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US INFLATION
ANYTHING GOES IN POLITICS New inflation factor ... Goldman Sachs warns that coming political ads may also play a role. 
Illustration of a television test pattern made of hundred dollar bills. Illustration: Shoshana Gordon/Axios Original article: https://www.axios.com/newsletters/axios-macro-0ea652dc-d47e-45de-9f36-db13991af157.html Peter Burgess COMMENTARY I get more and more frustrated by the 'hard-ball' tactics of the Republican political operatives ... tactics that have been effective in helping to make Democrats lose elections, but only work because of the story, but very little because of facts. This alert about inflation messaging has the potential to be a potent weapon for the GOP because there seems to be almost nobody in the media that has done their homework about inflation. Almost all the inflation analysis seems to start after 1980, ignoring what happened in the US and World economy in the 1960s and the 1970s. It is rare for the OPEC oil cartel to be mentioned and the oil shock of 1973. At the time I wrote an essay based on the idea that the OPEC oil shock of 1973 was the biggest economic event in all of history. I think I concluded that it was bigger than even WWII ... and much of what I wrote then has been validated over time. It is rare for media commentators on inflation to differentiate between 'cost push' inflation and 'demand pull' inflation yet it is common for 'stagflation' to be referenced. Nobody seems to challenge the idea that the Fed should be aiming for 2% inflation year over year. My biggest gripe, however, by far, is the role that profits are playing in the fuctioning of the modern economy, and the way in which the flow of profits are more and more owned by very very few. I refer to this as the financialization of the modern economy, something that has been facilitated more than anything else by the digitization of almost everything and the failure of most of the oversight mechanisms to modernise to be effective in this ultra-fast moving new world. I am scared stiff of a US policy agenda that is driven by the archaic ideas of the GOP. I understand people voting for the GOP because the Democrats are completely failing to get their messaging right. The Democrats have a policy agenda that would be good for everyone, including not only those at the bottom of the pyramid but also those at the very top. There is only so much inequality that people will accept ... and in the not too distant future we should anticipate socio-enviro-econmomic instability that is more violent than anything we have yet seen. I don't want this to happen, and it need not happen, but it will if the rich and powerful countries do not step up in a way that is much more than mere tokenism. Peter Burgess | ||
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New inflation factor: political ads
It's not just rising grocery and gas bills that might encourage household expectations of future inflation — Goldman Sachs warns that coming political ads may also play a role. Why it matters: The bank says soaring prices are set to feature prominently in Republican political ads ahead of midterm elections. It warns the messaging may cause consumers to push long-run inflation expectations higher, a suggestion that's already made the Fed hyper-sensitive. 'We see the upcoming onslaught of inflation-focused political advertisements as adding to the risk that the Fed could continue to tighten aggressively even if economic activity decelerates sharply,' economists at Goldman Sachs wrote in a research note. Details: The team admits there is limited study on direct links between political ads and consumer inflation expectations because soaring prices haven't been a prominent campaign issue in decades. Among the research they point to is a recent paper that found a 'statistically and economically significant effect' on consumer inflation expectations when new information on recent inflation — including the Federal Open Market Committee's inflation forecast — is provided. The bottom line: The main risk of upward-shifting consumer expectations is further increases in food and gas prices, Goldman says. But upcoming political messaging may also shape consumers' perceptions.
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