Tangle - September's troubling inflation numbers.

Episode Date: October 17, 2022

We're covering the latest inflation numbers from the Labor Department, what they mean, and who has gotten most of this right. Plus, a question about Israel's Iron Dome and if it could be used in Ukraine.Read Tangle's previous coverage on inflation 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 subscribe to Tangle by clicking here or drop something in our tip jar by clicking here.Our podcast is written by Isaac Saul and produced by Trevor Eichhorn. 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 where you get views from across the political spectrum. Some independent thinking without all that hysterical nonsense you find everywhere else. I'm your host, Isaac Saul, and on today's episode, we are going to be talking about inflation again, and more specifically, the latest inflation numbers we just got for September, which came out on Thursday in the Labor Department's Consumer Price Index Report. on Thursday in the Labor Department's Consumer Price Index report. Before we jump into those numbers, though, I do want to give a brief plug for Friday's subscribers-only newsletter that went out. On Friday, I published a piece titled, Maybe We Should Forgive Herschel Walker's Past.

It drew a lot of mixed reactions. I'd say most of them were positive, but there were some negative ones. Some folks wrote in and said, wow, this is one of my favorite pieces yet. Well argued. Another reader said, fantastic article. I am not a fan of Mr. Walker, but I am a fan of reason opinions. And this is exactly that. Another reader said, this is as wishy-washy of a piece as I've ever read from you. And another reader wrote in simply, you can F off, but you know, the real thing. They said it. Hurtful stuff in my inbox. But you know, that's all part of the game. Anyway, if you want to read the piece, there is a link in today's episode description. If you're not yet a subscriber, you'll be able to read the first few paragraphs. It's a preview and then

you'll be prompted to subscribe. If you are a subscriber, you can read the whole thing. I felt pretty proud about the piece. I think it's a good take. I think it's something I really believe. I don't want to try and summarize it here because it's a pretty nuanced topic, but I would appreciate if you read it and if you like it, if you shared it. All right, so that is it for my Friday plug, which brings us to today's quick hits. which brings us to today's quick hits. First up, at least 11 people were killed and 15 injured when a gunman opened fire at a Russian military training camp on Saturday. Separately, Ukraine said it was attacked by a fleet of Iranian drones sent by Russian forces. Number two, on Thursday, the January 6th committee released video taken by documentarian Alexandra Pelosi, the daughter of House Speaker Nancy Pelosi,

the Democrat, which was taken on January 6th during the riots at the Capitol. Number three, early voting begins today in Georgia's midterm election, one of the most watched in the country. Senate candidates Herschel Walker and Raphael Warnock participated in a debate on Friday night, but Walker was a no-show for last night's debate in Atlanta. Number four, the Biden administration is using Title 42, the Trump-era immigration policy they are fighting in court, to deny Venezuelans seeking asylum at the border entry into the United States. 5. With less than three weeks until Election Day, Republicans have regained an edge in midterm polling. 6. And a little bonus segment here, there are three big debates happening tonight. In Ohio's Senate race, Representative Tim Ryan, the Democrat, is facing off with J.D. Vance, the Republican, in a debate.

In Georgia's gubernatorial battle, Governor Brian Kemp, the Republican, is facing off with St.D. Vance, the Republican, in a debate. In Georgia's gubernatorial battle, Governor Brian Kemp, the Republican, is facing off with Stacey Abrams, the Democrat. And in Utah's Senate race, Senator Mike Lee, the Republican, is facing off with Evan McMullin, the Independent. On Thursday, the Labor Department released its latest Consumer Price Index, or CPI, numbers. A quick reminder, inflation is measured by the Consumer Price Index, 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 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 rose 0.4% in September compared to August, after gaining 0.1% in August compared to July. Economists polled by Reuters had projected CPI to increase 0.2%, meaning the actual increase was twice expectations. CPI was up 8.2% compared to this time a year ago, after being 8.3% over the last year in August. Perhaps most importantly, Core CPI, which is a measure of the index that excludes more volatile energy and food prices, showed its largest annual increase in 40 years. Core CPI jumped 6.6% in the 12 months through September, the most since 1982. It rose 0.6% in September compared to August, matching the rate it rose in August compared to July. Food prices increased 0.8% in the last month and are up 13% from this time a year ago.

Healthcare prices rose 0.8%, new vehicle prices rose 0.7%, while shelter costs, which includes rent, are now up 6.6% in the last year. This is not what the Fed wants to see six months into one of the most aggressive tightening cycles in decades, Sal Guattieri, a senior economist at BMO Capital Markets in Toronto, told Reuters. Meanwhile, gas prices declined 4.9%, apparel prices fell 0.3%, and used car and truck prices declined for a third straight month. Last week, recipients of Social Security also received an 8.7% cost of living increase, the highest in over 40 years. On average, the increase means retirees' monthly payments will go up by about $146,

bringing your typical monthly check to $1,827. Some 70 million Americans receive Social Security checks. We've been covering inflation after the monthly reports are released by the Labor Department since May. As we've written before, we have covered inflation repeatedly and will continue to because it remains a top concern for voters heading into the 2022 midterm elections. Today, we'll take a look at some arguments from the left and the right and then my take. You can find all our previous coverage on inflation with a link in today's episode description. All right, first up, we'll start with what the left is saying. Some on the left argue there are still encouraging signs that inflation is going to come down soon. Others say this is another inflection point and the Fed must continue to raise rates. Some are calling for cost of living

adjustments for everyone, not just those on Social Security. In The New Yorker, John Cassidy argued that the inflationary pressures may ease soon. Earlier this year, it seemed perfectly possible that by now, the inflation rate would be coming down more sharply, Cassidy said. The presumption was that as pandemic-related supply chain problems got resolved, and the price of oil fell back from the highs it hit after Russia invaded Ukraine, prices for all sorts of things, particularly stuff that gets shipped from China and other places in big boxes, would decline. And, in fact, this has happened. Excluding food and energy prices, the prices of all other goods taken together didn't rise at all last month, the CPI report showed,

and some widely purchased items fell in price. They included clothes, footwear, used vehicles, major appliances, smartphones, and sporting goods. The problem is that such stuff makes up less than a quarter of the consumer price index. Several factors are pointing to further falls in inflation in the months ahead. As the calendar year comes to an end, some big price increases from late 2021 will drop out of the 12-month inflation figures. With shipping costs having plummeted recently, the prices of many goods should continue to fall, he said. Despite OPEC's announcement that it intends to reduce production, crude isn't trading much higher than where it was 12 months ago, and it's down about 25% from its peak earlier this year. Predicting what will happen to prices of services is also tricky, but there are some signs that

rents, which have been one of the biggest drivers of inflation in this sector, may finally have peaked. And as the Fed's interest rates continue to slow demand and employment growth, that too will help to moderate price rises. In the Washington Post, Sebastian Malaby said the Fed must double down against inflation. This time last year, the Federal Reserve committed to its most fateful error since the 1970s. Having made a reasonable bet that inflation would be transitory, it failed to pivot fast enough when the bet proved wrong, Malaby said. Today, the results are all around us. Inflation has been at its highest in four decades. The Fed has belatedly hiked interest rates aggressively, driving the dollar to nosebleed levels and adding to the global stresses from the Ukraine war. U.S. mortgage rates are at a 20-year record high. The world's major public companies have shed about

a quarter of their value since the peak last November. One year on, the Fed faces a new version of its 2021 dilemma. It has raised rates five times this year and is expected to deliver another hefty hike at the start of next month. But some Fed leaders are starting to foresee a time when a pause might be appropriate, even though the latest inflation news released Thursday is grim. In an echo of last year's debate, the Doves affirm their commitment to the Fed's 2% inflation target, but wonder whether the pressures might dissipate without too much additional tightening, Malaby said. Yet, however real the risk of excess tightening, the opposite risk is scarier.

The central economic fact of 2022 is that inflation remains way above the Fed's 2% target, and although the data bounce around a bit, there is no clear evidence that inflation has really peaked. In the New York Times, Peter Coy argued for a cost of living adjustment, or COLA, for everyone. We've come to expect that certain people will be protected from inflation by cost of living adjustments and others won't. But there's a good case to be made that COLA should be universal, covering all wages, all pensions, and even all bonds, Coy wrote. The roughly 70 million people who receive Social Security or Supplemental Security income will be largely shielded from the past year's inflation surge by the COLA announced on Thursday, an 8.7% increase in monthly benefits next year. The COLA isn't perfect. For one thing,

it comes just once a year, and in the meantime, inflation erodes the real value of those government checks. On the whole, though, the cost of living adjustment is an extremely valuable government benefit. There's a theory that COLas could contribute to high inflation by insulating people from its consequences and that way making them less determined to resist it by, say, not buying something they think is overpriced, Coy wrote. In 1989, the economists Stanley Fisher and Lawrence Summers wrote that by trying to make inflation painless, governments may end up increasing inflation and reducing welfare. Indexation only makes possible sense for governments with impeccable anti-inflationary credentials, they wrote. Economist Lawrence

Ball said he doesn't necessarily buy Fisher and Summers' conclusions. They remind him of the argument that seatbelts don't save lives because the safety they provide just leads people to drive more recklessly. Besides, there's something cruel about telling people that they're going to be exposed to the ravages of inflation to make them fight harder against it. Alright, that is it for what the left is saying, which brings us to what the right is saying. Many on the right blame Biden for inflation and insist the Fed must continue to raise rates. Some criticize Biden for not properly grasping the difficulties facing Americans. Others call out the economic quote-unquote experts who keep

being wrong about inflation's persistence. In the Wall Street Journal, James Freeman wrote about Biden's role in creating the problem. Despite warnings from leading economists from the Clinton and Obama administrations, Mr. Biden from the start of his presidency insisted on enacting massive spending increases based on his false claim that the U.S. economy was in a shambles and in need of emergency federal intervention, Freeman said. It was never true. In the first quarter of 2021, when he took office, the U.S. economy was humming along at a robust 6.3% annual growth rate. This followed an explosive 35.3% surge in the third quarter of 2020 after many shutdowns had ended and then solid economic growth of 3.9% in the quarter before he took office. The Biden fairy tale of a struggling economy was used to sell his program

of juicing demand with heavy spending. Meanwhile, his regulatory activism discouraged supply, especially in energy. The result? Too many dollars chasing too few goods. Of course, Mr. Biden could not have done all his damage if the Federal Reserve was not also blundering, continuing its money creation binge long after the rebound from lockdowns had begun. But at least the Fed is trying to learn from its mistakes and is now withdrawing stimulus, Freeman said. Some Biden allies are even heralding a huge new cost of living adjustment for Social Security as a historic increase in benefits. But of course, it's just an effort to offset the historic monetary debasement authored by Mr. Biden and the Fed. This massive cola means our government has failed in its bedrock responsibility to maintain the value of currency.

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 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 6 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.

In the Washington Examiner, Tiana Lowe said inflation will not peak and the Fed will not pivot until next year, at the earliest. Since the spring, the investor and so-called expert classes have continually beclowned themselves, predicting that inflation has peaked, then sending markets into a boom and bust cycle with their delusion that the Federal Reserve will pivot away from its rate hike campaign, Lowe wrote. Three data points ought to provide the definitive proof that core inflation will not peak and that the Fed will not pivot until next year at the earliest. Headline inflation is up 8.2% year-over-year, with core inflation at 6.6%, the highest in exactly four decades. Service prices up 6.7% year-over-year,

which are much stickier than goods prices are accelerating, with the monthly price increase doubling from July to September of this year. The second point of proof is the producer price index report released earlier this week. Given that wholesale prices run upstream of consumer costs, PPI inflation coming in at double the rate of expert expectations bodes poorly for future CPI prints, she said. Furthermore, core PPI came in at 7.2% for the year ending last month. The final set of tea leaves to emerge this week came in the form of the Fed minutes from last month's meeting. True to the Fed's continued declarations that they're willing to risk a recession to kill the worst inflation since the Volcker era, the minutes demonstrated the Fed continues to understand that circumstances dictated has a singular, not dual, mandate.

That is to kill inflation, not keep markets or job gains in the black. In the Washington Free Beacon, Matthew Continetti wrote about the stagflation president. According to President Biden, the most recent BLS data are superfluous. After all, everybody already knows that, quote, Americans are squeezed by the cost of living. That's been true for years, and they didn't need today's report to tell them that, end quote. As a matter of fact, Biden said in a statement, rising costs are a key reason I ran for president. Just a minute, Continetti said. Biden's reading of recent economic history is filled with evasions, half-truths, and yarns. They deserve comment and rebuttal. I don't remember Biden staking his 2020 candidacy on inflation. He couldn't have. The inflation hadn't happened.

It didn't arrive until the spring of 2021, by which time Biden was living, during weekdays at least, at 1600 Pennsylvania Avenue. Nor do I recall Biden warning the country about the coming threat of rising prices. To the contrary, Varsity Joe was captain of Team Transitory. The temporary inflation would subside, he and his team argued, as kinks in the supply chain got worked out and the Federal Reserve tightened the money supply. They were wrong, of course, Continetti said. Inflation persisted. By the winter of 2022, Biden was blaming high prices on corporate greed and Putin's price hike. Now, he says, inflation is the fault of the opposition party. No reason is provided. This president isn't into causality.

If Republicans take control of Congress, Biden warns, everyday costs will go up, not down. It's unlikely that voters see things the same way. At the least, a Republican Congress will check Biden's big spending instincts for the next two years, and most people draw a straight line between Biden's policies and the parlous state of the economy. All right, that is it for what the left and the right are saying, which brings us to my take. The news is getting increasingly grim, I would say, that the chances of the quote-unquote soft landing seem to be going down quite a bit. As an exercise today, I went back and skimmed through previous coverage on inflation and Tangle. In October of 2021, Paul Krugman wrote that, quote, wait and see looks like the prudent thing to do. In November, Krugman insisted we not panic, noting that previous price spikes were often one-time events. By December, conservative commentators were several months into begging

the Fed to take action and raise interest rates and hoping Biden would pause his economic agenda. By May, Biden was delivering national addresses on inflation, while some on the left were arguing it was corporate greed or Americans' lack of understanding about inflation that was the biggest problem facing the Biden administration. In the five months since then, we've gotten a steady stream of predictions from the left that inflation indicators were increasingly good and relief was just around the corner, while the right has mostly warned that it was only going to get worse. Participating in the exercise of reviewing those pieces was illuminating. To put it plainly, or as plainly

as possible, columnists on the right have been mostly right, while columnists on the left have spent most of the last year arguing things were just going to get better, weren't actually that bad, or weren't being caused by anything the president could control. To some degree, that last part is true. The Fed has more influence on macroeconomic movement like inflation than a president, but there should be little doubt that at the intersection of fiscal policy, the spending policies of the federal government, and monetary policy, the actions of the Fed like interest rates or buying up billions of dollars in bonds, we have real world results. In this case, huge injections of stimulus into the economy from the federal government, combined with years of

historically low interest rates and lots of money printing, have put us where we are now. In this most recent round of opinion-making, new explanations for the latest numbers on inflation have percolated. Krugman, for example, is now arguing that core inflation may not be as useful right now because it is driven by housing costs, and housing costs are driven in large part by market rents, and most ren are driven in large part by market rents, and most renters have leases, which means that their rent largely reflects the state of the rental market in some time past, i.e. when they sign their lease, which means core inflation, heavily influenced by rent prices, is really lagging by, say, roughly a year, the length of

most leases. It's an alluring argument, and it also does little besides tell us that we can expect core inflation to continue rising for months to come since the post-pandemic rent and housing frenzy happened in the last year. Throughout this entire affair, I'm proud to say I've championed the quote-unquote I don't know stance. I didn't know when inflation would end, whether it was transitory, how precisely to bring it down, or what proportional impact major events like COVID stimulus or the war in Ukraine were having. I didn't think anyone knew as surely as they claim, but we're far enough along now to be able to look at some of the real world outcomes. The few things I have taken a definitive stance on are that this is very, very bad for lower

income Americans, very bad for Americans on fixed incomes like the $70 million receiving Social Security, and bad for Democrats and Joe Biden. I've also explained why I changed my mind on greedflation and why I expected it to be a long haul to get out of this mess. None of those opinions have moved any time recently. As convoluted as the numbers sometimes are, and as weird as this economic moment is, the inflation we're seeing appears steady. Food, shelter, energy, healthcare, they all just continue to go in the wrong direction. And that means the Fed must keep the pressure on with higher interest rates, even if it triggers a recession.

The alternative to that is far worse. All right, that is it for my take, which brings us to your questions answered. This one is from Frank in Lake Oswego, Oregon. Oswego, Oswego. I'm not sure exactly how to say that. Trevor's going to correct me because he's from Oregon. Hi, it's Trevor. It's Oswego. Frank said, why doesn't the U.S. install the Iron Dome missile defense system for Ukraine like we did for Israel? This is a good question, Frank. So interestingly enough, you're not the only person who's floated some version of this

idea. Just last week, the Washington Post wrote a story about how Israel was not planning to sell its air defense system to Ukraine, which, you know, duh. Israel has great experience with air defense and Iron Dome, and we need exactly the same system in our city, Kiev Mayor Vitaly Klitschko said in an interview on Tuesday. We have been talking with them a long time about it. These discussions have not been successful. The reasons Israel isn't going to hand over their missile defense system should be obvious. They need it. In August, it took down 97% of the 470 rockets fired by

Islamic Jihad forces from the Gaza Strip. However you feel about Israel, Palestine, and the politics of the region, you could certainly understand why it wouldn't be eager to hand over that protection to someone else. As for the U.S. installing one, I think the reason that isn't happening is twofold. One, iron domes aren't just sitting around ready for sale. They take tons of money to build, design, and install. And if the U.S. were to actually pull something like that off, it would require delivering and setting up the system without incident and without crossing the red lines of the West's involvement in the war, as drawn by Vladimir Putin. And number two, it probably wouldn't work nearly as well. The rockets the

Iron Dome is intercepting from Gaza are far more rudimentary than the large guided missiles being used by Russia to bomb Ukraine. That's not to say it wouldn't be helpful, it would as smaller rockets are being launched into Ukraine, but it is to say that it wouldn't offer the same kind of protection as it does for Israel. All right, that is it for your questions answered, which brings us to our under the radar section. Officials in Alaska have announced the cancellation of the fall crab harvest in Bristol Bay for the second straight year. For the first time ever, they also canceled the winter harvest of snow crabs. The decision comes after data from a NOAA Eastern Bering Sea Survey showed a 92% decline in overall snow crab population from 2018 to 2021.

Snow crab populations are believed to be falling due to a combination of warming of the Bering Sea, increased threats from predators, and overfishing. In 2016, the industry grossed $280 million, meaning the cancellation will be a major hit to the Pacific Northwest economy. USA Today has the story, and there is a link to it in today's episode description. All right, next up is our numbers section. The drop in the S&P 500 from the last market close before Biden's inauguration on Friday was 5.6%. Republicans' current lead over Democrats in generic ballot polling among likely voters is 49% to 45%. Republicans' current lead over Democrats in generic ballot polling among men is 50 to 45 percent. On generic ballot polling of

likely voters, the current polling split among women is 47 to 47. Among likely voters aged 18 to 29 years old, Democrats lead in generic ballot polling 52 to 40. Among likely voters aged 45 to 64, Republicans lead in generic ballot polling is 59 to 38. Alright, that is it for our numbers section, which brings us to our Have a Nice Day story. This is about a bakery in San Francisco that has created what can only be described as a dream come true for any Star Wars fan, Pan Solo. Hannah Lee Pervin and her mother, Katherine Pervin, co-owners of One House Bakery in Benicia, California, spent weeks making a recreation of the character Han Solo, who was frozen in carbonite in The Empire Strikes Back, in bread. The six-foot bread

sculpture has gotten national attention and is now on display outside the bakery. Mom made me leave it because I was obsessing over the lips, Hannah Lee joked with the New York Times. She was like, you need to walk away. There's a link to this story in today's episode description in the New York Times, and we also have a picture in the newsletter of the totally insane bread sculpture if you're interested. All right, everybody, that is it for today's podcast. As always, if you want to support our work, please go to readtangle.com slash membership

and become a paying subscriber to keep this podcast rolling. You can also just do the simple deed of spreading the word about Tangle. Take two minutes, text this podcast to three friends, tell them to follow us, give us a five-star rating, listen to the podcast, etc. All that stuff goes a really long way. Thank you so much. We'll be right back here same time tomorrow. Have a good one. Peace. Our podcast is written by me, Isaac Saul, and edited and produced by Trevor Eichhorn. Our script is edited by Ari Weitzman, Sean Brady, and Bailey Saul.

Shout out to our interns, Audrey Moorhead and Watkins Kelly, and our social media manager, Magdalena Bokova, who designed our logo. Music for the podcast was produced by Diet75. For more from Tangle, subscribe to our newsletter or check out our website at www.readtangle.com 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 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.