Inflation Acceleration & Florida’s Law & Order - Top 3 Takeaways – April 11th, 2024
- Inflation acceleration. On the one hand it wasn’t anything you didn’t already know. That’s because the Consumer Price Index Report delivered yesterday was based on the price you paid for stuff in March. It’s doubtful that you need a government report to know that the inflation rate is still high and that it’s been getting worse. Every time to go to pay a bill you probably know. On the other hand, after three years of consistently paying for the highest rate of inflation we have been faced with in over 40 years, the hope remains that there’s light at the end of the tunnel – and that the end of the tunnel isn’t that far away. That’s the bigger problem here. Entering this year most of the economic “experts”, believed that the era of extraordinarily high inflation had just about run its course and that it would only be a matter of months – perhaps as few as a few and certainly not more than six – before the inflation crisis would have finally run its course. Well, not only hasn’t inflation returned to more normal levels during the first few months of the year, but it’s also been steadily reaccelerating to start the year – rising from a 3.2% annual rate in February to a 3.5% annual rate in March – a figure that’s now 1.5% higher than the Federal Reserve’s target inflation rate. But even that breakout doesn’t really tell the potentially bigger story of what’s happening right now. In March the year-over-year inflation rate for energy was well below the overall inflation rate. Excluding food and energy the March inflation rate was actually 3.8%. The reason that currently matters is because of what you’ve probably been noticing at the pump.
- The highest prices you’ve paid in quite a while. For example, in Florida gas prices are currently 4% higher than they were just a month ago. The even bigger issue is that wholesale oil prices, an indication of future gas prices, are currently 10% higher than a month ago – meaning there’s even more of a cost increase coming to pump. Also, oil prices are back to the highest levels since last fall. So, what had as recently as last month provided a tailwind in helping to reduce the rate of inflation, is in real-time serving as a driver of inflation. In other words, if all other drivers of inflation were otherwise equal, inflation in real-time is still accelerating higher. This isn’t terribly surprising because the primary catalysts for high inflation are still in place... Record government debt spending creating artificially high demand...check. A devalued dollar due to the record government debt spending...check. Executive actions restricting U.S. energy policy which makes us reliant on foreign sources of energy...? Check. Wars straining supply chains due to a leadership vacuum in the world...check. It’s not complicated. If we continue to do similar things, we’re going to get similar results. The only caveat to that would be if the economy were to enter into a recession which would reduce consumer demand. On the one hand, it’s somewhat remarkable that we’re three years into this period of extraordinarily high inflation and yet we’ve only spent six months of it in a recession (the first half of 2022). On the other hand, the continuation of poor policy has the potential to soon send us into another one. And that’s because...obviously, there won’t be any interest rate decreases anytime soon – which means there’s won’t be any interest rate relief on the cost to borrow money anytime soon – which means that the record levels of consumer debt we’ve taken on will become harder to afford, etc. And that’s independent of the Fed potentially rethinking interest rate policy. Specifically, whether they may need to resume raising interest rates.
- Law and Order. It’s a great time to be a criminal in New York. In fact, it’s never been better. It’s not a great time to be a criminal in Florida. In fact, soon – they'll never have been a worse time. A day after Governor DeSantis signed the bill into law that creates the toughest penalties in the country for criminals who steal things, he signed five bills into law that establishes the same for those who seek to harm the most vulnerable among us. Among the new policies in place starting in October, all crimes involving the sexual exploitation of minors now come with tougher penalties. That includes every related offense (including any possession of child pornography) automatically becoming a felony. It also gives greater voice to victims of sexual predators by allowing hearsay statements made by minors, regardless of age, to be admitted as evidence. There are new protections for foster children and additional resources for foster children making the transition to life on their own as adults. Florida will also keep a closer watch on registered sex offenders than ever before. Florida may not be able to control who’s being allowed by the Biden administration to come across the border, but we can control how we handle law and order. On October 1st, when all of the new laws kick in, the answer will be more seriously than any other state.