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New CPI Data Is Out…I Didn’t Expect This

By Last Updated: October 12, 2023
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Why You Can’t Afford to Ignore the Latest CPI Data

The Consumer Price Index (CPI) is more than just a number; it’s a ticking time bomb. If you’re not paying attention, you’re setting yourself up for financial ruin. The latest CPI data is out, and it’s a wake-up call for everyone—especially given the current geopolitical tensions and the looming financial crisis.

The CPI Surprise: A Reality Check

The CPI exceeded expectations, rising to 3.7% year-over-year. This is a shocker, considering the long-term view that inflation would hover around a range of 2.5% to 3.5%. So, what’s fueling this unexpected surge? The answer lies in the nuances of the CPI components, particularly the ‘shelter index.

The Shelter Index: A Mirage?

The shelter index, which accounts for over 70% of the total increase in core inflation, rose by 7.2% over the last year. But here’s the catch: the data is based on ‘owner’s equivalent rent,’ a dubious metric at best. This method involves calling homeowners and asking them how much they would rent their homes for—a flawed approach that leaves ample room for manipulation.

The Oil Factor: A Ticking Time Bomb

With the ongoing conflict in the Middle East, the price of oil is a wild card. If oil spikes to $150 a barrel, the ripple effect on consumer prices could be catastrophic. But paradoxically, it could also trigger a deflationary spiral. How? Because if prices soar and incomes plummet, consumers will buy less, leading to a vicious cycle of economic downturn.

The Wage Conundrum: The Other Side of the Coin

While consumer prices are rising, nominal wages are falling in 17 states. This is not just a nightmare; it’s an economic horror show. When nominal wages go down while consumer prices go up, it’s a recipe for disaster. People will struggle to put food on the table, let alone invest for the future.

The Geopolitical Quagmire: Adding Fuel to the Fire

The conflict in the Middle East could exacerbate this already precarious situation. If oil prices soar, it could initially drive up consumer prices. But in the long run, it could lead to a recession, further depressing wages and potentially even triggering deflation.

The Fed’s Dilemma: Between a Rock and a Hard Place

The Federal Reserve is in a tight spot. On one hand, rising inflation could justify another rate hike. On the other, falling wages and the potential for economic downturn could argue for a rate cut. It’s a lose-lose situation, and the Fed’s next move could tip the scales in either direction.

The Call to Action: Time to Take Control

So, what should you do in this economic minefield? Should you buy gold, silver, Bitcoin, or commodities? Should you be in cash or treasuries? The answer is not straightforward, but one thing is clear: you can’t afford to bury your head in the sand.

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