PPI Telling the Story: The Inflation Genie is Out of the Bottle

In the old cartoons, when there was a Genie in the bottle, it was always a dubious thing to let it out.

Yes, you might have gotten three wishes from the Genie.

But something always went wrong in the cartoons right?

The “wish” always ended up with unintended consequences.

Such is the case now that the Inflation Genie is out of the bottle. The March PPI (producer price index) was 1.1%. It was up nearly 7% year-over-year.

No- I’m not going to strip out food and energy (as some pundits do) as that’s a joke. We’re all eating and driving.

It’s been over 30 years since we’ve seen the Genie. Most people don’t even know what the Genie looks like.

For the first time, there was an Op-Ed in the Wall Street Journal today asking the Fed to stop cutting interest rates given the effects on inflation which is leading to things like spiking food prices around the world (and now the riots in countries like Haiti.)

As America “saves” its housing market, others go hungry around the world.

Yes- unintended consequences.

You can also see inflation’s long arm here in the United States as gas prices spike. Also some fixed income people are going without eggs and eating less bread.

So far, there hasn’t been riots in the United States.

But the Genie usually doesn’t go back into the bottle easily. He wants to stick around and play. He wants you to have your three wishes.

We are perhaps on Wish #1: please save the housing market

What will be Wish #2?

Prepare yourself. There’s a reason the Genie is rarely out of the bottle.