I read lumber has not gone down in price since last week of March.
The Fed and the CEA last week put out inflation numbers and immediately tried to downplay them as "April 2020 was a low base" and "reflation". Economist I read occasionally take:
https://johnhcochrane.blogspot.com/2021/04/inflation-levels.html#more
March inflation is up. The CEA delivered a historic tweetstorm. It starts with
temporary factors: base effects, supply chain disruptions, and pent-up demand, especially for services
I'm glad for once to have nailed a forecast: That Fed and Administration's first response to inflation would be to invoke "temporary" factors, just as in the 1970s. We'll see how that pans out.
The CEA goes on to "base effects,"
In the near-term, we and other analysts expect to see “base-effects” in annual inflation measures. Such effects occur when the base, or initial month, of a growth rate is unusually low or high..
This unusually large price decrease early in the pandemic made April 2020 a low base.
Since this is about the past, we can say something more definite. Yes, if you start from a low base, you can see a lot of growth. To get around the arbitrariness, let's look at price levels. Here is the recent CPI (blue) and CPI less food and energy (red). These are the levels of the CPI -- conceptually how many dollars it takes today ($271) to buy what $100 bought in 1983.
This is non-seasonally adjusted CPI (blue) and CPI less food and energy (red). If anything the story, reflation was over last fall and this is something new is clearer. But, as 2019 reminds us in both graphs, stuff happens.
David Einhorn's last newsletter he went through a bunch of real-life things that showed how broken the market was (including Archegos and Gamestop). I'm left with the impression cheap money being thrown everywhere and long-term zero percent interest rates have created a ridiculous operating environment. Interest rates have to rise. In fact, I disagree with the notion you can even claim an economy is "healthy" when operating at ZIRP or near-ZIRP. When interest rates rise however, a lot of people are going to be dragged kicking and screaming going into it, which is why I don't expect the government and the Federal Reserve to go that route...which is what happened in the 1970s. We've been on ZIRP or near-ZIRP for 13 years now. There's an entire generation of people that don't understand how debt operates when you have to pay higher interest, be it the 30-year-old looking to buy a house or a guy on Wall Street valuating companies or a venture capitalist or a Congressman that doesn't have a clue about how Treasury yields affect budget discussions.
You are conflating two things here. There is real price inflation, and there is asset price inflation. Asset prices don't count as 'inflation' as they are merely a switch from one asset (cash) to another asset (investments.)
The purpose of the Federal Reserve is to contain real price inflation within a narrow band. If asset prices are operating in bubbles, it is not the job of the Federal Reserve to raise interest rates, which causes harm in the real economy, to address this.
Clearly what is going on is that some mostly very wealthy people have too much money to play with and have nowhere useful that they can find to invest it in or to spend it on. The answer to this is to raise taxes, especially capital gains taxes, and not to raise interest rates.
It's interesting to already see hack right wing economists once again call for interest rates to rise due to asset inflation after dropping those concerns when Trump was President.
The goofy show that I enjoy listening to late at night, Coast to Coast AM has been dropped in most of Canada. There is a radio station that I can get it in sometimes, but other times I get in a different radio station that airs The (New!) John Batchelor Show.
John Cochrane, AKA The Grumpy Economist happened to be on the John Batchelor Show that night and I listened after that to him on a podcast he did with John Batchelor that presaged the broadcast I heard.
1.On the podcast, Cochrane claimed, with no evidence, that 'nobody sees inflation until it's too late to address it.' and John Batchelor then used that line both with Cochrane and another guest on the program I heard. The problem is, the only basis for this is that when inflation first started to become a problem in the United States in 1966, the prevailing economic orthodoxy at that time was Keynesianism, and it was not able to explain 'stagflation.'
2.Cochrane credited Reagan for addressing inflation, and fair enough, but he neglected to mention that Reagan's large budget deficits allowed for inflation to return again in 1986/1987. The subsequent rise in real interest rates caused George H. W Bush to lose re-election, but, in fact, this inflationary spiral was addressed by 1993 or so with the annual inflation rate going no higher than 5.4% in 1990, and with the exception of the period from approximately 2006-2008 when prices rose as a result of the oil price shock, inflation has not been a significant problem for nearly 30 years now.
On another matter, I was somewhat surprised with the gratuitous and dishonest swipes that Cochrane made against unions on the show.