This Is Not Your Father’s Inflation

Published on: 11/08/2022

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo discuss how today’s inflation is different than what your parents dealt with.

 

TRANSCRIPT

 

TONY:

Welcome to another edition of Chart Talk.  I’m Tony Ogorek.  I’m here with Portfolio Manager, Jeff Viksjo.  And Jeff, today we’re going to be talking inflation, and our perception that today’s inflation is not your father’s inflation.  We’ve got three charts, let’s take a look at the first chart.  What do we see here?

 

JEFF: 

Yea this chart just asks consumers, ‘are you aware of what’s going on with higher prices?’.  You can see that red bar at the far right, that’s today.  And they’re saying ‘of course, I’m aware.  I know what’s going on. Prices are rising at an extremely high rate’.  We haven’t seen this high a rate since just after the Great Financial Crisis when there was concern about inflation as well. There also was a lot of Government spending at that time. But clearly, right now, everyone is aware of what’s going on.


TONY:

Yea and Jeff you see the mid-term elections and the politicians are using this as a cudgel to beat the party in power, and you got a lot of media out there drawing a lot of attention to inflation.

So, let’s take a look at our second chart.  Interesting.  This takes a look at the inflation rate from 1980, which is when inflation was at its zenith, to where we are today.  Sort of an interesting picture, don’t you think?

 

JEFF:

Yea, if you lived during that time, 1980, you owned a home, bought furniture, everything that was going on, energy prices.  You were very aware of inflation, and probably that experience lapped stayed with you for a while.  But if you look at the chart, inflation got very low and stayed there for a long time, so you aren’t used to it anymore.  You aren’t used to going to the grocery store and seeing prices going up.  So, all of a sudden, we’ve seeing this post-COVID bump.  But this is new for consumers to see something like this.

 

TONY:

Sure, and let’s look at our final chart.  You know, we didn’t have Google back in the ‘70s and ‘80s.  But here, we’re looking at citations in books and we’re seeing that inflation, the frequency of the appearance of inflation in books and searches, was really, really considerably higher than it is today.  And then when you go in the brown bars, you’re seeing that, that’s when Google came out, and you’re seeing that the searches for inflation continues to come down because it hasn’t an issue.  Now, with the Fed dropping rates, dramatically, with their quantitative easing and just dropping rates down to zero.  And you’re seeing the Federal Government, both administrations, adding perhaps $6-trillion to the money supply in spending, deficit spending, you’re seeing that inflation just rocketed up.

Our thesis is that this inflation is not a significant part of the economy.  It’s going to be dealt with, relatively, quickly.  It hasn’t been embedded for decades, as it was in the ‘70s and 80’s.  And therefore, the inflationary expectations are going to be a little bit easier to mute by the Fed.

So, thank you for joining us for this edition of Chart Talk.  We look forward to seeing you at our next talk.

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