WHOOSH, Dollar’s Purchasing Power Goes to Heck as Services Inflation Takes Off, Food Spikes, Energy Explodes, But Used Cars Finally Stall | Wolf Street

The Consumer Price Index today – a measure of how fast the dollar and everything denominated in dollars, including labor, lost its purchasing power – is a horror show, the likes of which the majority of Americans have never experienced in their lives. Reality on the ground is even worse for many people because CPI is slow to pick up the red-hot housing inflation as we’ll see in a moment, and because CPI structurally is skewed to represent the inflation felt by higher-income households, while lower income households, as Fed governor Lael Brainard pointed out last week, face higher inflation and feel it much more.

But in 1981, the Fed was effectively cracking down on inflation with double-digit policy interest rates, and inflation was on the way down.

Now inflation is spiking, and the Fed is still repressing short-term interest rates to near 0%, and it still holds $8.9 trillion in assets on its balance sheet as a result of years of money printing, including $4.8 trillion that it printed over the past two years to repress long-term interest rates and to produce the biggest wealth disparity ever. And now we’re surprised by this spike in inflation?

There is no period in history that compares to this period, not even the 1970s because the Fed wasn’t printing money in the 1970s.

Energy costs exploded by 11.0% for the month and by 32.0% year-over-year.

Bitcoin has plunged by 33% against the dollar year-over-year, and by 41% against the dollar from the peak in November. Plus, on top of it, Bitcoin lost another 8.5% in purchasing power due to inflation. So do the math, in terms of this being a hedge against anything.

WHOOSH, Dollar’s Purchasing Power Goes to Heck as Services Inflation Takes Off, Food Spikes, Energy Explodes, But Used Cars Finally Stall | Wolf Street