Brane Space: Is The Current Inflation Rate Really Running At 13 Percent? I Call Bunkum On That Claim

In a recent reply to yet another Kim Strassel demolition job on Joe Biden's handling of the economy ('Is Joe Biden Re-Electable?', WSJ, Aug. 19-20, p. A12), comparing Biden's performance to Jimmy Carter's in 1979, I wrote:

"Get real, Kim! Biden's economic performance is among the best and better than any previous Dem officeholder!

i) Inflation went down after passage of the inflation reduction act and is now near 3.2%. We actually have the lowest inflation amongst the G7 nations (See Harmonized Headline HICP graph).

ii) U.S. has had the highest GDP growth in the G7 group (Again check the available graphs!)

iii) Unemployment in May was lowest since 1969, and the lowest income workers made the largest historic gains.

iv) Housing starts have surged to the most in 3 decades (Reuters)

Biden indeed has one of the best narratives in terms of economic success. Despite all the disruptions and headwinds the U.S. has the best economy in the world. Even the Financial Times in a recent piece rued how the U.S. was leaping past the UK in growth and lower inflation.."

But this didn't please the Journal's resident Biden-haters who jumped all over the comment like gangbusters. The most commonly repeated trope? That the actual inflation rate was really what it was originally 14 months ago (9%) PLUS the current median rate of 3.2% so effectively: 9% + 3.2% = 12.2% and in fact more than that, closer to 13%. According to one ignoramus trying to rationalize this bollocks - from their comments:

"You're only looking at YoY. Now if you want to look at 2 year inflation, yes, we are over 12% and some months it has been over 13%. If you start it from the beginning of the Biden presidency, it's over 15%."

To which I replied:

Give me ONE - I say ONE - authoritative citation from a recognized independent source (NYT, WaPo, Financial Times) to back that economic sophistry up. In other words, provide one single source to explicitly confirm your take or I have to regard it as codswallop."

The Noveaux inflation "expert" then responded:

"The headline inflation you hear is only year over year. So the 3.2% Biden is crowing about is 3.2% increase over the 8.5% of 2022 and that was 8.5% over 5.4% from 2021. So if you had $100 in July 2020, you would need to have $105.4 in 2021 to have the same value, $114.359 in 2022, and $118.0185 in 2023. Put in another way, your $100 from 2020 is now worth $83.79."

To which I retorted:

"Again, Jay, I get what it is you're saying: Basically that inflation is being 'lowballed' when reported in a year-over-year form, i.e. under Biden's BLS, or Treasury. So no 'cumulative' inflation is reported. I am not saying this is disinfo only asking you to cite ONE named authoritative corroborating source (FT, WSJ, NYT, WaPo) that reaffirms this is the correct standard to use in assessing inflation. After all, if some parts of media are hoodwinking us we need to know, right?"

And then right on cue he fired back:

"It's pretty simple high school math. Pull up the inflation rates for the last three years on statista. I gave you all the inflation prints and provided the math. ((100 x (1-2021 inflation)) x (1-2022 inflation)) x (1-2023 inflation)."

To which I finally responded, before the thread was shut down:

"Appeals to HS math and "basic statistics" are clever but then why aren't the mainstream media using it as a standard? Or even an accompanying reference? With no independent citation from a reliable source to validate that this measure ought to be used in any way, shape or form, I am afraid we are in airy fantasy land. Or better, Right wing distraction narrative land."

This despite me citing from the WaPo report from Saturday:

"Inflation has fallen every month since June 2022. Officially recorded average inflation has dropped from 9 percent to 3.2 percent with no discernible jump in unemployment."

I then tasked him with integrating his 'cumulative' variant with the "neutral rate of inflation" defined by Swedish economist Knut Wicksell a century ago. This form, according to a WSJ piece yesterday ('Doubts Arise on Return to Low-Rate Era', p. A2) "can’t be directly observed. Instead, economists and policy makers infer it from the behavior of the economy".

Adding for clarification:

"If borrowing and spending are strong and inflation pressure is rising, neutral must be above the current interest rate. If they are weak and inflation is receding, neutral must be lower. The debate over where neutral sits hasn’t been important until now. Since early 2022, soaring inflation sent the Federal Reserve racing to get interest rates well above neutral.

With inflation now falling but activity still firm, estimates of the neutral rate could take on greater importance in coming months. If neutral has gone up, that could call for higher short-term interest rates, or delay interest-rate cuts as inflation falls. It could also keep long-term bond yields, which determine rates on mortgages and corporate debt, higher for longer.

Every quarter, Fed officials project where rates will settle over the longer run, which is in effect their estimate of neutral. The median estimate declined from 4.25% in 2012 to 2.5% in 2019. After subtracting inflation of 2%, that yielded a real neutral rate (sometimes called “r*” or “rstar”) of 0.5%. In June, the median was still 0.5%."

The Journal piece also noted that this happens to track a widely followed model codeveloped by New York Fed President John Williams that also puts neutral at 0.5%. If there really exists some 'cumulative' form of inflation we must reckon in, how does it square with the neutral rate of inflation? Or does it not affect that neutral rate at all? (Which is somewhat incredible on its face, given our objector - 'Jay'- insists there is a "pile up" of inflation over time - like cars piling up on an interstate after a crash.)

Our WSJ resident expert had no clues, no answers. Not even how he might remotely reconcile his "pile up" variant with current inflation as reported in the FT, WaPo and other mainstream outlets. Another surprise from the WSJ piece:

"Economic growth is now running well above Fed estimates of its long-run 'potential' rate of around 2%, suggesting interest rates at their current level of 5.25% and 5.5% simply aren’t very restrictive."

In other words, the effect of the rate hikes has been minimal. Which single-handedly wrecks another WSJ commenter's claim (a guy named Ralph Klein) that the Fed has been solely responsible for bringing rates down, not Joe Biden's Infrastructure Reduction Act. What it showed me clearly is that it's useless to argue any economics benefits that accrue directly from Joe Biden's policies. The denizens of the Right media will simply not accept it and instead devise any kind of ruse, or excuse, to dispute it or diminish it. As I responded when informed by the last guy (Klein) that I couldn't be an independent because I "sang Biden's praises" too heartily:

"Independents, like me may be compelled to "sing the praises of Biden" (I call it giving credit where credit is due) because:

a) The way you Reepos- including WSJ op-ed writers (like Strassel, Henny, Jenkins Jr.), pile on to him without giving the man a single break or kudo - while giving the traitor Trump all kinds of breaks.

b) Praise or cover for a criminal - 4 indictments, 91 felonies - over a decent president with more humanity in his little finger than Trump has in his whole orange corpus.

That is enough to make any sober citizen come to his defense, but apart from select never-Trumpers, I've seen few in the GOP do that."

When I then added I took the economic articles by WaPo writers such as Jennifer Rubin, Eugene Robinson and E.J. Dionne more seriously than the op-ed blabbery of Kimberely Strassel or Daniel Henninger, the guy lost it. He accused me of being "hooked on extremists' garbage which is why no serious exchange was possible."

Jeez, and here I thought it was because you were a diehard Trumper and the orange fungus had colonized your brain, making any rational output impossible. The problem with all these WSJ trolls is they suffer from a negativity bias. They therefore fail to see the positive wins on multiple fronts, e.g.

GDP: still at nearly ¼ of global:

30 years ago U.S. share was 24% of world’s GDP and latest data show it still is.

Productivity:

Typical U.S. worker produces nearly 5x the output of a Chinese worker. Also, American worker output is greater than that of Europeans, Japanese, British, Canadians and Australians by a wide margin.

Financial Capital:

The U.S. arguably has the deepest and most liquid financial market in the world enabling the birth of new businesses and continued growth of successful ones. The public financial value – known as market capitalization- now stands at 170%. (For most countries it is below 100%)

According to the UK magazine The Economist: “By a whole range of measures, American dominance is striking”.

So why so much negativity? The Economist’s assessment of the data suggests the pessimism we’re seeing is nothing more than “emotional baggage brought on by a perpetual negative news cycle”. This leads to a negative news and information bias. Much of it driven by politics (often from the Trumpian Right) working overtime to divide us. This has led to a persistent negativity bias evident in the WSJ respondents replies to my comments.

But optimism is a choice and a reality for winners who don’t breathe in every negative trope about inflation, spending or debt. Especially when it involves Joe Biden's undisputed achievements.

And:

Why Are Biden's Poll Numbers So Low Despite Vast Personal Satisfaction? Blame The Damned Media - Especially On The Right!

And: