Tangle - Is inflation finally going away?

Episode Date: June 15, 2023

Inflation. On Tuesday, the Department of Labor reported that inflation has risen at 4% year-over-year in May, meaning it was at its lowest annual rate in more than two years. We have covered inflation and interest rate hikes 15 times before. You can find our previous coverage here.Tickets are officially live (and public!) for our event in Philadelphia on Thursday, August 3rd. Thanks to all the folks who bought tickets — we're on track to sell this baby out! Remember: Our goal is to sell out the venue, and then take Tangle on the road. Please come join us! Tickets here.You can read today's podcast ⁠here⁠, today’s “Under the Radar” story here, and today’s “Have a nice day” story ⁠here⁠. You can also check out our YouTube channel for our previous coverage on inflation and our latest video on the Trump indictment, which will premiere today here.Today’s clickables: Quick hits (1:39), Today’s story (4:02), Right’s take (7:39), Left’s take (11:51), Isaac’s take (16:39), Listener Question (19:36), Under the Radar (22:48), Numbers (23:44), Have a nice day (24:23)You can⁠ subscribe to Tangle by clicking here⁠ or drop something⁠ in our tip jar by clicking here.⁠Our podcast is written by Isaac Saul and edited by Jon Lall. Music for the podcast was produced by Diet 75.Our newsletter is edited by Bailey Saul, Sean Brady, Ari Weitzman, and produced in conjunction with Tangle’s social media manager Magdalena Bokowa, who also created our logo.--- Send in a voice message: https://podcasters.spotify.com/pod/show/tanglenews/message Hosted on Acast. See acast.com/privacy for more information.

Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is Chinatown is streaming November 19th, only on Disney+. yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca.

From executive producer Isaac Saul, this is Tangle. Good morning, good afternoon, and good evening, and welcome to the Tangle podcast, the place we get views from across the political spectrum, some independent thinking, and a little bit of my take. I'm your host, Isaac Saul, and on today's episode, we are going to be talking about inflation and the question of whether it is finally, maybe almost going to be over past us. We'll see. We're going to talk about some of the latest numbers and some of the commentary around those numbers. Before we jump in, though, a quick heads up for real this time. Tomorrow in our Subscribers Only Friday edition, we are going to publish a piece about the 2024 election, the one that I was hoping to publish last week before Donald Trump got indicted, which kind of threw our whole schedule up into the air. So we're going to

run that piece tomorrow. A reminder that Friday subscribers only additions are for subscribers only. So you have to be a member. You can do that at www.readtangle.com backslash membership. And yes, it is still on our roadmap to get some of those Friday additions up as paywalled podcasts, but we are not quite there yet. All right, with that out of the way, we'll jump in today with our quick hits. First up, a fishing boat carrying migrants from Libya to Italy sank off the coast of Greece, killing at least 79 people. 104 of the migrants were rescued, but more are still feared missing. Number two, U.S. Senators Elizabeth Warren, the Democrat from Massachusetts, and Ron Wyden, the Democrat from Oregon, asked Congress to open an antitrust

investigation into the PGA Tour's proposed deal with Saudi-backed Live Golf. Number three, Miami Mayor Francis Suarez, a Republican, launched a 2024 bid for president. Number four, the Southern Baptist Convention voted to keep two churches expelled after they were voted out for having women pastors. The Southern Baptist Convention is the largest Protestant denomination in the United States. Number five, President Biden vetoed a Republican-led resolution that would have repealed new limits on emissions from heavy-duty vehicles. And a breaking news story that just came on the wire a few minutes ago, the Supreme Court has officially upheld a 1978 law aimed at keeping Native American adoptees with their kids. We

covered the Indian Child Welfare Act in a previous edition of the newsletter and the podcast, and you can find a link to those editions in today's episode description and in today's newsletter. We are back with some breaking economic data. That's right. Inflation cooled to 4% in May on an annual basis. That is the lowest level in two years. On a monthly basis, inflation came in at 0.1%. Some good news. Finally, some relief. At the grocery store and the gas station, brand new data shows inflation fell to its lowest level in two years last month at just 4%, with some of our necessities like food leading the way.

And that encouraging news comes as we're watching for a decision this afternoon from Federal Reserve Chair Jerome Powell on whether we're in for another interest rate hike. Yearly inflation rate that we're talking about here. So prices rose by 4% between May of this year and May of last year. And that's encouraging because that's a slower pace than the 4.9% that we had seen in April and then much slower than the 9%

that we had seen in the summer of last year. On Tuesday, the Department of Labor reported that inflation had risen at 4% year over year, meaning it was at its lowest annual rate in more than two years. A quick reminder that inflation is measured by the Consumer Price Index, or CPI, which is designed by the Bureau of Labor Statistics to measure price fluctuations for urban buyers who represent the vast majority of Americans. The CPI tracks this number by taking 80,000 items in

a fixed basket of goods and services, representing everything from gasoline to apples to the cost of a doctor's visit. The CPI went up 0.1% for the month, bringing the annual inflation rate down from 4.9% in April to 4% in May. That is the lowest annual rate since March of 2021, when inflation first began rising and shortly thereafter hit its highest levels in 41 years. Core inflation, which measures inflation while excluding more volatile food and energy prices, rose 0.4% on the month and was still up 5.3% from this time last year. Those numbers left economists a little less optimistic about the picture of inflation last year. Those numbers left economists a little less optimistic about the picture of inflation, but the latest numbers still represented a milestone for the economy.

The White House shared a chart celebrating the latest inflation numbers, which drew a lot of criticism and praise on Twitter. I'm going to describe the chart briefly since this is a podcast and you can't see it, but the White House basically tweeted out something that said, great news. Today's inflation report shows annual inflation is now at the lowest level since March of 2021 and less than half of what it was last June. This is giving families real breathing room. And then they have this chart that says inflation has fallen by more than half in the last year since last summer. And it shows inflation starting in July of 2020 and then going all the way up to over 9% in May or July or June of 2022, and then showing where it is now at about 4%. So it's basically a chart that shows this big

peak up to the top and then coming back down about halfway as high. That is important because some of the commentators we're going to quote in a minute talked about that chart. Meanwhile, the Federal Reserve declined to raise interest rates yesterday for the first time in 15 months since its fight against inflation began. Again, another reminder that interest rates represent the cost of borrowing. So the Federal Reserve raises its interest rates, which makes things like credit card debt or mortgages or loans more expensive. And then the Fed uses interest rate hikes to slow spending and investment in order to tamp down inflation. So the Fed's decision to not raise interest rate hikes this time was pretty notable. They've raised them 15 consecutive

times over the course of the last couple of years. It means that the federal fund's interest rate, the benchmark rate, will now be between 5 and 5.25 percent. Its decision not to hike rates came on the latest inflation numbers, though Fed officials made it clear that more interest rate hikes could be coming if things did not continue to trend in the right direction. The Fed's target is to get inflation under or at 2%. All right, so those are the numbers. That's what's happening today. We're going to take a look at some commentary from the left and the right about inflation and the Fed's decision, and generally

the state of the economy as a whole. Then, as always, I'll share my take. First up, let's start with what the right is saying. Many on the right criticize Biden for celebrating inflation numbers that are still hurting Americans. Some argue that until inflation is resolved, Biden will struggle to convince Americans the economy is strong. Others suggest this economy is beginning to look a lot like 2008. In the Wall Street Journal, William A. Galston said inflation will be Biden's headwind. According to a recent Economist YouGov survey, only 18% of voters think the economy is improving, while 53% think that it is getting worse. 21% say the economy is growing, while twice as many, 42%, say that it is shrinking. More than half believe that the U.S. is in a recession. Standard economic measures tell us

the economy is growing at a modest pace. But when asked to name the best indicator to measure the state of the economy, 54% said the prices of goods and services they buy. For most voters, the negative effects of inflation outweigh all the economic improvements that Biden touts. Most Americans' perceptions of the economy are shaped by experience, not statistics, and some parts of experience stand out from the rest. My wife and I have an above-average income, but we suffer sticker shock every time we go to the grocery store and we've made some changes in our purchases. The consequences are more severe for households earning less, Gelson said.

Meanwhile, airline ticket prices have soared and housing has become much less affordable. If I were Biden, I would acknowledge that rising prices are now the electorate's core economic concern, and I would put my determination to bring prices under control at the center of my economic message. In the Daily Wire, Zach Jewell mocked the White House for bragging about the chart showing inflation skyrocketing after Biden took office. The White House celebrated inflation reaching 4%, but the chart may have not been the clear victory sign the Biden administration was going for, as it showed the massive increase in inflation

from January 2021 to May 2022 when it reached 9% under the current president's watch. Inflation reached a 40-year high of 9.1% under Biden's presidency, while the inflation rate under former President Donald Trump hovered around 2% and even hit an average of 1.2% in Trump's last full year in the White House. The slight inflation rate decrease in May came as a result of lower gas prices and increases in grocery prices and other line items, Politico reported. The recent decrease in inflation isn't likely to convince policymakers at the Federal Reserve that the U.S. is out of the woods because core prices, which the Fed mainly focuses on, rose for the sixth straight month in May, Jewell wrote. In Newsweek, Philip Pilkington says that it's beginning to look like 2008. The American economy is in a tough spot, Pilkington said.

For the last 18 months, the economy has been mired in stagnation. Since the fourth quarter of 2022, it has only grown 1.2% in inflation-adjusted terms. For context, the average five-quarter growth rate during the 2010s was around 2.7%. And though the headline inflation is now under 5%, core inflation, that is, inflation with food and energy stripped out, has barely fallen at all and remains higher than headline inflation at 5.5 percent. Taken together, this means the Federal Reserve may have to hike rates further. Outside of the interest rate, other pressures are making themselves felt. The commercial real estate market has all but collapsed, while the residential

market is not looking too hot either. Mortgage applications peaked at 8.5% in Q2 of 2022 and fell to 6.1% in Q1 2023, which is remarkably similar to what happened in 2006 to 2007. Good forecasters do not claim to have a crystal ball, however. It is less important to try to put an exact date on when the economy will start to crack up than it is to understand its weaknesses. Those weaknesses are now severe in the American economy. Surveying the current economic landscape, it would take something resembling a miracle to pull the economy out of its current stagnation and avoid a recession. All right, that is it for the right is saying, which brings us to what the left is saying. Most on the left are celebrating the numbers, saying the inflation scare could be just about over. Some suggest we never needed to cause higher levels of unemployment to contain inflation,

as some popular economists suggested. Others cautioned not to let up the fight too soon. In Bloomberg, John Authors said the great inflation scare is reaching its final phase. The great post-COVID inflation scare appears now to be decisively entering its final stage, he wrote. The big question now is how long that stage will last. It's good news for most of us, although arguably not quite as positive as it might first appear. Core inflation barely changed. In fact, it actually ticked up a little. Still, shelter inflation, roughly a third of the index, is what keeps it at a politically and economically unpalatable level. He adds that this is encouraging because the shelter index tends to be a lagging indicator and it doesn't inform the latest trends. Zillow's data

on new leases suggests that the spike in rental inflation is over. There's more positive news in the technical statistical measures developed by different teams at the Federal Reserve, which show that the trend is now clearly in the direction of lower price rises, authors said. And if there's one startlingly positive news item buried in the data, it concerns the highly politicized but extremely important business of health insurance. Thanks largely to being driven so much by shifting political tides, premiums have had periods of extreme inflation in the decades since Obamacare came into effect. The latest data suggests that premiums are down more than 20% over the last 12 months. That might just be a handy spur to consumers'

disposable income if it continues. In New York Magazine, Eric Levitz argued that Larry Summers was wrong about inflation. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 influenza cases have been reported across Canada,

which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca. Summers warned that Biden's $1.9 trillion American Rescue Plan would cause inflation, and then consumer prices shot up and his stature within the business press rose. From his newly elevated platform, he suggested we needed five years of unemployment above 5% or two years of 7.5% unemployment or one

year of 10% unemployment to control inflation. In the Harvard professor's estimation, U.S. policymakers had no choice but to deliberately throw millions of Americans out of work or else accept a steadily deepening inflationary crisis. It is now clear that Summers was wrong. His call for austerity was premised on the notion that only a sharp increase in unemployment could prevent a ruinous wage-price spiral. In reality, both wage and price growth have been slowing for months, even as unemployment has remained near historic lows. Summers' failure to anticipate this outcome should lead us to reconsider how prescient his analysis of post-COVID economy ever was, Levitt said. Even core inflation is overstated,

as outdated shelter costs are the biggest service sector component of inflation. As economist Adam Ozemeck notes, if you replace the CPI's estimate of housing costs with the Bureau of Labor Statistics' estimate of real-time rent growth, you'd see that core inflation has fallen substantially since last fall. Bloomberg's editors, meanwhile, argue that doing nothing on inflation is still the greater risk. Advocates of a pause argue that the Fed's tightening is already bearing results. The steepest series of interest rate increases in more than

four decades, from near zero to more than 5% in less than 14 months, has taken down several poorly prepared regional banks, which might in turn curtail credit and economic growth. Also, some inflation indicators have been easing. Goods prices have settled down after spiking during the pandemic. Decelerating rents and home value should soon flow through to official measures, the editor said. This progress, though, is no assurance of success. Banking turmoil only impacted a small fraction of the industry, and at 3.7 percent, the unemployment rate remains near its lowest point since 1970, and below the level that Fed officials consider sustainable without overheating the economy, the editor said. No wonder some measures of annual wage growth remain as high as 6%,

and core consumer price inflation at 5.3% in May far exceeds the Fed's 2% target. If one adjusts for that level of inflation, it's not even clear that short-term interest rates are high enough to restrict growth. There's a risk that unrelenting interest rate increases will now eventually trigger a deeper recession than needed to get prices under control, inflicting unnecessary suffering. But the alternative is far worse. Allowing inflation expectations to become entrenched will ultimately force the Fed to take rates much higher and cause much greater hardship to compensate and restore its credibility. All right, that is it for what the right and the left are saying, which brings us to my take.

So inflation still makes my head spin, if I'm totally honest. As we wrote in our piece exploring whether we were wrong about greedflation, none of this is ever particularly simple. I'm actually on record in our numerous pieces on inflation saying that the right has mostly gotten this right. Many conservative columnists mourn that inflation was coming, many were ignored or their concerns were downplayed, and many ended up being correct that it wasn't simply going to pass through but would remain entrenched for many months and perhaps years. So far, all of that has been true, and there's no doubt that lower-income and middle-class families have been hurt by this the most. I do think, though, that there is a much sunnier economic story that the Biden administration can now tell. It goes something like this. We did everything we could to prevent the economy from tailspinning because of COVID-19.

We probably threw a little too much money at the problem, but that was better than not doing enough. The result has been mostly good. Unemployment has been around or below 4% since 2022 and is still historically low. Wages are still rising, also at a historic pace. Housing costs are now down, and once the lagging data catches up, the inflation numbers will go down even more. Gas prices are falling. Health insurance prices are falling. Food prices are coming down, though there is still more work to do. Now, we did face historic inflation numbers, but we trusted the Fed to address the problem, and so far the path they charted has worked. Inflation is cooling and getting closer to their

2% target, and we've accomplished this without setting off an economic crisis or another recession, and the light at the end of the tunnel is now visible. I think that is a pretty good story, and a pretty fair one, too. Of course, the Biden administration won't tell it quite this way. It still seems resistant to saying that anything it did from a fiscal policy perspective made inflation worse. But I do think it is worth saying that the Fed seems to have the economic situation mostly under control. A few bank scares aside, it's staying on the tightrope without falling. In August 2022, I wrote this. I don't know what the answer is.

I'm hoping smarter people do. But it seems increasingly likely that the Fed is going to have to shock the system with a large, unexpected rate hike, or it's going to have to slowly grind the economy to a halt with continued incremental rate hikes. It's unlikely that more than a decade of near-zero interest rates and monetary stimulus will be undone with a few months of interest rate hikes. Yes, we may have seen peak inflation, but we also may keep experiencing that peak inflation for many months to come. Today is the most optimistic I've been since writing that, and the most optimistic I've been over the last two years that those smarter people in the room are in control. I am not sure what is next, but here's hoping that it stays that way.

All right, that is it for the left and the right are saying, which brings us to your questions answered. This one is from Karen in Santa Barbara, California. Karen said, I've read everything you've written about the Trump charges, as well as a few articles from other sources. But what I have seen zero speculation about and what I am dying to know is why he did it. What is the most likely motive? Is it just carelessness? Too lazy to handle them properly? Is it that he wanted to boast about them? To use them as leverage in some sort of future negotiations between powerful parties to destroy America? Some of those speculations seem far more likely than others, but I'm puzzled as to why this hasn't been discussed in articles even a little bit.

Also, presumably Mar-a-Lago has plenty of room for garages and storage sheds. Why bathrooms and ballrooms? Why were they even at the Florida estate in the first place? Okay, so let me start by sharing two ideas I've generally seen from the right and the left, just to be fair. On the left, some folks have shared what I think are far more outlandish ideas, like Trump was planning to sell the documents to foreign adversaries or use them for personal gain. I always thought this notion was a little bit ridiculous, and so far there is no evidence that anything like that has happened. On the right, I think the argument has mostly been that he took them because he can. He is the president, and these classified documents can be declassified by him, and many presidents have been forced to return things to the National

Archives after leaving office. Again, Biden is currently under a separate special counsel investigation for mishandling classified documents. This take, I think, is also pretty ridiculous. But other notions ring more true to me. The conservative pundit Ben Shapiro put it like this. The rumors at the time this broke was that he was selling off our nuclear codes to the Chinese or some such nonsense, and it turns out that was all crap. The theory I had from the beginning was correct, that basically Trump was like, I like that document. It's nice, Shapiro said. That was the actual reason he had documents, not for any nefarious purposes, but because Trump likes things. Honestly, I think that is basically it. I think the reason Trump took the documents is mostly vanity and a little bit of insurance in Trump's mind. I think it was a

combination of Trump enjoying showing the documents off to people and also him viewing the classified documents as personal assets. After all, if the indictment proves true, Trump was using the documents to prove to a reporter that a story floated in the news about him wasn't true. He probably took the things he thought were really cool or interesting or significant, and he took them with him when he thought it was advantageous to do so. And he wasn't very much concerned with tradition, norms, rules, or the law. As for why they were placed haphazardly throughout Mar-a-Lago, that is much more difficult to answer. General carelessness, a lazy staff, an incompetent staff? I have no idea.

I'm sure Trump wasn't the one personally lifting and moving the boxes, though it does seem like he was giving orders about where they should go. Either way, none of it looks like the work of a group of people who were deeply concerned about keeping the documents secure, which is not going to look great at trial. All right, that is it for your questions answered, which brings us to our under the radar section. The United States and Iran have quietly restarted talks on a bid to release American prisoners and slow Iran's growing nuclear program. That's according to an exclusive report in the Wall Street Journal. While the talks are ongoing, the United States approved $2.7 billion of payments

from the Iraqi government to Iran for electricity and gas imports that had been frozen by U.S. economic sanctions. U.S. officials said the transfer of funds was unrelated to the negotiations and called it routine. But White House officials have reportedly traveled to Oman three times for negotiations since December. Iran is seeking billions of dollars in energy revenue trapped by U.S. sanctions in exchange for prisoner releases and accepting limits on its nuclear program. The Wall Street Journal has the story, and there's a link to it in today's episode description. All right, next up is our numbers section. The percentage increase in shelter prices last month was 0.6%. The percentage

increase in food prices last month was 0.2%. The average price of a gallon of gasoline in the United States right now is $3.58. The average price of a gallon of gasoline a year ago was $5.01. The average hourly earnings for workers over the last month increased by 0.3%. And the amount of money the Trump campaign raised since news of his indictment was $7 million, according to a Trump spokesperson. All right, and last but not least, our have a nice day story. A new drug is showing signs of success at treating a type of brain tumor. The French international pharmaceutical company Servier Group has reported the promising findings

following a study of 331 adults with grade 2 gliomas. In its findings, Servier Group reports that its new drug, and I'm going to butcher this, voracidinib, has delayed the growth of grade 2 glioma for a median of 27.7 months, more than double the time for patients who received a placebo. Grade 2 gliomas are progressive malignant brain tumors, and these initial findings represent the best progress in treating them in over 20 years. For those in this study, treatment with the drug significantly improved progression-free survival and delayed the time to the next intervention. That's according to results published in the New England Journal of Medicine. The drug was granted fast-track designation by the U.S. Food and Drug Administration, the FDA, in March,

and the company is currently working on timelines for submission of a new drug application in the FDA. Reuters has the story, and there's a link to it in today's episode description. All right, everybody, that is it for today's podcast. As I said at the top, if you want to hear from us tomorrow, please go to readtangle.com slash membership. I've got a piece I've been working on. I'm writing on. I'm excited about it. It's, you know, tearing into both the parties a little bit for what I think is a pretty stupid idea. So keep an eye out for that if you are a member in tomorrow's Friday edition. Quick reminder, tickets on sale, Philadelphia, August 3rd. Be there, Thursday night.

Going to be drinks, guests, political debate, a chance to meet the team at Tangle. It's going to be fun. It's at Brooklyn Bowl in Philadelphia, which has awesome food and obviously some bowling, which will probably be available after the event. Yeah, you should come. Tickets are cheap. They're like 25 bucks. And we need to sell this baby out so we can do a tour and come to your city or other cities after this. If you're in the Pennsylvania, New Jersey, Maryland, Delaware, New York, Washington, D.C. area, I think it would be awesome if you showed up. Also, West Virginia. I mean, Ohio. If you really want to make a trip, fly out. Philadelphia is a great city. Tickets for the

event are on sale at readtangle.com backslash live. There's also a link in today's episode description. And of course, don't forget to go check out our YouTube channel where we have a new video on the Trump indictment. We are off on Monday for Gene Teenth. And on Tuesday, we've got a special podcast coming out for you. So stay tuned for that. All right. We'll see you then. Have a great weekend. Peace. we'll see you then.com and check out our website. We'll be right back. unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in

Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca.