states too—$100 in California tends to buy $89.45 worth of goods on average, but in the Los Angeles area, $100 can purchase about $87.86 worth...

Two recent articles I've come across explain the phenomenon of inflation very well. Or pick up a book if you want more depth. Money Mischief would be a place to start.  Milton Friedman’s priceless lessons on inflation Inflation – it’s on everyone’s mind. Everyone is talking about how inflation is the highest it has been in forty years. With the slowing economy, what was said to be a “transitory” phase has turned into “stagflation.” Some are blaming the government. The government is blaming the war. Republicans are blaming the Democrats, and the left is blaming greedy corporations. As the blame game and alarm rage, it remains a fact that most of us don’t know what inflation is. Few know what causes it. Fewer know how it can be curbed. Under the circumstances, it pays to listen to the respected American economist Milton Friedman as he deconstructs this “alarming” phenomenon. The Nobel Laureate, speaking at the University of San Diego and the San Diego Chamber of Commerce in 1978, bu...

Employed full time: Median usual weekly real earnings: Wage and salary workers: 16 years and over

  As Milton Friedman said: Inflation is a monetary issue. Think the money supply had anything to do with that? And what caused this? Spending by Congress and Quantitative Easing by the Fed.

Joe Biden signed into law the horrific Inflation Acceleration Act – which, as you know, increases government taxes and spending by roughly ANOTHER $750 billion. One of the groups that betrayed taxpayers and fiscal sanity in this fight was the inaptly named Committee for a Responsible Federal Budget. To believe this bill will lead to a “responsible federal budget” is about as divorced from reality as to believe that this is an “inflation reduction act.” Yet here is the statement that Maya McGuineas of CFRB put out to the press: This legislation focuses on lowering health care and energy costs, raising revenue, and reducing deficits and is exactly what the doctor ordered. Senator Manchin deserves tremendous credit for pushing this fiscally responsible reconciliation bill. I'm speechless. The Heritage Foundation reports that the bill will INCREASE the deficit by “at least $110 billion through 2031.” The bill raises $300 billion for corporate give-always for the climate change industri...

By Jack Crowe National Review Inflation surged 8.5 percent in July compared to the same month last year, down slightly from the four-decade high reached in June, the Labor Department announced Wednesday. The Consumer Price Index, a key measure of the cost of goods and services, dropped slightly due to a decline in record-high fuel prices which drove the previous month’s historic inflation spike. The increase also beat expectations as economists surveyed by Dow Jones expected headline CPI to increase 8.7 percent year-over-year in July. Excluding volatile food and fuel prices, core inflation rose 5.9 percent annually and 0.3 percent monthly. The average national fuel price stood at $4.010 per gallon as of Wednesday, down from a record-high $5.016 in mid-June. Despite the slight relief offered by declining fuel prices, the Federal Reserve is still expected to further raise interest rates to bring inflation closer to its target of 2 percent. Voters across the country consistently rank infl...

From the Tax Foundation. Full analysis here .  Reconciling the reconciliation bill: The Inflation Reduction Act, successor to the House-passed Build Back Better Act of late 2021, has been touted by President Biden to, among other things, help reduce the country’s crippling inflation. Among the major tax changes are a 15 percent corporate minimum tax, drug price controls, IRS tax enforcement, and a tax hike on carried interest to pay for increased spending on energy and health insurance subsidies as well as deficit reduction. See a more comprehensive list here . According to our model, the bill would raise about $304 billion in net revenue from 2022 to 2031, but would do so in an economically inefficient manner, reducing long-run economic output by about 0.1 percent, eliminating about 30,000 full-time equivalent U.S. jobs, and reducing average after-tax incomes for taxpayers across every income group in the long run. What about inflation? On balance, the long-run impact on inflation...

Technically, because GDP was negative for two quarters, it's a recession. However, there are caveats to current economic conditions, which mean if it is a recession, it's very mild. And there's still that pesky 2yr/5yr bond rate inversion (2.9/2.72). It's inflation that is the beast, which will undo everything.   T he GDP Price Index came in at an 8.7% increase, well above expectations of an 8.0% gain and compared to the unrevised 8.2% rise seen in Q1. By Kelly Evans The Exchange , CNBC Why was real GDP negative in the first half of this year? Because inflation ate up all the gains. The bombshell report this morning showed that real GDP shrank again in the second quarter, by 0.9% annualized, after a 1.6% drop in Q1. But wait, how can real GDP be shrinking while the labor market at the same time added 2.7 million jobs, and the unemployment rate fell from 4% to 3.6%? Because inflation ate up all the real economic gains. Nominal GDP--actual dollars before any adjustment fo...

Food prices helped drive the Consumer Price Index up 9.1% in the past year, marking the biggest annual increase in 41 years. According to government statistics, food costs rose 10.4% in the past year — the fastest pace since February 1981. Driving the increase: Energy prices were responsible for more than half of the monthly gains in headline inflation, with gas prices rising over 11% last month, Axios ' Neil Irwin and Courtenay Brown write . However, the average price of regular-grade gas is falling. As of this morning, it is at $3.92 in the greater Austin area — down from $4.65 a month ago.

The Republicans on the congressional Joint Economic Committee have calculated that from January 2021 through the end of this year, inflation will have cost the typical American family nearly $8,400. If these trends continue, this means that inflation will have erased all of the $6,400 median household income gains that were made under Trump. Here are the highlights: Prices increased 13.3 percent from January 2021 to June 2022, costing the average American household $718 last month alone Even if prices stop increasing altogether, the inflation that has already occurred will cost the average American household $8,616 over the next 12 months. In the United States overall, the monthly inflation cost in June 2022 was highest within transportation ($343), followed by energy ($214), food ($85), and shelter ($81). Families in Colorado are facing the highest transportation inflation ($487) and shelter inflation costs ($149); families in California are facing the highest food inflation costs (...

As shown by the chart below, the Biden administration is selling off US Strategic Petroleum Reserves (SPR) at the fastest pace on record. As of today, we are now at the lowest levels since 1985. Here is where things get concerning: despite the biggest decline ever in the SPR, total US oil inventories (outside of the government’s emergency SPR) have barely budged off their lows. Let me repeat that. The biggest release of oil ever in the US has barely increased our total domestic inventories. Low supplies can only mean higher prices (oil was at $97 today, July 15, down from its peak of $130 in March 2022) in the future, if demand remains the same -- or increases. you cannot have economic growth without energy to power that growth, and we will continue to see a humanitarian crisis until governments all over the world work to increase natural gas, nuclear energy, and oil production. If they don’t, shortages, cost-of-living spikes, and disruptions to our food and energy systems are likely t...

Inflation at the wholesale level climbed 11.3% in June compared with a year earlier, the latest painful reminder that inflation is running hot through the American economy. The Labor Department reported Thursday that the U.S. producer price index, or PPI — which measures inflation before it hits consumers — rose at the fastest pace since hitting a record 11.6% in March. Last month’s jump in wholesale inflation was led by energy prices, which soared 54% from a year earlier. But even excluding food and energy prices, which can swing wildly from month to month, producer prices in June jumped 8.2% from June 2021. On a month-to-month basis, wholesale inflation rose a substantial 1.1% from May to June. Thursday's PPI report came a day after the Labor Department reported that surging prices for gas, food and rent catapulted consumer inflation to a new four-decade peak in June, further pressuring households and likely sealing the case for another large interest rate hike by the Federal Res...

More than half of all Americans weren’t even alive the last time prices rose at this pace of 9.1%. Yet Democrats say dam the torpedoes and full speed ahead with another $1 trillion tax and spend bill. Stimulus is a large part of what caused this runaway inflation to begin with. I wonder why they don't get it.  Biden remarked that the data was backward looking, that June's numbers didn't reflect the drop in oil prices in July. Nothing to worry about. These aren't the droids you're looking for. OMG. All data is backward looking; otherwise, its a projection or prediction, or just a wild ass guess. Even the Carter administration didn't have this level of incompetence.  This is a scary bunch ruling Washington these days. November can’t get here soon enough . 

(Update 5/24: Since publishing this article (May 23), the price of Natural Gas increased to $8.81 per MMBtu or 8.6% on the NY Mercantile Exchange. The price of oil is $110.57 per barrel.) Since Biden was elected president with his declaration of war against fossil fuel production, the oil price has spiked from $60 a barrel to above $100 a barrel, an increase of about 70%. Gas prices at the pump have surged nationally at a similar pace, from $2.59 a gallon under Trump to about $4.59 a gallon last week.  But don’t fret, because the Biden White House is “doing everything we can to bring gas prices down.” Another energy crisis may be brewing, and that is a result of the surge of natural gas prices. (Don’t forget, natural gas is by far the number one source for electric power generation in America.) Here at home, those prices have climbed from less than $3 per MMBtu in 2020 to $7.40 as of last week. (See chart.) This is close to a 150% increase in price. James Grant from the Interest Ra...

Wholesale prices in the U.S. soared 11% in April from a year earlier, a hefty gain that indicates high inflation will remain a burden for consumers and businesses in the months ahead. The Labor Department said Thursday that its producer price index (PPI) — which measures inflation before it reaches consumers — climbed 0.5% in April from March. That is a slowdown from the previous month, however, when it jumped 1.6%. The cost of groceries in the past 12 months is up 10.8%, the largest 12-month increase since November 1980, The Wall Street Journal reports, citing Labor Department consumer price index (CPI) data. Grocery costs rose 1% in April after increasing by 1.5% in March; they have risen by 1% or more in the past four months. Dairy prices, led by milk, shot up the most in April, by 2.5%. The April year-over-year increase in the April PPI declined from the 11.5% annual gain in March, which was the biggest increase since records began in 2010. The producer price data captures inflatio...

Inflation slowed in April after seven months of relentless gains, a tentative sign that price increases may be peaking while still imposing a financial strain on American households. Though it wasn't much, markets responded positively. The Consumer Price Index (CPI) rose 0.3% month-over-month (m/m) in April, above the Bloomberg consensus estimate calling for a 0.2% gain, and compared to March's unrevised 1.2% increase. The core rate, which strips out food and energy, increased 0.6% m/m, topping forecasts of a 0.4% rise and compared to March's unadjusted 0.3% increase.  Compared to last year, prices were 8.3% higher for the headline rate, above estimates of an 8.1% increase but a deceleration from the prior month's unrevised 8.5% rise. The core rate was up 6.2% y/y, north of projections of a 6.0% gain, and down from March's unrevised 6.5% rise.   Nationally, the price of a gallon of regular gas has reached a record $4.40, according to AAA, though that figure isn’t ad...

With inflation running at percent 8 percent annually, according to CPI numbers released March 10, and energy prices at nearly all-time highs, some in Congress want to impose a windfall profits tax on crude oil.  The Consumer Price Index (CPI) rose 0.8% month-over-month (m/m) in February, in line with the Bloomberg consensus estimate, and up from January's unrevised 0.6% gain. The core rate, which strips out food and energy, increased 0.5% m/m, matching forecasts, and slightly below January's unadjusted 0.6% rise.  Compared to last year, prices were 7.9% higher for the headline rate—again the fastest pace since 1982—in line with estimates and an acceleration from the prior month's unrevised 7.5% rise. The core rate was up 6.4% y/y, matching projections, and rising from January's unrevised 6.0% rise. Initial jobless claims came in at a level of 227,000 for the week ended March 5, versus estimates calling for 217,000, and above the prior week's upwardly-revised 216,000...

President Biden at his State of the Union address vowed to fight inflation, though that has been a struggle, with consumer prices soaring 7.5% over the past 12 months.  Biden said during his speech before Congress: "My top priority is getting prices under control. We have a choice. One way to fight inflation is to drive down wages and make Americans poorer. I think I have a better idea to fight inflation: Lower your costs, not your wages. Make more cars and semiconductors in America. More infrastructure and innovation in America. More jobs where you can earn a good living in America instead of relying on foreign supply chains, let's make it in America. My plan to fight inflation will lower your costs and lower the deficit." Even if making it (supplies?) in America would work, it would take several years, but that is not the underlying cause of inflation. Inflation is caused by two major factors: Too much money in the financial system and more demand than supply.  U.S. Inf...

Wholesale inflation in the United States surged again last month, rising 9.7% from a year earlier in a sign that price pressures remain high at all levels of the economy. The Labor Department said Tuesday that its producer price index — which measures inflation before it reaches consumers, or wholesale prices — jumped 1% from December. Excluding volatile food and energy prices, wholesale inflation rose 0.8% from December and 8.3% from January 2021. The Producer Price Index (PPI) showed prices at the wholesale level in January rose 1.0% month-over-month (m/m), above the Bloomberg consensus estimate of a 0.5% gain, and north of December's unrevised 0.2% increase.  The core rate, which excludes food and energy, gained 0.8% m/m, above estimates of a 0.5% rise and above the prior month's unadjusted 0.5% rise. Y/Y, the headline rate was 9.7% higher , the same as the prior month, but higher than projections calling for a 9.1% gain. The core PPI increased 8.3% y/y last month, above est...

The  Consumer Price Index  (CPI) rose 0.6% month-over-month (m/m) in January, above the Bloomberg consensus estimate of a 0.4% increase, and following December's upwardly-revised 0.6% gain. The  core rate , which strips out food and energy, also increased 0.6% m/m, topping forecasts of a 0.5% gain, and matching December's unadjusted rise. Compared to last year, prices were 7.5% higher for the headline rate—the fastest pace since 1982—above estimates of a 7.3% increase and an acceleration from the prior month's 7.0% rise. The core rate was up 6.0% y/y, above projections of a 5.9% increase, and following December's unrevised 5.5% rise. Weekly initial jobless claims  came in at a level of 223,000 for the week ended February 5, versus estimates calling for 230,000, and down from the prior week's upwardly-revised 239,000 level. The  four-week moving average  declined by 2,000 to 253,250, and  continuing claims  for the week ended January 29 was unchang...