All eyes turned to US inflation data Wednesday, as markets exhibited what one popular strategist called “bad inflation paranoia.”
Although US tech shares clawed back losses Tuesday, thus averting a second consecutive steep slide, the angst on display earlier in the week lingered.
The red-hot read on consumer prices will test traders’ mettle.
In a new Op-Ed for Bloomberg, Bill Dudley warned that “the days of low Treasury yields are numbered,” not exactly the kind of message that’s likely to soothe frayed nerves. “The Fed is likely to raise short-term rates far beyond” current levels on 10s, Dudley wrote, adopting an ominous cadence, adding that the term premium “is likely to increase, too.”
Had a current Fed official said such things in public, markets would be in a tailspin. “Anyone who has been in finance for less than a decade has rarely seen 10-year Treasury note yields above 3%, so what’s coming could, for many, be quite a shock,” Dudley went on to say, before declaring “the secular bond bull market that began nearly 40 years ago” dead. Or at least in its death throes.
The GOP is happy to embrace the inflation narrative if it helps undermine public support for Joe Biden’s infrastructure and American Families Plan. “There’s so much money out there in the economy that the demand is high, and it’s out pacing supply and it’s starting to push prices up,” John Thune declared.
Better to balloon the deficit and run up debt to fund tax cuts for the wealthy, I suppose. After all, they’ll just plow the windfall into investments and financial assets. The broader economy won’t benefit much, and the wealth divide will get worse, imperiling societal cohesion, but at least there won’t be “too much” demand. It’d be a shame if, as Thune suggested, everyday people have money to buy stuff.
I’ll never tire of highlighting the figure (below) which, for anyone who hasn’t seen it, doesn’t include any spending associated with the pandemic.
Supply-siders summarily ignore that visual. They won’t even talk about it. Right-wing financial portals exhibit the same penchant for looking the other way. They (quite literally) won’t engage. It’s a reality too stark to address.
In any event, the course is now set. The GOP talking points will be inflation and the notion that generous unemployment benefits and the prospect of more fiscal stimulus are discouraging workers from accepting job offers. Mitch McConnell claimed that when he spoke to businesses in Kentucky, nearly all of them said labor shortages are the result of Biden paying prospective workers “a bonus to stay unemployed.”
McConnell’s anecdote was almost surely exaggerated and besides, what’s so bad about restoring some of labor’s bargaining power? Ideally, that would be accomplished by other means but, as discussed here Tuesday in “Greed Is Good. Just Not If You’re A Worker,” if stimulus and the prospect of a refurbished economy are prompting workers to drive a harder bargain, some might say “It’s about time.”
Establishment Republicans must have missed that part of the Trump spiel. Everyday people haven’t seen an appreciable increase in real wages in decades. Trump, however disingenuously, pledged to be a champion for those folks. Bernie Sanders and Alexandria Ocasio-Cortez make the same promise, only without the cynicism and minus the implicit scapegoating and xenophobia.
In any case, lines at gas stations in states affected by the Colonial Pipeline hack have only served to amplify the GOP’s message. Gas prices are now above $3 for the first time in seven years. “Gasoline above $3 a gallon is often considered a trigger point for politicians,” Bloomberg noted.
Of course, one could pretty easily argue that the pipeline hack is just further evidence to support the notion that the US needs to take a more holistic approach to infrastructure — in this case how to protect it.
Once the pipeline’s capacity is restored, some East Coast filling stations will wait two weeks for gasoline to make the long journey from Houston. “For diesel and jet fuel, the transit time is even longer — about 19 days — because they are heavier and move more slowly,” Bloomberg wrote, in a separate piece.
“If there is an upside surprise in CPI, to reflect the surges in the prices of so much around us, it will embarrass the Fed, and the US Dollar, and Yellen, and many others,” Rabobank’s Michael Every wrote Wednesday. “Some pre-emptive positioning may already be underway,” he added. “The White House said Tuesday it takes ‘the possibility of inflation seriously,’ or should that have been ‘serious inflation is possible?'”