2025-12-06XThread

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1/5 Revisiting the repost below ...46% of the public said affordability is the worst they have ever seen. They are not wrong. What question were they answering? The last time CPI inflation rose this much over five years was almost 40 years ago. https://t.co/8w8CzzDWGb 2/5 The last time CPI had a similar rise to now (right arrow) was 1965 to 1973 (left arrow). The red part followed. Two things to note. * 1965 to 1973 is 8 years. The similar rise today took 5 years. * January 1973, the stock market was also at an all-time high. https://t.co/IQK7qLMxb6 3/5 Economists will scoff at this because they view inflation (orange) differently than normies (blue). https://t.co/9i38BCslMh 4/5 And economists will publish papers on inflation to tell normies they are wrong. Those papers will look like this. https://t.co/lvd3mpo3jX 5/5 The largest employer of economists in the world, the Federal Reserve, needs to take this affordability problem seriously. They will say they are, but how does the cutting rates fix this problem? The chairman's pronouncement that "inflation expectations remain well contained" does not make it so. It never has and never will (see "transitory.") The Fed needs to really explain what it is doing about the affordability problem, because the fix seems to be bringing the inflation rate down to 1% for an extended period. A 3% rate of inflation five years after COVID (and a 27% price rise) is not "close enough." And telling the public it will boost the stock market and that it has positive externalities will only anger them, as this chart shows.

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Politico released a poll this morning with these alarming results: --- Almost half — 46 percent — say the cost of living in the U.S. is the worst they can ever remember it being, a view held by 37 percent of 2024 Trump voters. Americans also say that the affordability crisis is Trump’s responsibility, with 46 percent saying it is his economy now and his administration is responsible for the costs they struggle with. --- You would be correct to say the rate of inflation was worse in 2022, when it hit 9%, but I think the poll respondents are answering a different question: they're talking about the cumulative rise over the last five years. And on this front, you'd have to go back 45 to 50 years to remember a worse time, so those under 60 (or 55) are correct. I would argue this is a textbook definition of unanchored inflation, the very thing that keeps central bankers awake at night. These results should equally alarm the Federal Reserve, as inflation is its mandate. Jay Powell mouthing the words "inflation expectations remain well contained" at next week's press conference does not make this go away. In fact, it might anger the public that he doesn't care. I really want them to explain in great detail why they think that, to fix this problem, they need to cut rates.
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