"As the midterm elections draw nearer, a central conservative narrative is coming into sharp focus: President Joe Biden and the Democratic-controlled Congress have a made a mess of the American economy. Republicans see pure political gold in this year’s slow-motion stock market crash, which seems to be accelerating at the perfect time for a party seeking to regain control of Congress in the fall....So, now the bill is coming due. Unexpectedly high inflation — running at the hottest levels in four decades — is forcing the Fed to do what it has avoided doing for years: tighten the money supply quickly and forcefully"- Christopher Leonard, NY Times Sunday
"Why do voters seem determined to believe things that aren’t true? One can attribute some dissatisfaction to the relentless “sky is falling” media coverage. But let’s face it: Voters are grumpy, frustrated and tired after covid and annoyed about gas prices. They might know Biden spent months trying to pass his agenda but didn’t get what he wanted. And so confirmation bias is likely setting in for a lot of Americans, telling them everything must be bad..." - Jennifer Rubin, Washington Post, March 29 , 'What's A White House To Do About Clueless Voters?'
On Saturday, both CNN and MSNBC sources announced gas had hit an average of $5 a gallon in the U.S. This followed one of the lead stories in the WSJ on Friday (p. A5):
Fuel Costs Upend Business, Economy
In which it was noted:
" U.S.
gasoline prices approach a record average of $5 a gallon, fuel costs are
rippling through almost every corner of business, with signs emerging that
the rising expenses are beginning to alter consumer behavior. The
price of regular gasoline averaged about $4.97 Thursday, up about 26 cents from
the prior week and nearly $2-a-gallon higher than this time last year,
Prices of
gasoline, as well as diesel and jet fuel, continue to face upward pressure for
many reasons that are unlikely to go away soon. Oil and fuel production hasn’t
increased quickly enough to meet growing global demand, as economies emerge
from pandemic-related restrictions. U.S. fuel-making capacity has actually
declined due to refinery closures, while U.S. exports have remained strong as
the thirst for fuel in other parts of the world leads traders to
capitalize on the arbitrage opportunities of sending it abroad."
This was followed up in the WSJ Weekend edition with the front page headline: Inflation Hits Four-Decade High' in which we learned "the sharp increase in the CPI (consumer price index) over April -May was driven by sharp rises in energy by up to 34.6 percent from a year earlier."
The piece also noted how consumers have agonized over the price of groceries - up 11.9% on the year, and then observed how inflation pressures were "distinctly broad-based." And overall:
“High inflation is a
downside of strong U.S. growth, fueled in part by low interest rates and
government stimulus to counter the Covid-19 pandemic’s impact. The annual rate
of inflation has risen sharply since early 2021, when the U.S. economy’s
rebound from the pandemic accelerated, leading to supply disruptions and other
imbalances that put upward pressure on prices for longer than policy makers
anticipated.”
But look - I forecast such exploding gas prices back on March 7, citing oil markets guru Dan Dicker and FT columnist Gillian Tett - both of whom noted any cutoff of Russian oil would have serious repercussions to the cost of gas. Ms. Tett observed in her FT column 3 days before:
"the formal exclusion of seven Russian banks from the Swift messaging system only comes into effect on March 12. Another is that we simply do not know how a freeze of Russian assets will ricochet around interlinked contracts. "
I also quoted Alan Tooze, Professor at Columbia, e.g.
"Russia’s reserve accumulation, like reserve accumulation by other oil and gas producers such as Norway or Saudi Arabia, is a source of funding in western markets — [and] part of complex chains of transactions that may now be put in jeopardy by the sanctions.”
I actually wrote as well,
"Are Americans really prepared for those price increases including possibly $9/ gallon gas by the end of next month? Groceries spiking too - given meat and agro supplies have to be delivered by trucks to supermarkets. Will 'Muricans suck it up and factor the hits into a "small personal sacrifice" for Ukrainians, as Dan Dicker hopes?
Or will they do more moaning, crying and negative polling - blaming Biden for everything but their kid failing to notch a Harvard entry, or toenail fungus? "
Yes, you read it there first! But as we've seen in the intervening months all too many Americans are ready to buy into Reepo talking points about "Biden's inflation." They also prefer to ignore the earlier -cited WSJ piece, e.g. tracing the root basis of oil- food inflation to: the Chinese lockdowns on account of rising Covid infections, the Ukraine conflict which has prevented 1/3 of the world's grain from being shipped, and "the sheer appetite for travel of formerly pent up Americans" - which also includes, of course, demand for more goods (laptops, cell phones etc.) , services (as in hotel restaurants), and rental cars.
Can Biden control any of these? Can he stop Americans from traveling? From going on buying sprees when they do travel? Can he order the Chinese to halt all their Covid lockdowns? Can he send in a Navy cruise missile fleet to break through the Russkie blockade of Ukrainian wheat? Well in the last he could, but then get set for WWIII with the new 'Satan' ICBMs likely unleashed, e.g.
The bottom line is that none of these are within Biden's control, and by extension neither is inflation. Let's also go back to the earlier (Friday) WSJ piece, noting the oil-gas "arbitrage opportunities". This basically means oil traders can speculate on the commodities markets and drive prices up. According to the U.S. Energy Information Administration about 43 percent of the cost of a gallon of gas actually derives from the price of crude on the oil futures/ commodities market. Long story short, when enough traders (speculators) bet that oil prices will go up - well, Holy Moly, they will! Hence, pricing from the oil commodities market is basically out of the control of any one leader, even of the most powerful nation on Earth.
So let's assume you are coughing up $5 a gallon for gas right now. Then you can blame $2.15 of that on the oil speculators-traders, and another $1.25 on refining costs and oil company profit -taking. Add another 50 cents for marketing and the balance (22%) arises from state and federal taxes.
But do Americans grasp this? I doubt it. With their brains in a fog over exploding prices most probably likely believe Biden can snap his fingers and make any or all parts contributing to the above vanish. Which tells me they are gulping down phony FOX News barf and they'd rather listen to too many Repuke talking points blaming Biden for inflation. If they weren't listening to that garbage, I warrant Biden's poll numbers would not have recently dived to 40% or less than Trump's (at 41%) at the same time in his presidency.
Rightist blowhard pundits are also big on blaming Biden's "inflationary" government stimulus without saying or registering the next part: i.e. that in fact those cash infusions provided stuggling households with "$4 trillion in excessive savings keeping millions afloat as they swim in a sea of inflation" (WSJ, p. A2, May 28-29).
Now to my way of thinking it's not cricket to heap scorn on Biden for triggering inflation then not give credit for the stimulus payments keeping up to 22 million afloat now.
Besides, if you have to blame one unified source directly for U.S. inflation, you can tag the Federal Reserve. As Chris Leonard write in Sunday's NY Times:
"The Fed has steadily inflated stock prices over the last decade by keeping interest rates extremely low and buying up bonds — through a program called quantitative easing — which has the effect of pushing new cash into asset markets and driving up prices. The Fed then supercharged those stock prices after the pandemic meltdown of 2020 by pumping trillions into the banking system. It was the Fed that primarily dropped the ball on addressing inflation in 2021, missing the opportunity to act quickly and effectively ."
Smart Americans need to give Joe Biden a break and stop blaming him for everything under the Sun, especially rising inflation. People cannot allow their current misery and miasma - from warped perceptions about the economy sown by the Right - to lead them into doing something monumentally stupid this fall.
Republicans at every level are betting they can ride the inflation monster to victory in both houses of congress this fall. They are betting it will fire up the Trumpites and ideologues on the Right, and discourage too many Dem voters - leaving the latter to wallow in self-loathing and staying home. This would be a freaking catastrophe of cataclysmic proportions - make no mistake. I mean, can any thinking person imagine Jim Jordan leading House investigations into Joe Biden and Nancy Pelosi? Lauren Boebert and Marjorie Taylor Green leading impeachment proceedings with their own articles of impeachment? Don't believe me? A House analysis by the nonpartisan Cooke Political Report from last week (WSJ, June 10, p. A4) found that:
"any Democrat sitting in a single- digit Biden seat…is at severe risk and even a few in seats Biden carried by 10 to 15 points could lose.”
So yes, Republicans are openly plotting to steal the presidency in 2024, as is detailed here and they are counting on a discouraged Dem base to help them this year, to lay the groundwork. An essential element of their plot is winning control of Congress. That means the future prospects of both the Democratic Party and American democracy could be severely damaged by a loss in 2022. It's time to pull heads from the memetic GOP sewer and wake up!
See Also:
Shredding Five GOP Myths About Oil- Gas Pricing
And:
The Inflation Specter In Perspective..
And:
by Richard Heinberg | June 19, 2022 - 5:58am | permalink
And:
by Sarah Anderson | June 8, 2022 - 6:37am | permalink
A tight labor market created a rare moment of leverage for low-wage workers last year. But Corporate America took no great leap forward on pay equity.
A new Institute for Policy Studies report, Executive Excess 2022, reveals how low-wage corporations have continued to pump up CEO pay during the pandemic while workers are struggling with rising costs.
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