“We hope you will enjoy the show”, sing The Beatles in “Sgt. Pepper’s Lonely Hearts Club Band

CONCLUSION

“Inflation” (deflation; stable prices) can appear in various diverse economic arenas. The United States consumer price index measure of course covers somewhat different ground from producer price yardsticks, and both of these weathervanes differ from asset price realms such as the S+P 500 and homes. However, these assorted inflation domains and phenomena influencing them in various ways are not entirely separate.

Despite its enthusiastic claims of surveying assorted inflation indicators and marketplaces, the beloved Federal Reserve Board focuses primarily on consumer-level inflation, as measured by indices such as personal consumption expenditure prices.

The US obviously is not an independent island in the interconnected global economy, though it plays a critical part. However, American “inflation” in the general sense of the term (and even if one excludes the asset price territory of the S+P 500 and homes) is more widespread and less well-anchored than the Fed and armies of its devoted followers (especially the investment fraternity and the financial advisors and media who assist it) believe. The ongoing long run trend for rising US Treasury yields (see the UST 10 year note rate) evidences this trend of sustained and increasing US inflation. Inflation will force the Fed to weaken its longstanding tenacious yield repression program.

Demand for credit relative to its supply of course affects US Treasury and other interest rate levels and trends. America’s federal debt situation of enormous budget deficits (massive spending) probably will continue to propel both inflation and UST yields higher.

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American Inflation and Interest Rates- Painting Pictures (5-4-21)