Terry McCrann: US inflation has reached boiling point

This time the financial shock is going to be worse than anything we’ve experienced before, because we’ve all been feasting on the free money fantasy.

US inflation has already added to 4.2 per cent in the seven months to July.

Inflation is up, up and away in the US and the Fed – their version of our Reserve Bank – is in utter, desperate, utterly pathetic, and yet inevitably disastrous denial.

The greediest people on the planet who infest the lower part of Manhattan and try to cram into the other end of Long Island are caught between their ‘trust in the Fed greed’ and the increasingly undeniable inflation reality.

They ‘balanced that’, so to speak, with Wall St falling nervously but still only relatively marginally overnight Friday.

Inflation? Inflation? What inflation? That’s been the pathetically desperate response from the Fed as the ever-mounting evidence has rolled out from month to every month.

Oh, it’s only transitory: if we all go to sleep and wake up on New Year’s Day, it will all have disappeared, is essentially what Fed head Jerome Powell has been saying.

Well, whether transitory or not, not a single one of the vast number of experts at the Fed – the Federal Reserve – saw even this supposedly ‘transitory’ inflation as it was actually happening.

It wasn’t a case of getting predictions wrong, it was a case of not seeing what was actually happening to prices around them.

If ever there was a open-and-shut, absolutely undeniable, case for sacking a whole cohort of ‘experts’, this has been it.

Back in March, not a single one of the two dozen or so Federal Reserve Board members and Federal Reserve Bank presidents saw consumer inflation higher than 2.6 per cent over the course of 2021.

On the latest figures, it’s already added to 4.2 per cent in the seven months to July.

Just to make it very clear, that’s not 4.2 per cent over the 12 months to July, but 4.2 per cent in the seven months of this year to July.

That’s to say, in the first seven months of the year, inflation has run at a 7.1 per cent annual rate.

And just a few months before, the highest that any of those two dozen idiots – sorry, ‘experts’ - projected it to be would be for the entire year was 2.6 per cent.

Do you think, do you really think, they missed it?

Inflation would not only have to be zero for the rest of the year, but actually go negative to get even, actually, not close to that 2.6 percent.

The next monthly number comes out in two weeks, for August. Trust me. It will not be negative.

A pointer to what it – consumer inflation – might be came from the inflation figure that surfaced Friday in the US and which drove the nervous Wall St trading.

This was for producer prices. They were up 0.7 per cent for the month, making 8.3 per cent for the 12 months - which the agency releasing the data noted was “the largest advance (interesting word) since 12-month data were first calculated in November 2010”.

Now, all these ‘experts’ at the Fed did lift their inflation forecasts at the June meeting. To an average of 3.4 per cent. But the single highest forecast was still ‘only’ 3.9 per cent – already behind what inflation has added up to in the first seven months alone.

But still they persisted with: ah, but next year it will all go away. The single highest June forecast for inflation in 2022 was just 2.5 per cent.

I’ve detailed this at length because I want to get across to you the absolute stunning ineptitude of the people who are controlling your financial future.

As I wrote last week, Wall St is totally dependent on what the Fed does, and our market is totally dependent on what Wall St does.

Right now the Fed’s official interest rate should be at – to be gentle – 3 per cent; and heading higher, instead of the (disgraceful and inept) zero it’s been since 2010.

If it was at 3 per cent, the Dow would probably be at half the level it is now. Do your own calculation on what the Australian market would be; it would not be at 7300.

Now the Fed can keep the music playing for a while, by pretending the inflation doesn’t exist.

But in its total ineptitude, it is utterly incapable of understanding that actually work to entrench it.

There are two futures for the US: it slumps into the stagflation of the 1970s or it manages to run a high inflation moderately strong growth economy. The latter, for a time.

Either though has to end in tears. And when the US starts to (really) ‘cry’ those tears will wash over us – and the rest of the world – like a financial tsunami.

This time it’s going to be worse than anything we’ve experienced before, because we’ve all been feasting on the free money fantasy.

By the trillion, by the tens and indeed hundreds of trillion.