Inflation Ex-Inflation

Here's you regular inflation update.

The U.S. investment community continues in denial about inflation in the U.S. Measuring "core" inflation, which excludes food and energy, is nonsense. Tim Iacono puts it this way:

But that's a lot like looking at a burning garage, where the fire has not yet spread to the house, and concluding that the situation is under control.

We're in the same place we were last year at this time with one big difference. If you'll remember, last year energy prices were rising and it was beginning to permeate the economy. Then summer came and the impending elections where Goldman-Sachs did it's dipsy-do election manipulating bail-out. Gas prices fell precipitiously, inflation eased in the ex-inflation areas and everyone sighed with relief.

Too bad it's not last year. There's no election this year and Goldman has shot it bullets. Oil supplies are tightening, gasoline prices are approaching new highs and it doesn't look likely for there to be a real easing until after the "driving season". Bottom line? I think we're in for some more inflation that will be a bit more profound than last year, causing the Fed to have to maintain interest rates (if not increase them).