News & Politics

The Alarming Spike in the Producer Price Index Should Force Biden to Change Course

(AP Photo/Bradley C. Bower, File)

The Producer Price Index (PPI) is one of those measurements used by economists to take the temperature of the overall economy. And right now, the PPI is showing us that the economy has a raging fever.

This is in contrast to what the Biden administration has been telling us for months. We’re assured that the spike in prices is absolutely nothing to worry about. We’re told that the problem is with “bottlenecks” in the supply chain causing “temporary” increases in prices for raw materials.

That’s probably what Biden prays for every night before going to sleep. But the PPI is telling us something much different and far more alarming.

The Bureau of Labor Statistics report on the PPI says the “Producer Price Index for final demand increased 0.7% in August, seasonally adjusted… On an unadjusted basis, the final demand index rose 8.3% for the 12 months ended in August.”

Investopedia says of the PPI: “The producer price index focuses on the whole output of producers in the United States. This index is very broad, including not only the goods and services purchased by producers as inputs in their own operations or as investment but also goods and services bought by consumers from retail sellers and directly from the producer.”

Far more than the Consumer Price Index (CPI), the PPI gives us a glimpse into future inflationary pressures that will eventually work their way to the consumer. And the PPI is telling us to batten down the hatches and prepare for a storm. The Washington Examiner:

According to the Aug. PPI report, “Leading the August increase in the index for final demand, prices for final demand services rose 0.7%. The index for final demand goods moved up 1.0%… For the 12 months ended in August, the index for final demand less foods, energy, and trade services rose 6.3%, the largest advance since 12-month data were first calculated in August 2014.”

Even worse, “For the 12 months ended in August, the index for processed goods for intermediate demand climbed 23.0%, the largest 12-month increase since jumping 23.6% in February 1975.”

This is not surprising to anyone who isn’t a socialist. It’s the law of supply and demand and Biden is only making the situation worse.

Apparently, Biden does not understand the basic law of supply and demand.

When the government showers the economy with trillions of dollars, the value of each dollar declines. When this phenomenon occurs in the aftermath of an unprecedented nationwide economic shutdown, you get the worst-case scenario of more dollars chasing fewer goods and services. This typically produces a vicious inflationary spiral, wherein price, wage, and cost increases build on each other.

However, according to the Biden administration, modern monetary theory, wherein the government can print an endless amount of money without regard to the national debt and annual deficit, is somehow immune to inflation.

That was the attitude of Biden’s Democratic forebearers in the 1960s and ’70s. Either the country was somewhat “immune” to inflation or “a little inflation never hurt anyone.”

It doesn’t matter what the Biden administration is saying about supply “bottlenecks” and “temporary” price increases. Prices were supposed to begin leveling off by mid-summer, but they haven’t. And the latest PPI would seem to indicate that the real price increases have yet to arrive. When they do, will Democrats scale back their spending plans to regain control of prices?

Don’t bet on it.