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Notwithstanding The New Reality that this morning's ISM report (June) was another sequential acceleration and the best print since August of 2008 (yes, before the narrative fallacy of the Great Depression that forced the politicized Fed to cut to "emergency" level interest rates), the prices paid component is turning into a moon-shot.

Prices paid - those are leading indicators for reported inflation and, of course, they are paid for in US Dollars (which are getting smoked). The rest of this picture is self explanatory - see the chart below and, remember, what matters most to our macro model is what happens on the margin.

The Bond market gets this. The Fed isn't allowed to, yet...


Keith R. McCullough
Chief Executive Officer

Reflation morphing into Inflation...  - a1