Inflation in the USA - decline and fall

 The price inflation rate in the USA is still frightening in October 2022 - 7.7%, but there is a predicted improvement from the peak of 9.1% in June 2022. As was mentioned in these posts published on June 3 and September 14, the inflation in the USA is driven by the printed money pumped into the economy through Personal Income. In that sense, the price inflation has to be as transient as the injection of “helicopter money”. In other words, no printed money - no inflation a year later. Figure 1 depicts the link between the helicopter money (as expressed by the excess of printed money in the Personal Income part of the nominal GDP). The helicopter money flows through the economy and affects the prices approximately one year later. The new injection of "counter-inflation" money will bring a bit more inflation in approximately 2024Q1. 

Currently, the PI/GDP ratio sinks below the long-term threshold of 87% and goes deeper and deeper forcing consumer prices also to fall. The CPI will drop together with the PI share in the near future. The helicopter money is digested by the US economy and fully transferred into consumer prices.

Figure 1. The current CPI (blue dots) delays by approximately 1.25 years behind the money injection. The shifted CPI (red dots) is synchronized with the money injection as expressed by the PI.  In the near future (likely in 2023Q1-2), the CPI will fall below the zero line.

The segment with fast consumer price growth ended in June 2022, and the CPI has been slowly increasing above the level of 295 as Figure 2 shows. In October 2021, the CPI was 276.59 and this gives the current inflation rate of 7.76% per year, with the CPI=298.06 in October 2022. Figure 1 shows that the rate of inflation has been falling since June 2022 as a reaction to the slowly growing CPI since June 2022 and the quickly growing CPI a year ago. The gap between the CPI values in 2022 and 2021 has been decreasing and the rate of inflation drops. 

Figure 2. CPI curve from 2015.

  

 

Figure 3 presents the monthly increment in the CPI and Figure 4 shows the corresponding rate of inflation. One can observe the synchronization of negative monthly CPI increments and deflation. The CPI growth stopped and the rate of inflation will be decreasing accordingly. Moreover, there is no reason for the CPI not to decrease after a dramatic growth period and the absence of printed money and the corresponding PI/GDP ratio decline. The PI/GDP ratio in 2023Q1 will likely be much below the long-term level. The share of PI in GDP fell from 0.8753 in 2021Q4 to 0.854 in 2022Q3. The GDP and PI estimates are quarterly and the next estimate will be published in January 2023. The CPI data for November 2022 will be published in December and there is no reason to think that the CPI inflation will not fall by a larger value than in October 2022 (-0.5% from September).  

 

Figure 5 presents the monthly (annualized) CPI inflation rate. In October 2022, this rate was +0.5%. However, in October 2021, the monthly rate was +1.0%. The difference in growth rates is -0.5% between 2022 and 2021. This is an indication of inflation fall and Figure 6 presents the difference between the current CPI monthly growth rate and a year ago. This difference is negative since July 2022. It will be negative for the next year or so with the potential decrease of the inflation rate into the negative zone. 

Figure 3. The monthly CPI increment. Notice the fall in the monthly increment in July and October. 

Figure 4. The inflation rate. By definition, the periods of deflation and low inflation coincide with the negative monthly CPI increment. 

Figure 5. The monthly (annualized) CPI inflation rate. 

Figure 6. The difference between the monthly CPI inflation rate for a given month and the same month a year ago. Notice the negative difference since July 2022. The deflation is coming with the

The Share of Labor Compensation in GDP has been in a catastrophic decline since 2000

One of the most damaging economic phenomena observed in the USA in the 21st century is the decline in the labor force participation rate and the employment/population ratio as presented in this post. For the employees, this decline was also accompanied by a dramatic fall in the Share of Labor Compensation in GDP as Figure 1 shows.  The long-term decline from the 1950s to the 2010s is 4%. The lost share goes to capital. The capital share has grown from 36% to 41% in 2019. It is not an exaggeration to call the 1950s-1970s a golden era. 

Figure 1. Borrowed from FRED

The US elections. Who will be the next slave for the US elites?

Originally, "democracy" is the power of people with money and slaves who were called citizens. The essence of any democratic state is to find slaves for the citizens. It can be physical slaves as was written in the first version of the US Constitution. It can be physical colonies where citizens of democratic states had the right to kill and so on. Furthermore, it can be economic colonialism with the overexploitation of children. Compador bourgeoisie plays the role of an avatar. Currently, the opportunities to have slaves outside the democratic states shrink - the biggest countries like China, Russia, India, Brasilia, and the larger part of the earth's population are not in any kind of manipulation. OPEC+ ignored Biden's direct request. When a body cannot get food outside (Europe is likely the last source of food for the US) it starts to eat itself. The US is divided and the stake is who will be the next servant. Such a decision is rarely made without a civil war. In the part, civil wars were physical. These days it is rather the ultimate case of Bernays propaganda.  A larger part of the US population must be converted into zombies. To achieve such a goal, the sense of (own) truth must be chosen over facts (nobody said it better than Biden). In that sense, slavery is the truth of superiority over the fact of equality. The elites or actual US citizens will share the benefits of the new slavery in the corresponding proportions. Republicans are going to restart industrial production and get maximal profit. Democrats will bargain climate change fines. Can Elon be the person to shift the current power status to Reps by running Twitter in the real fact format? I am sure that the younger population will not support Reps since the overwhelming majority is under nirvana substances or see the possibility to prevail with their own truth over the factual superiority of more talented people.

Supply-side economy has died

Since the Reagan era, the US economy has used the supply-driven approach to economic development. The economy was pumped by the (personal and government) debt growth with gradually decreasing borrowing rates to speed up.  The borrowing rate has been approaching zero in the 21st century and the increasing debt was spent to generate new services and goods. This model is working only for spherical cows in an absolute vacuum and unlimited energy influx. The limit to this influx has been extended by the expanding neo-colonial-type inequivalent exchange of resources for the image of money. Currently, this type of relationship has died independently on the winner in the fight between Russia and China against the US. Even OPEC+ understands that the relationship with the US is broken by the green transition. As a result, the supply chain suffers from problems in energy supply worldwide. The supply-side economy is over and the production of not-needed services and goods is over. The qualified customer will be a relict animal soon with rudimentary qualities not demanded in real life.    

On the promise of the US to respond to any A-bomb

It is clear that the US position articulated by Ned means the right opposite. (A word said is a lie.) There is no reason for the US to respond except for the direct massive attack on the US territory. Any response to any other application of the A-bomb anywhere means total destruction of the whole US. Ned just reflects the fear of the US elites in the last effort to avoid total annihilation.  

Gas price ceiling for Norway or the best feature of the free market is that the market is easy to buy.

The European Union is governed by politicians with clear signs of bipolar disorder in the mania stage. They do not understand the reality of economic relationships which is replaced by a big illusion of their ability to control all actors and all processes of the world economy. In other words, they believe in the free market economy concept, but sincerely consider that the best side of the market economy is that they can control this market.  They are correct that the free market economy is an illusion and it is under full control. Their mistake is that the global market and even the European market are not under their control. The request to put a price ceiling on natural gas from Norway or any other country for their benefit contradicts the interests of the free market owners who see the extremely high profit from the current gas price as an incentive people respond to. As the market real owners responded to the incentive proposed by Perdue Pharma. And millions of other small, mid-size, and larger opportunities. In part, the reaction of OPEC+ and Russia is in the interests of these free market owners. One can easily identify the avatars of these mystique owners by checking the companies with the largest profits. They always own these companies which own the free market. 

За что голландцы съели де Витта?

Практика политического противостояния включает эпизоды, которые могут показаться дикими современному человеку. Одним из таких событий стало пиршество оранжистов, которые убили, пожарили на костре, а потом съели великого пенсионария (близко к премьер-министру) Яна де Витта и его брата. Это произошло 20 августа 1672 года. Не так и давно. Вероятно, в Голландии или где-то еще есть прямые потомки этих каннибалов. Надо отметить, что в мире больше известен факт каннибализма, связанный с капитаном Джеймсом Куком, произошедший в 1770 году.  Надо было петь:"Но почему голландцы съели Витта?"