There are so many price charts like this now that it’s laughable to hear Ben Bernanke say there are no inflation expectations being priced into the economic system. Assuming the depression historian has access to live quotes, we’ll assume he isn’t looking at the expectations being priced into TIPs, Oil, or Manufacturing Prices Paid.
In the chart below we highlight the V-Bottom in just that – the Prices Paid component of this morning’s ISM Manufacturing report. The month of April saw another sequential rise on a monthly basis (78 versus 75 reported for March) and another higher-high for this stage of the economic cycle.
Now some doves argue that prices are only inflating because they’d deflated so much on a y/y basis. To that point what we have to say is we agree. It’s math. But we’d also add that the 2008 prices from which we deflated were from are all time highs.
Is Bernanke daring you to speculate on reverting back to 2008 price levels? Maybe. With unemployment this high, that will take the low-end of this society right back to the poor house (they are actually there already). For that, I can’t imagine Bernanke’s conscience sleeps well at night. It’s his choice to pander and maintain an inflation policy.
At least Warren Buffett joined our camp this weekend in acknowledging that he is now “concerned about inflation.” Look for some consensus climbers to start following him to where the math has already gone.
Keith R. McCullough
Chief Executive Officer