‘The strongest case imaginable’ to pause student-loan payments even longer comes from staggering inflation report, advocates say

joe biden
U.S. President Joe Biden.

  • Student-loan payments are resuming in 53 days.
  • Advocates say new inflation data showing a 4-year high is cause for Biden to extend the payment pause.
  • The Ed. Dept. still plans to resume payments on Feb. 1, but says it is monitoring the Omicron variant.

The last time Americans saw inflation this high was when Ronald Reagan was president, according to Friday data form the Bureau of Labor Statistics.

This has advocates for student-loan borrowers asking one question: Why is President Joe Biden still resuming payments in less than two months?

The Consumer Price Index, which measures US inflation, rose 6.8% year-over-year in November, showing just how much Americans’ wallets are being squeezed by higher prices across the board. Prices for gas, food, and energy all rose, and in 53 days, 43 million federal-student loan borrowers will have to add monthly student-debt bills back to their monthly expenses. This comes as the Student Debt Crisis Center found in a recent survey, 89% of borrowers with full-time jobs do not feel financially secure enough to resume payments next year, given that a large portion of their incomes will be dedicated to those monthly bills instead of basic goods.

“Today’s economic data make the strongest case imaginable for a change of course as the Biden Administration rushes headlong into a hasty and poorly timed restart of the entire student loan system,” Student Borrower Protection Center Executive Director Mike Pierce said in a statement. 

“American families today are being forced to pay more to meet their basic needs, as rent, food, and energy prices skyrocket,” he went on. “Adding the burden of a student loan bill will stretch millions of families’ finances to the breaking point. Washington does not need this money; American families do.”

Student-loan payments have been on pause and accruing 0% interest since the pandemic began, but in August, Biden’s Education Department made clear the extension through January 31, 2022 is “final.” Advocates and lawmakers are urging the department to change its mind not only because of surging inflation, but because of uncertainty the new Omicron variant brings, as well.

“This debt is just overwhelming for people,” Senate Majority Leader Chuck Schumer said earlier this week. “If we don’t extend the pause, interest rates just pile up. Students owe a fortune. And with Omicron here, we’re not getting out of this as quickly as we’d like.”

Sandy Baum, a nonresident senior fellow for the Center on Education Data and Policy at the Urban Institute, told Insider that she’s worried about the transition back into repayment, especially for those who struggle with navigating the system. But she noted the availability of the income-driven repayment plan, in which borrowers can use this plan to make monthly payments based on what they can afford.

She added, though, that the plan “is not perfectly structured. There are barriers to getting in it, and there are barriers to staying in it.”

“If we want to be able to continue to offer loans, we have to have a system that requires people who are able to pay to pay,” Baum said. “If you don’t have any money and you don’t have a job, then of course you can’t repay and there needs to be provisions for that.”

The Education Department still plans to restart payments in February and told Politico in a statement that it is “still assessing the impact of the Omicron variant” and in the coming weeks “will release more details about our plans.”

Advocacy groups maintain that borrowers need answers now on a further extension.

Biden “should immediately extend the student loan payment pause to give families certainty that they won’t have to choose between paying for food and onerous student loans,” Remington Gregg, council for civil justice and consumer rights at Public Citizen, said in a statement. “Payments are set to resume in less than 60 days, even as another strain of the coronavirus hinders people’s ability to get back to work and return to normalcy. The choice couldn’t be clearer.”

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Inflation was the highest it’s been in nearly 40 years in November

Walmart shopping
  • The Consumer Price Index soared 6.8% year-over-year in November, exceeding the 6.7% forecast.
  • The reading shows the fastest pace of price growth since 1982, when Ronald Reagan was president.
  • Inflation has accelerated through the fall as the supply crisis and strong spending fueled price hikes.

Build Back Better just got a body blow. Joe Biden is facing the highest inflation since Ronald Reagan was president.

The Consumer Price Index — a commonly used measure of US inflation — rose 6.8% year-over-year in November, the Bureau of Labor Statistics said Friday. Economists surveyed by Bloomberg forecasted a one-year gain of 6.7%. The print shows inflation accelerating again from the October pace of 6.2% and reaching its highest level since 1982, when Reagan was in the middle of his first term as president.

On a month-over-month basis, the index climbed 0.8%. That exceeded the median forecast for a 0.7% jump and showed inflation cooling from the 0.9% surge seen in October. Though the year-over-year measure signals worryingly high inflation, the slowing pace suggests inflation might have peaked this fall.

 

Core CPI, which strips out volatile food and energy prices, ticked 0.5% higher through the month, matching the average forecast. Core measures are usually regarded as more telling of broad inflation trends, as they aren't influenced by sudden moves in gasoline or grocery prices.

The Friday release shows just how hard the supply-chain crisis hammered businesses and shoppers across the US. Port bottlenecks and goods shortages eased somewhat in November but remained a major strain on the recovery. The start of holiday-season spending and Black Friday sales led to strong demand crashing up against limited supply.

November also saw US gas prices peak before tapering off into December. The nationwide average reached $3.43 per gallon earlier in the month but has since crept slightly down to $3.35. A prolonged downtrend could pull broad inflation to lower levels, though it's unclear whether the Omicron variant will curb travel demand.

The print also ramps up pressure on Democrats as they push for another massive spending package. The party aims to pass the Build Back Better plan by Christmas, but red-hot inflation has led Republicans to link new spending to soaring prices

Elevated inflation has also led Sen. Joe Manchin of West Virginia to express some trepidation toward passing the measure in 2021. The centrist Democrat said Tuesday that inflation is "not transitory" and the Senate should focus more on inflation risk than jamming through more spending.

"The unknown we're facing today is much greater than the need that people believe in this aspirational bill that we're looking at. And we've got to make sure we get this right," Manchin said during The Wall Street Journal's CEO Council Summit. "We just can't continue to flood the market as we've done."

With inflation endangering Biden's spending agenda and hurting Democrats' 2022 election hopes, the Friday data suggests the party has a tougher road ahead before price growth slows.

Where inflation heated up in November

The CPI report offers economists the first look at where prices soared the most last month. Energy costs fueled the bulk of the month's inflation, with the category seeing prices climb 3.5% in November. Gasoline prices saw the biggest jump of 6.1%, matching the pace seen in October. Fuel oil inflation slowed to 3.5% from 12.3%, according to the report.

Food prices rose 0.7% month-over-month, decelerating from October's pace of 0.9%.

Used car prices jumped 2.5% through November, matching the pace seen the month prior. The category fueled one-third of higher inflation in the spring before cooling off through the summer. The category is still up 31.4% year-over-year, more than nearly any other product.

Shelter inflation held at 0.5% month-over-month. The category has been closely watched in recent months. Such inflation tends to be stickier than other kinds, meaning it's less likely to reverse course if it speeds up. Though the US housing market has been white-hot throughout 2021, soaring home values have done little to drive shelter inflation higher.

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Biden has the power to lower your price at the gas pump, and he’s facing increasing pressure to do so

Gas station Brooklyn
A person pumps gasoline at a Conoco gas station, a brand owned by Phillips 66, in Brooklyn, New York, U.S., November 11, 2021.

  • Biden could cool gasoline prices, one of the biggest drivers of today’s historic inflation.
  • The White House is reportedly eyeing options as lawmakers and Americans call for a fix.
  • Possible actions range from an oil export ban to tapping the goverment’s underground oil stockpile.

While Biden can’t do much about overall inflation, he has a few options when it comes to rising gasoline prices. And he’s being urged to choose one.

Prices of nearly every good and service in the US are soaring at the fastest pace since 1990 — especially when it comes to energy. With Biden’s approval ratings plummeting and Americans’ recovery hopes dashed, lawmakers on both sides of the aisle are pressuring his administration to fight back.

Energy prices climbed 4.8% in October, according to the Consumer Price Index. Gasoline prices leaped 6.1% — the largest one-month jump since March. While the president can’t quash broad inflation like the Federal Reserve can, but the White House has a few tools to solve the problem.

Biden has 3 options to fight inflation at the pump

Likely the easiest one to leverage is the Strategic Petroleum Reserve. The reserve is a government complex of deep underground storage wells that, as of Friday, hold more than 600 million barrels of crude oil. The SPR isn’t usually used to change gasoline prices, but key Democrats are already pressing the administration to tap the massive stockpile.

“We’re here today because we need immediate relief at the gas pump and the place to look is the Strategic Petroleum Reserve,” Senate Majority Leader Chuck Schumer said during a Sunday news conference in New York. “Let’s get the price of gas down right now. And this will do it.”

To be sure, using the SPR probably wouldn’t solve the price problem for good. The reserve stores crude oil, meaning it would take some time for oil to be refined into pumpable gasoline. The stockpile is also limited and it can’t permanently close the gap between driver demand and gasoline supply.

But the world’s most influential oil group has already denied Biden’s calls for more product. The Organization of Petroleum Exporting Countries declined to boost production earlier in November despite soaring prices and overwhelming demand.

OPEC’s refusal has led the White House to prepare a multifaceted approach for lowering prices. Along with tapping the SPR, the Biden administration is mulling regulatory changes that would allow refiners to turn more crude oil into gasoline, according to Bloomberg. Among the actions is a relaxing of the rule to mix gasoline with biofuels. Easing the mandate would help more supply hit the market and, in turn, ease prices.

The White House could also ban oil exports to keep more supply in the US, but administration officials have balked at such measures so far. Holding back exports could hurt relations with other countries, particularly those the Biden administration aims to restore diplomacy with after disputes with the Trump administration, Bloomberg reported.

No matter what Biden does to cool gasoline inflation, the fixes don’t need to last forever. Energy prices will fall by 7% over the next 12 months, David Kelly, chief global strategist at JPMorgan, said in a Monday note. Oil production is expected to “increase sharply” in the year ahead, he added.

The eventual cooldown won’t just dampen gas prices. A 7% drop in energy prices will subtract 0.5% from broad inflation, Kelly said. If the decline in energy prices is the only change in CPI from October 2021 to October 2022, the inflation measure will still plunge to 3.5% from 6.2%, he added.

In other words, the best long-term solution is to wait it out.

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Inflation isn’t one size fits all: some lower-paid workers have actually gotten a raise

A restaurant worker wears a facemark while holding a tablet to take customer orders.
A Texas-based restaurant chain has promoted young workers to manager roles amid a labor shortage

  • Inflation surged in October, hurting Americans’ wallets amid a supply-chain crisis.
  • While most workers are worse off, those in lower-paid industries, like hospitality, have actually seen wage growth.
  • Biden said his Build Back Better agenda will help curb price increases.

The data shows that Americans are getting slammed by inflation. The truth is more complicated.

This Wednesday’s inflation report showed prices climbing at the fastest rate since 1990. Inflation is so high, in other words, that workers’ wage gains have been more than canceled out by it.

But that’s just the average wage. If you look closely at the data from the Bureau of Labor and Statistics, lower-paid workers have actually gotten a raise in 2021.

As Insider’s Ben Winck and Andy Kiersz reported, high inflation proved sticky in October due to shipping delays and a supply-chain crisis that’s left firms unable to match American spending, which hasn’t faltered thanks to pandemic stimulus and pent up demand. Rising prices are mostly hurting American workers.

As the Washington Post’s Heather Long wrote on Twitter, workers in lower-paid industries like hospitality are seeing wages actually rising and growing faster than inflation.

Businesses have been struggling to hire during the pandemic, particularly in lower-paid industries like leisure and hospitality. To counter the labor shortage, some restaurants, like McDonald’s, have raised their starting wages during the pandemic to attract more workers. In the October jobs report, hospitality gained the largest share of jobs, at 164,000.

Wages and salaries for leisure and hospitality grew by 2.8% from the first to second quarter of 2021, and while lower-wage industries are still 5.5% below pre-pandemic levels, pay in the sector is continuing to grow.

Inflation undoubtedly remains a concern. President Joe Biden acknowledged in a Wednesday statement that reversing rising prices in the country is a “top priority” for him, and he believes passing his Build Back Better agenda is key to making that happen.

“17 Nobel Prize winners in economics have said that my plan will ‘ease inflationary pressures,'” Biden said. “And my plan does this without raising taxes on those making less than $400,000 or adding to the federal debt, by requiring the wealthiest and big corporations to start to pay their fair share in taxes.”

While the White House believes this inflation is temporary, though, Insider reported that price growth is accelerating in nearly every corner of the economy, an ominous sign. Inflation has been higher than expected much of this year, but price rises across the board were a new feature in October, and hint at more pain to come.

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There’s one really scary thing about inflation from October that’s different from the rest of 2021

St. Louis coronavirus shoppers
Shoppers browse in a supermarket while wearing masks to help slow the spread of coronavirus disease (COVID-19) in north St. Louis, Missouri.

  • Inflation is running at its fastest rate since 1990. Yet the breadth of stronger price growth is even more frightening.
  • Prices rose faster in October across almost every category tracked by the Labor Department.
  • The Wednesday report could be a sign that the White House is wrong and inflation will stay persistently high.

Inflation is real.

Prices just grew at the fastest annual rate in 30 years, in the October inflation report. And that’s not even the most worrying thing.

The Consumer Price Index rose 0.9% in October, exceeding the median forecast for a 0.6% leap and marking the largest one-month price surge since 2008. But on a year-over-year basis, the inflation measure climbed 6.2%, the largest such jump since 1990.

Hot inflation prints aren’t new; price surges have been a defining characteristic of the reopening. Yet the October CPI report shows inflation that’s not just fueled by a handful of categories, but by accelerating price growth in nearly every corner of the economy.

The CPI measure is made up of various groups of goods and services. Monthly reports typically see prices in some groups climb while others decline. But October’s report showed prices rising in all but one category. When prices rise for almost every good in the economy, it’s the kind of thing that sets off alarm bells.

One month of strong inflation won’t topple the US economy, but the October report hints at how the country could enter an inflationary spiral.

The October read is also a marked change from other alarming inflation reports earlier this year. June saw a similar 0.9% monthly spike in prices, but the bulk of the increase in the overall index came from a wild double-digit increase in the price of used cars. October’s report, on the other hand, can’t be chalked up to a handful of outliers. Inflation isn’t just accelerating, it’s broadening.

Energy costs drove the bulk of the increase. Fuel oil prices soared 12.3% through the month. Gasoline and utility gas prices rose 6.1% and 6.6%, respectively.

Used vehicle prices rebounded 2.5% in October after declining in the two previous months. Apparel was the only category to see prices stay flat, but that still marked a pick-up from the 1.1% drop seen in September.

It’s too early to tell if the CPI read is an outlier or a harbinger of economic catastrophe to come. But with prices soaring across the board, the odds of persistently high inflation are rising.

How higher inflation can become permanent

If high inflation is scary, persistently high inflation is a nightmare. Somewhat linked to inflation expectations, this means that businesses raise prices when they expect prices to climb. This can spark a vicious cycle. Workers then demand higher wages to offset higher prices, and it shows up in economic data that prompt businesses to hike prices again.

Ending such a spiral can be done, but it’s painful. The US curbed massive inflation in the 1980s, but only with sky-high interest rates that plunged the country into another economic downturn.

October data is the first possible sign of such an inflation spiral materializing. Not only are prices rising faster in nearly all categories, but Americans are bracing for even stronger inflation. The median one-year expected inflation rate rose to 5.7% from 5.3% in October, according to a survey from the Federal Reserve Bank of New York. That’s the highest level since at least 2013, when the Fed’s survey began.

The latest report also cuts into the mainstream argument that higher inflation will be transitory. The Biden administration and the Federal Reserve reiterated the outlook earlier in November, arguing price growth would cool once the global supply-chain crisis abates. Yet inflation has already exceeded the government’s initial forecasts, and the October report reveals just how fragile the transitory thesis is.

To be sure, the economy is still far from normal. A global energy crunch and dire supply shortages are behind much of the recent price surges, and if both can be solved, inflation will likely ease.

It’s not yet time to panic. But it may be time to start getting a little scared.

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Bitcoin notches new all-time high after inflation data shows prices are surging at the fastest rate in 30 years

Bitcoin Balloon 2
Bitcoin Balloon 2

  • Bitcoin notched an all-time high minutes after US inflation data showed prices are surging at the fastest rate in 30 years.
  • Bitcoin rose to an intraday high of $69,000, reflecting a 4.6% gain from the time CPI data was released.
  • “I have never been on board with the suggestion that bitcoin is an inflation hedge but it’s clear today that the narrative is sticking,” Craig Erlam of Oanda said.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Bitcoin notched a new all-time high on Wednesday moments after US inflation data showed prices are surging at the fastest rate in 30 years.

The price of the coin rose to an intraday high of $69,000 at 9:15 a.m. ET Wednesday based on Coinbase data, reflecting a 4.6% gain from 8:30 a.m. ET, the time the Consumer Price Index was released. Bitcoin was trading at $65,951 before the data was published.

Bitcoin pared those gains, and was trading 1.46% higher to $68,393 as of 10:30 a.m. ET.

The fresh CPI data, which showed price growth rising at a quickened pace in October, stoked concerns that inflation would be an issue well into 2022. Bitcoin, often touted as a hedge against rising prices due to its fixed supply of 21 million, rallied in response.

Bitcoin bulls have long said that the token cannot be devalued by any government institution due to its decentralized nature and the inability to mint more of it.

The CPI – a key measure of nationwide inflation – gained 6.2% on a year-over-year basis, the fastest rate of annual inflation since 1990. CPI rose 0.9% in October, higher than the 0.6% estimated by economists at Bloomberg.

Bitcoin did not always react to inflation by surging in price, though. In July, bitcoin fell after a strong inflation reading. And in May, bitcoin fell 7% on a day when CPI data showed prices rising at their fastest rate since 2008.

“I have never been on board with the suggestion that bitcoin is an inflation hedge but it’s clear today that the narrative is sticking,” Craig Erlam, senior market analyst at foreign exchange firm Oanda, said in a note. “And if the narrative has indeed stuck, this could bode well in the near term as the inflation data may get worse before it gets better.”

Other cryptocurrencies are also seeing record highs, pushing the market capitalization of the entire crypto market above $3 trillion for the first time this week.

Gold, another inflation hedge, edged higher by as much as 1.91% to $1,852.65 per ounce on Wednesday.

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US stocks slide as inflation data shows prices continue to rise at the fastest rate in decades

Traders work on the floor of the New York Stock Exchange (NYSE) on November 05, 2021 in New York City.

US stocks slid Wednesday after inflation data showed that prices are rising at the fastest rate in decades.

The benchmark S&P 500 edged lower after ending an eight-day winning streak in the previous session – its longest run since 1997. The Dow Jones Industrial Average and the tech-heavy Nasdaq-100 also slipped.

Here’s where US indexes stood shortly after the 9:30 a.m. ET open on Wednesday:

The Consumer Price Index – a key measure of nationwide inflation – gained 6.2% on a year-over-year basis, the fastest rate of annual inflation since 1990. It also showed price growth picking up from September’s one-year pace.

CPI rose 0.9% in October, higher than the 0.6% estimated by economists at Bloomberg. The reading marks an acceleration from the 0.4% gain seen in September and the largest one-month jump since 2008.

“While supply chain disruptions and labor shortages won’t last forever, the bigger question is to what extent these factors affect wage inflation and housing inflation, which are stickier parts of the overall inflation picture and can be slower to reverse,” Nancy Davis, founder of Quadratic Capital Management, said in a statement.

If inflation doesn’t subside, Davis, who is also portfolio manager of the Quadratic Interest Rate Volatility and Inflation Hedge ETF, said the central bank may need to taper at a quicker pace and hike interest rates. This, she said, could hurt stocks and bonds.

Still, she said that CPI is just one measure of inflation. A significant portion of its calculation is comprised of shelter, mainly rental prices in cities, which is not the most comprehensive view of inflation, she added.

Equities have been boosted by strong third-quarter earnings despite headwinds such as supply-chain constraints, persistent labor shortages, and rising inflationary pressures.

The yield on 10-year Treasury notes rose to 1.476% Wednesday compared to Tuesday’s 1.431%. Bond yields and prices move inversely.

Coinbase Global stock slipped 11% Wednesday after the largest cryptocurrency exchange in the US reported third-quarter earnings that missed Wall Street’s expectations.

In cryptocurrencies, bitcoin slipped below $67,000 after hitting new highs, while litecoin is on track for a 30% weekly gain.

Oil prices rose. West Texas Intermediate crude oil jumped 0.17% to $84.29 per barrel. Brent crude, oil’s international benchmark, climbed 0.18% to $84.93 per barrel.

Gold edged higher by as much as 1.31% to $1,853.61 per ounce.

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The highest inflation in a decade worsened in October as the supply-chain crisis showed no signs of stopping

Shopping Mall coronavirus
People wearing masks are seen in a shopping mall in San Mateo, California, the United States, May 19, 2021.

  • The Consumer Price Index gained 0.9% in October, overshooting the median estimate of 0.6%.
  • The reading also marks an acceleration from September’s price growth of 0.4%.
  • The report shows inflation rebounding as the global supply-chain crisis raged on and companies kept hiking prices.

Inflation swung higher in October, signaling the global supply-chain crisis kept prices surging at the fastest rate in decades.

The Consumer Price Index – a popular measure of countrywide inflation – gained 0.9% last month, the Bureau of Labor Statistics said Wednesday. Economists surveyed by Bloomberg expected the index to climb 0.6%. The reading marks an acceleration from the 0.4% gain seen in September and the largest one-month jump since 2008.

On a year-over-year basis, CPI rose 6.2%. That’s the fastest rate of annual inflation since 1990 and also showed price growth picking up from September’s one-year pace.

Core CPI, which excludes volatile food and energy prices, gained 0.6% in October, according to the report. That exceeded the median forecast for a 0.4% jump.

The Wednesday report shows inflation rebounding in October as the global supply tangle raged on. Shipping delays and port logjams have strangled businesses in recent months, leaving firms unable to match Americans’ strong spending. The worldwide energy crunch also lifted CPI as countries scrambled to generate ample power.

Supply-chain problems have been “larger and longer-lasting than anticipated” and kept inflation high, Fed Chair Jerome Powell said in a November 3 press conference.

As companies have continued to lift prices, other pockets of the economy are healing faster. The US added 531,000 nonfarm payrolls in October, according to data out Friday. That handily exceeded forecasts and marked a strong rebound in the labor market’s recovery after it stumbled during the Delta wave. The latest jobless-claims data hinted hiring held strong into November, and with the holiday season approaching, greater spending stands to juice the rebound even more.

Paying big for food, gas, and cars

The October price surge was mainly driven by ballooning energy prices. The segment rose 4.8% last month, beating out food and services. Fuel oil saw the largest price jump of any category with a 12.3% gain in October alone. Gasoline prices and utility gas prices rose 6.1% and 6.6%, respectively.

Prices for food rose 0.9%, matching the September rate and bringing the year-over-year jump to 5.3%. All six major grocery-food groups gained through the month, and the index for meat, poultry, and fish notched a 1.7% leap.

Used car prices rose for the first time since July. The category saw the most dramatic price gains of any group earlier in the year, with monthly increases surpassing 10% in April and June. Price growth was weaker at 2.5% in October, but suggests the rapid vehicle inflation could return.

Clothing prices saw the smallest growth throughout last month, with prices holding flat after falling 1.1% in September. Shelter, transportation, and medical care costs all saw prices rise less than 1%.

The report shows the country still struggling to handle inflation despite a broad economic recovery. The Biden administration and the Federal Reserve have both doubled-down on the view that inflation will prove transitory. Despite price growth running above prior forecasts, inflation should cool off next year, Powell said at a press conference last week.

“As the pandemic subsides, supply bottlenecks will abate. As that happens inflation will decline from elevated levels,” he said. “The timing of that is uncertain. We should see inflation moving down by the second or third quarter.”

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Here are 5 leading market experts’ views on inflation as prices continue to rise

Inflation and stock appreciation
Malte Mueller/Getty Images

  • Inflation is high, and five market experts have weighed in on where prices head from here.
  • Paul Tudor Jones, Carl Icahn, Jeff Gundlach, Stanley Druckenmiller, Alan Greenspan .
  • Inflation is “the single biggest threat” to society, Jones said previously.

What do a tank of gas, a week’s worth of groceries, your new home, a used car, and a back-to-school-outfit have in common?

They’ve all gotten more expensive this year.

Consumers are facing the highest prices in about a decade, and it’s likely to stick around through at least the middle of next year. Many of the top market experts have begun sounding alarms over the trend.

Here’s what five of them have to say as inflation continues to increase.

Paul Tudor Jones

For billionaire investor Paul Tudor Jones inflation is the number one problem facing society.

“It’s probably the single biggest threat to, certainly, financial markets, and I think to society just in general.” Jones told CNBC in an Oct. 20 interview.

Jones, the founder and chief investment officer of Tudor Investment Corporation, said it’s clear that inflationary pressures aren’t “transitory,” considering the economy has overheated in part thanks to unprecedented levels of fiscal and monetary stimulus.

He said equities, not fixed income assets like bonds, are much better investments in the “inflationary world.”

Carl Icahn

Meanwhile, the legendary billionaire investor Carl Icahn suggests investors try bitcoin if they are looking to hedge inflation. “If inflation gets rampant, I guess it does have value,” he said warily of the cryptocurrency.

Icahn said inflation is taking hold – in a bad way.

“The market is certainly going to hit the wall. I really think there will be a crisis the way we’re going, the way we’re printing money, the way we’re going into inflation,” he said in an October CNBC interview.

Jeff Gundlach

For Jeff Gundlach inflation all comes down to two factors: wages and rent.

The billionaire “bond king” and CEO of investment firm DoubleLine told CNBC in an Oct. 22 interview that those two factors are “waiting in the wings to keep things elevated.” He said wages for lower salary jobs have risen to “sky high” levels, and soon, that trend will likely push up wages for supervisors as well. As for the cost of shelter, Gundlach said in the last six months, median rent has risen by more than 10%.

“We’re going to get persistently high inflation thanks to the shelter component,” he said, adding that inflation is likely to stay above 4% at least through 2022.

Stanley Druckenmiller

Druckenmiller, on the other hand, thinks inflation will top 4% for at least the next four years, and the Federal Reserve will be late in raising interest rates to counteract it, Bloomberg reported.

Just a year ago the billionaire investor and founder of Duquesne Family Office said inflation could reach as high as 10% with markets in a “raging mania.” That party, he told CNBC at the time, will eventually end in a “hangover.”

Alan Greenspan

Greenspan, the former chair of the US Federal Reserve, said “unprecedented amounts of government spending” and “burgeoning federal debt” may lead to higher inflation for a longer period of time.

On top of that, Greenspan, who is now a senior economic adviser to Advisors Capital Management, raised alarms over demand-side inflation, where “too many dollars chasing too few goods and services,” and supply-side inflation, where shortages in energy, transportation, and raw materials are prevalent.

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Everything from going out to eat to ordering furniture is slow and annoying now. Economists have no way to measure that.

Server at a restaurant
The restaurant industry may see its recovery stall as Delta variant rages.

  • Inflation measures track prices of common goods, but they fail to capture worrying COVID-era trends.
  • The labor shortage and supply-chain crisis have simply made customer service worse in many cases.
  • Economists have no way to track this, leaving experts in the dark as they navigate the recovery.

You’ve probably been out to eat recently. If it was your first time out in a while, you noticed some changes.

That $6 beer might be $9, if you live in New York City, and the menu is probably more limited. Maybe there’s a QR code you have to scan to bring up the menu, too.

This is what economists mean when they talk about inflation and automation as big changes brought on by the pandemic.

But did you find yourself … waiting a long time for your food? Or for someone to even talk to you? Was the wait so long you got a little angry and snapped at the wait staff? (Take it easy, now, don’t make a scene.)

This is a very real thing impacting the economy, but there’s no way to measure it in any data that any economist has ever dreamed up.

The country’s top inflation measures – the Personal Consumption Expenditures price index and the Consumer Price Index – both track price changes across a wide range of goods and services. They have remained elevated in August as the Delta wave intensified and supply-chain bottlenecks worsened, but they don’t tell the story of the slow, annoying experience described above.

Restaurants’ wait times have worsened as owners scramble to staff up. Shipping delays are so bad that furniture resale is expected to become a $16 billion market. And hotels are ending once-common practices like turndown service to keep up with demand.

Inflation is changing what you get for the same pre-pandemic price and leaving Americans with worse quality than before. The total blindness of this for the economist profession shows how little we still know about what inflation actually is, and what you can’t see can hurt you.

What economists can and can’t see

One of the key features of inflation indexes like PCE and CPI is “hedonic adjustment.” As the quality of goods and services changes over time, BEA and BLS adjust prices to reflect whether you’re getting more or less for your money.

The classic example is TV sets: In the 1990s, a big screen TV cost well over $1,000, but was also massive, awkward, and generally suffered from blurry image quality. In 2021, you can get a 50-inch TV set for under $500 – a huge decline in price in and of itself – but that also has a photo-realistic 4K resolution and connects directly to the internet, allowing for instant high-definition “The Office” binge-watching sessions. That increase in quality is factored into the BLS’ price estimates for TVs, which have seen a 98% decline in their price index since 1990.

But it’s not really possible to measure hedonic changes for many things. Counting the ever-increasing number of pixels on a TV screen is one thing, but quantifying the effect of an overworked restaurant server is another.

BLS only measures hedonic adjustment for a fraction of the goods and services in the CPI basket, owing to those difficulties. Even without factoring in those hard-to-measure quality changes, prices for things like restaurant meals have been marching up since the pandemic:

Other economic commenters have noted possible hidden hedonic inflation. Alan Cole at Full Stack Economics gave the example of the subpar complementary breakfast during a recent hotel stay, while The New York Times’ Neil Irwin recently cited several examples of this kind of “shadow inflation” in an article.

From its onset, the COVID recession was different. The downturn was self-imposed as the government forced strict lockdowns and business closures. The path of recovery hasn’t been dictated by economic activity, but by the coronavirus’s spread. Now, as inflation emerges in areas beyond simple prices, it’s forcing a rethink of just how effective the typical indicators are at measuring the economy.

Each month brings a new normal for consumer spending. That’s put CPI and PCE to the test, and throughout the US economy, they’re failing to tell just how bad the situation is.

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