Bidenomics – How it’s going:

Prices going up, wages coming down…

Updated Consumer Price Index (CPI) numbers were released by the Bureau of Labor and Statistics (BLS) yesterday. Was it good news? It depends on who you ask. Some will tell you the numbers looked better than expected and that inflation is normalizing.

Others will point out that inflation is still hot, and even though the aggregate number looked relatively tame at 0.6% the unadjusted 12 month figure of 3.7% is still well above the target 2% and the real concern is the big jump in energy and gas prices in particular.

Energy as a category rose a whopping 5.6%, the biggest increase of the year, and gasoline - what you pay at the pump - is up 10.6%! This is a big concern, and if OPEC maintains their production cut, this could continue to rise, possibly even dramatically over the next few months.

This all translates to a decline in real wages of 0.5% right when you can least afford it.  And indeed, people on the ground are not buying official inflation numbers based on their lived experience of higher prices at the grocery store and higher utility bills. Higher everything. They don't care what the BLS indicator says. They know what they are paying for the things they need most.

This is a predictable result of rampant money printing. The term “money printing” often conjures images of central banks frantically churning out banknotes. However, the reality is more nuanced. Monetary expansion includes actions like stimulus programs, aid and bailouts to various industries - and countries, quantitative easing and adjusting interest rates.

When all of these newly created dollars hit the streets and chase the same or fewer goods, you have a recipe for inflation. And with Saudi Arabia cutting their oil output, we have a lot of dollars competing for a dwindling oil supply. No wonder gas prices jumped this month!

Gasoline is the lifeblood of the economy. When gas prices go up, everything goes up. And, it’s not just a concern for the average consumer filling up their tank. There are far-reaching consequences that can wreak havoc across the entire economy.

Consumer Spending

As the cost of filling up the gas tank increases, consumers have less disposable income to spend on other goods and services. This reduction in consumer spending can lead to decreased demand for products, which can, in turn, result in reduced production and layoffs in other industries.

Cost-push Inflation

When transportation costs increase due to rising fuel prices, companies often pass those costs onto consumers in the form of higher prices for goods and services. This phenomenon, known as cost-push inflation, can erode purchasing power and reduce the standard of living for many individuals and families.

Transportation

For industries heavily reliant on trucking, such as the shipping and logistics sector, increased fuel costs can result in higher operating expenses. These added expenses can lead to increased shipping costs for businesses and ultimately affect the prices consumers pay for goods.

Manufacturing and Production

Manufacturers and industrial companies often rely on fuel for their operations, from running machinery to transporting raw materials and finished products. When gas prices rise, these companies face increased production costs. This can either lead to reduced profit margins or, in some cases, the passing of these costs onto consumers in the form of higher prices for manufactured goods.

Agriculture

Higher gas prices can lead to increased production costs for farmers. These added expenses can translate into higher food prices, affecting not only consumers but also food security and overall economic stability.

Small Businesses

Higher fuel costs can strain struggling budgets and make it more difficult to compete with larger corporations. Small businesses often have limited resources to absorb increased operational expenses.

Economic Growth

When gas prices soar, it can put a damper on economic growth overall. High fuel costs can reduce consumer confidence and lead to decreased spending, causing businesses to scale back operations and investments. This, in turn, can lead to slower economic growth and, in some cases, recessionary pressures.

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Watch out for continued repercussions of money printing and higher energy costs. This could be the next leg down for the economy. Do you have tangible assets the government can't print away? Gold and silver are great buys right now, still off of highs for the year, but central bank buying is heating up. Make your purchases now before the People's Bank of China (and others) drive gold even higher.