Weakening Wednesday – Inflation Clouds Earnings Reports

Inflation is everywhere.  

Coca-Cola (KO), Proctor and Gamble (PG) and others have discussed raising prices in response to rising input costs for their products including both labor and materials and that's the kind of permanent, long-term inflation that the Fed simply cannot ignore.  "Transitory" inflation has been the Fed's excuse for extending their easy-money policy because the Fed's own mandate REQUIRES them to take action to curb inflation but major corporations announcing price increases is not at all transitory – it's embedded, long-term inflation.  

As you can see from the ShadowStats chart above, the Fed mainly controls inflation by chaning the way we measure inflation – something they have done since they started messing with the CPI in the Reagan years in order to pretend giving money to rich people wasn't making poor people suffer.  That's why, for the last few years – even though you CLEARLY could tell the price of things you buy were going up, the Fed kept saying inlfation was low and they had to let rich people borrow money at 0% to help boost it.

When we apply a consistent measure of inflation for the last 15 years, our current rate of inflation is actually 10%, which makes perfect sense since the current devaluation of the Dollar over the last 12 months is also 10%.  That's why KO and PG HAVE to raise prices, they buy commodities and turn them into products and a lot of what they buy comes from overseas, where the weak Dollar doesn't buy them as much as it used to.  Both companies have indicated the price increses are earnings-neutral, so there won't be any better profits from this move – just higher prices passed along to the consumers.

IN PROGRESS

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