Inflation of 0 percent reported as inflation of 8.5 percent

Subhead from the newspaper of record today, “The Consumer Price Index climbed 8.5 percent in July, a bigger slowdown than expected, but inflation may remain uncomfortably high for some time.” Let’s dig into the article:

The Consumer Price Index climbed 8.5 percent in the year through July, compared with 9.1 percent the prior month, a bigger slowdown than economists had projected. After stripping out food and fuel costs to get a sense of underlying price pressures, prices climbed by 5.9 percent through July, matching the previous reading.

On a monthly basis, the price index did not move at all in July. That’s because fuel prices, airfares and used cars declined in price, offsetting increases in rent and food costs.

Core inflation was also slower than economists had expected on a monthly basis, climbing by 0.3 percent. In June, that figure was 0.7 percent.

The best official number that we have for the current inflation rate is actually 0 percent (“the price index did not move”). Or perhaps 3.65 percent (0.3 percent per month, annualized). But we are informed that inflation is a frightening 8.5 percent because of price changes that occurred at some point prior to July.

Do we believe that the 0 percent rate will endure? On the one hand, the typical American has bought so much since 2020 that it is tough to believe he/she/ze/they could fit anything more into his/her/zir/their house or apartment. On the other hand, every kind of service enterprise, including travel and tourism, is jammed, struggling to raise wages enough to attract labor, etc. (As noted here previously, one would expect that these enterprises would be half empty as the Followers of Science shied away from crowded environments so as to #StopTheSpread, but it seems that Science says the best way to end the COVID-19 pandemic is to gather unmasked in airliners, theme parks, concert halls, etc.)

Here’s the saddest photo from our Oshkosh trip, a donut shop in Chattanooga that has cut its hours due to “staffing shortages”. When they finally decide that they need to pay a high enough wage to open long enough to make enough profit to pay the rent, won’t they also have to contribute to inflation by raising donut prices?

In other words, until the labor market has cleared via employers raising wages, shouldn’t we expect more inflation? Also, we are still addicted to deficit spending since we can’t accept that the appropriate size for government is whatever we’re willing to pay in tax. It is tough to imagine inflation staying anywhere near 0 percent while politicians in D.C. are, at our behest, borrowing and spending (and then having the Fed magically absorb the new debt?).


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Current prices at CVS and Walgreens

Our AirBnB didn’t come with shampoo or soap, so we hit the Walgreens in Gatlinburg, Tennessee. All of the travel items that I expected to cost $0.99 were $2.99 or more. Inflation? It then occurred to me that I had seen these prices back around 2018. The current Walgreens/CVS prices for stuff are the same as one would have paid in a resort hotel’s lobby boutique in 2018.

Given that nearly every drugstore seems to be either a Walgreens or a CVS, and there has also been a fair amount of consolidation among manufacturers/brands, could lack of competition also be a factor in why toothpaste, shampoo, and other basics are costly? (Walmart’s store brand equivalents are only about half the price compared to the name brands at CVS/Walgreens, right? That tells us it isn’t about the materials cost or the dreaded “supply chain”.)

Loosely related, a Rite Aid in downtown San Diego (June 2022). The precious deodorant is locked down and alarmed.

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Cost of luxury high-rise construction in Florida

A neighbor is a refugee from the Land of Lockdown (Illinois) and is a partner in a real estate development company. “We decided to stop doing projects in Chicago because so many people were leaving,” he explained. He’s finishing a sold-out project of $4 million Florida beachfront condos that will be ready for occupancy early in 2023. It is on the site of a former hotel. What does construction cost right now for a luxury concrete high-rise? “It is $450 per square foot,” he responded. Three years ago? “Mid-$200s.”

Here’s a new one near us, which was planned starting at $4 million per unit, announced at $6-10 million, and has apparently been selling for up to $18 million for a 5,000-square-foot unit ($3,600 per square foot): SeaGlass, Jupiter Island (it is not in Jupiter, but in the next town up: Tequesta).

Some friends in northeast Florida will be moving into their new 3BR house soon. They bought it 18 months ago, which is when the developer began work on design and construction (theirs is a tweak to a standard design within the development). It will cost just under $1 million and is a 20-minute drive to the beach. The developer complains that, due to inflation, this particular house will actually be unprofitable.


  • City rebuilding costs from the Halifax explosion, from 2019, in which I describe an affordable apartment construction project in Boston. Even with free real estate, the construction cost of each unit ($555,555 per) rendered them unaffordable, without taxpayer subsidies, to a dual-income couple in which both of the partners (who will, one hopes, come in a rainbow of gender IDs) worked full time at the median Maskachusetts wage. Presumably that construction cost has now also doubled, but the median wage won’t have followed.
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Bidenflation for HVAC

I just ordered a COVID-fighting air filter for the Carrier Infinity system that soldiers on in the War against COVID-19 in Cambridge, Massachusetts while we live in blissful freedom from anyone complaining about Long COVID (“Karen’s Disease”?), Short COVID, or Other COVID here in Florida. Pre-Biden, the filter was $86.51 (March 2020). In July 2022, it is $106.53:

That’s inflation of 23 percent over two years. What about the labor to slide it in? $195 per hour from the one company that didn’t simply refuse to work.

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How long before the typical American house price will be the cost of Diet Coke?

The median sales price of a house is about $400,000 (WSJ) currently. We can check inflation in the New York Times:

As with any NYT article, the above contains plenty of lies. The biggest lie is graphing the official government inflation data going back to 1965 without noting that the method of calculating the inflation rate has dramatically changed over time (to make it appear lower, e.g., by excluding the purchase price of houses and actual mortgage and property tax costs incurred). The next lie is that the current inflation rate is 9.1 percent. The actual current rate, according to the same government data release purportedly covered by the NYT, is 1.3 percent per month (CNBC), which works out to 16.7 percent per year (1.013 raised to the 12th power).

At the actual current rate of inflation, how long before $400,000 is the price of a Diet Coke? Let’s assume that we’re getting our refreshing sugar-free soda in a restaurant for $5 (including obligatory tip). Within one human’s COVID-19-shortened lifespan of 73 years, therefore, the $400,000 price of a house will become the price of a Diet Coke. From Wolfram Alpha:

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What are you paying for a haircut after Bidenflation?

A basic haircut at a barber shop in downtown San Diego was $40 plus tip earlier this month. What are you paying?

Based on limited experience, haircuts in the West are much more expensive than haircuts back east. It was $36 in Denver before coronapanic.

“Want to Understand Inflation? Check the Price of Your Haircut” (WSJ, June 22):

In San Francisco, Shorty Maniace raised prices at J.P. Kempt Barber Social from $55 to $65 in May and is considering another increase. When the barbershop opened in 2013, a standard cut was $45. He says people regularly walk out of the salon in a huff after hearing the price.

How do all of the San Franciscans living in tents afford haircuts?

YWAM SF offers free haircuts to homeless or low-income people who need it or are going to have a job interview.

I’m a little out of touch because we’ve had a micro barbershop running here at home starting in 2018 for the kids and then in 2020 for everyone except the barber herself.

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Inflation in New York City is only 2 percent

“Looming Rent Increase of Up to 9 Percent Tests Adams’s Housing Priorities” (New York Times, May 4, 2022):

The powerful Rent Guidelines Board, which the mayor controls, will take a preliminary vote on Thursday on proposed rent increases of 2.7 to 4.5 percent on one-year leases and 4.3 to 9 percent on two-year leases. A final vote is expected in June.

The annual decision by the Rent Guidelines Board, which affects more than two million residents who live in buildings built before 1974 that have six or more units, always ignites passionate debate and an intense lobbying effort from tenants and landlords.

Note that the headline is kind of a lie, implying that rents might be going up by 9 percent in one year (the standard period to look at).

The good news is that, if you are one of the two million people who live in an apartment whose rent is set by the central planners, your personal inflation rate, at least for housing, could have been as low as 2.7 percent. How does this compare to the official government CPI? The word “inflation” does not appear in the NYT article (see “Team Transitory”).

Just a day later, the horror of 2.7 percent inflation was averted. “Panel Backs Rent Increases for More Than 2 Million New Yorkers” (NYT, May 5, 2022):

The New York City panel charged with regulating rents across nearly one million rent-stabilized homes voted on Thursday to support the largest increases in almost a decade.

The move, which must be formally approved next month, would raise rents on one-year leases by 2 to 4 percent, and on two-year leases by 4 to 6 percent. The increases are another reminder of the affordability crisis the city faces as it emerges from the pandemic.


  • “‘They’ll have to carry me out in a box’: inside the apartments of the luckiest renters” (Guardian, February 2022): Growing up on the Upper West Side, Hattie Kolp, like any kid, didn’t think much about the apartment she and her family moved into in 2002, but the roughly 1,500-square-foot two-bedroom has become the center of the 30-year-old’s life as an influencer. She shares photos of the apartment’s details that hint at the building’s 1890 construction – like an original butler’s pantry and ornate fireplaces – with her 90,000 TikTok followers and 52,000 followers on Instagram. … “My parents knew this was not their forever home, so they didn’t really care to do any projects,” says Kolp, who assumed the lease from her parents in 2018. … For New Yorkers who are acutely aware of how much a place like this should cost, Kolp’s rent – $1,300 per month – is jaw-dropping. Plus, it’s rent-stabilized – meaning it can only increase in rent modestly once a year. There are only 1m such units in New York City.
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How is Berkshire Hathaway an example of investment genius if it holds cash while inflation rages?

Berkshire Hathaway has been holding roughly $140 billion during a period of raging inflation (source):

This is about 20 percent of the company’s market cap (about $700 billion). The standard explanation for this is that it gives Berkshire Hathaway the ability to pounce on great deals, but Elon Musk is managing to buy Twitter without having had to let inflation erode a substantial percentage of his portfolio for 2+ years. The company’s annualized operating earnings right now are about $22 billion (CNBC). Inflation has been 8.5 percent. So the company is losing $12 billion to inflation annually, more than half as much as its headline “earnings”.

Admittedly the S&P 500 is flat compared to a year ago as well, so if Warren Buffett had done the obvious thing of parking money in the S&P it wouldn’t have done significantly better. Gold didn’t rise smoothly as the dollar fell in purchasing power. Bitcoin is about 32 percent lower today in nominal dollars than it was a year ago. But isn’t there something better to do with all $140 billion rather than leave it for exposed to the depredations of the government’s money-printing operation?

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