May 6, 2021
Summer is coming, and if you’re at all like me, you can’t wait.
I’ve been busy every weekend, getting the patio furniture outside, opening up the pool, and getting ready to fire up the BBQ.
If you’re also like me, you might be looking to make some tweaks to your home ahead of the summer season.
In my case, I decided to add an awning to a pergola by the pool.
I got the idea last summer while sitting outside under the hot sun — so I called the awning company, they came over, measured, and quoted me a price. The problem was by the time all that had all happened, summer was over — and they proposed delivering it to me in November. I hesitated because I didn’t feel like having an awning hog up space in my garage all winter.
(Let’s only say I really should have gotten the winter storage deal.)
Instead, I got sticker shock.
“We have to reprice it,” the company explained. “The cost of everything, the materials to the labor…everything has gone up.”
I’d say: The price of the awning and the labor? Up nearly 30%! In less than 12 months!
Summer 2021: An Inflationary Season
It’s pretty clear what’s going on: inflation is here.
Warren Buffett knows this. Indeed, the legendary investor delivered quite a message to his shareholders this past weekend: prices are going up.
It’s been my siren call for months now (and my local awning company and the Oracle of Omaha have confirmed) — prices on everything are going up, up, and away!
“We are seeing very substantial inflation,” the Berkshire chairman and CEO told investors at the conglomerate’s annual shareholder meeting on Saturday.
“We’ve got nine homebuilders in addition to our manufacture housing and operation, which is the largest in the country. So, we really do a lot of housing. The costs are just up, up, up. Steel costs, you know, just every day they’re going up,” he said.
And these costs are merely accepted.
The man who made twenty-three 1,000% recommendations just unveiled his #1 stock live on camera right here.
This cost-acceptance is what makes inflation stick, making it challenging for an economy to get rid of (as any Banana Republic government that thinks they can print their way to prosperity has learned.) These higher costs find acceptance because there’s enough demand, too little supply, and plenty of government fuel.
Indeed, I did my due diligence. And sure enough, all the awning companies in my area are charging more — as they should and as they must: it’s what the market dictates.
It’s all thanks to the very real uptick in raw material costs (have you seen copper?!) as well as the very legitimate increase in labor costs.
On the labor side, consider this: if an American goes to work these days, the pay needs to be compelling enough to beat the $300 per week from the Federal Government — along with the additional $200-$300 or more that worker gets from the state on unemployment.
And so material and labor costs are skyrocketing, with those costs passed onto consumers like you and me.
And consumers, we’re seemingly willing to pay it!
Something Buffet himself noted, as well.
“It’s very interesting. We are raising prices. People are raising prices to us and it’s being accepted,” he said.
American Prices: Going, Going, Gone
The numbers don’t lie…
The cost of U.S. consumer goods and services rose in February at the fastest pace in six months thanks to higher prices at the pump. Indeed, CPI, or the consumer price index, which tracks what U.S. consumers are paying for goods over 12 months, jumped to 1.7% in February from 1.4% a month before.
And then came March. In that month, consumer prices jumped again, with the Consumer Price Index showing a 2.6% annualized gain — a significant uptick from February’s 1.7% annualized jump. March’s prices crept higher by 0.6% on the heels of the February 0.4% increase for the fourth straight month of increasing costs.
The U.S. Bureau of Labor Statistics reports that March’s numbers show the biggest monthly gain in consumers’ prices since August of 2012.
And we haven’t even seen the May numbers, but I can promise you this… they’re even higher.
Don’t Tell the Fed or the Treasury Department
Of course, don’t tell anyone at the Federal Reserve or at Treasury this… and, if you do, be prepared for pushback.
Jerome Powell insists he can keep a lid on things and that we could even use a little inflation after having been struggling without it for too many years. So, money printing (the market hopes) and low rates are intact for the time being.
Meanwhile, Janet Yellen says not to worry about trillions in government spending! Because if there’s any inflation, they have tools for that.
“I don’t believe that inflation will be an issue, but if it becomes an issue,” she told NBC’s Meet the Press on Sunday, “we have tools to address it.”
Of course, one of the reasons she gave as to why she doesn’t believe the Biden stimulus plan ($6 Trillion) will be inflationary is because:
“It’s spread out quite evenly over eight to 10 years. So, the boost to demand is moderate,” she said.
So, here’s a question, Madam Secretary:
Why are we spreading it out over nearly a decade if you told us in the same interview that the country is in such a devastating place economically thanks to coronavirus?
Wouldn’t you want the stimulus now instead of years from now when she is predicting recovery?
Perhaps it is because, as I’ve maintained all along, this spending effort isn’t really about stimulus for a devastated economy but, instead, boosting the Democratic Party for years to come.
There is a desire among those in charge right now to shift our economy away from an independent capitalist system to a dependent, socialist system entirely reliant on big government.
Suppose Biden, Yellen, Harris, and their ilk succeed. In that case, they will effectively shift our economy in a massively structural way through higher taxes such that the power will lie with the government instead of with the people – reducing our freedoms and ratcheting up prices along the way.
Larry Summers is Right
As I’ve said repeatedly, Larry Summers — the former Treasury Secretary to Bill Clinton and the former head of the National Economic Council under Obama — is correct.
There is a massive risk to our economy right now for inflation. Summers has suggested we may soon face a 1970s economic environment again with prices spiraling out of control. It is likely the worst inflation in 40 years… and no one seems to be sounding the alarm except Summers.
Buffett, meanwhile, is a realist.
And so am I.
We’re installing the awning next month. Maybe it’ll protect me from this onslaught of inflation raining down.
- The British pound lost its top spot as the world’s reserve currency nearly a century ago — if the U.S. keeps pushing the limits of monetary policy, the dollar may suffer the same fate.
- Politicians and central banks always follow the same pattern regarding inflation: denial, dubbing it “transitory,” and ultimately scapegoating companies for the price hikes.
- The S&P 500 looks wildly different than it did twenty years ago, unlike the stagnant STOXX Europe 600 across the Atlantic, a testament to America allowing new businesses to grow and thrive.
- Europe has its version of Biden’s misallocated trillions in stimulus, Next Generation EU. The measure is a public-private package that’s supposed to strengthen the digitization of their economy, green energy, and gender equality. Good luck.
- China’s cementing relationships with African, Euro, Latin economies right now, waiting for the American financial system to stumble and hoping for a world where we’re all paying in digital yuan.
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Publisher, American Consequences
With Editorial Staff
May 6, 2021