Inflation? Head Fake Or Reality?

BigRedCar
07/18/21

We are told by the Federal Reserve in the person of its Chairman Jerome Powell that we are experiencing inflation, but that it will be “transitory.”

“Do not fret, dear, this inflation is transitory and you will be fine,” sayeth Jerome P during recent Congressional testimony. He then adjusts his glasses and gives you a grandfatherly look of confidence. But, should you feel good or is it all a head fake?

[Much of Christianity is built upon the notion that death is also transitory and that we shall live again in splendor with God in Heaven, but still we are dead. This is the story of inflation also?]

The Lumber Story

Comes now the story (the fable) of lumber which is tracked in the markets based on the cost of 1000 “board feet.”

A board foot is 144 cubic inches of wood which is notionally a board that is twelve inches long, twelve inches wide, and one inch thick.

Currently, the chart on lumber prices looks like this:

Here are some highlights:

 1. Price of 1000 bf of lumber on 20 Jan 2000 – $420.55. [Trump is President on this date. This is not a story of Trump v Biden. Those are only temporal placeholders for the fable.]

 2. Price of 1000 bf of lumber on 1 April 2020 – $260.15.

We then begin a steady climb until lumber prices peak in the short term on 13 Sep 2020.

 3. Price of 1000 bf of lumber on 13 Sep 2020 – $981.95

We dip thereafter, but to where?

 4. Price of 1000 bf of lumber on 29 Oct 2020 – $496.74

 5. In May of 2021, lumber prices peak at $1683.71

 6. Most recent price of 1000 bf of lumber – $546.00

WTF does that even mean, Big Red Car?

Fine, dear reader, allow me to interpret this for y’all a bit. Some ground rules.

 1. Prices for commodities fluctuate based on demand, public policy, and prognostications of what may or may not happen in the future.

Commodity prices, however, are very real if you are building homes or commercial construction using lumber. It is the real deal.

It is inalterably linked that if the cost of the components of a finished product go up, the price of the finished product will also go up.

 2. High demand drives up prices. Low demand settles prices lower. Basic econ.

 3. When the Biden admin took over, there was some concern about the issue of the economy. Fair comment?

 4. We had this Pandemic Thing, but the building trades just worked right through it.

Makes some sense, right? You’re building a 24-month custom home, you can’t stop until that baby is dried in — roof, walls, windows, exterior doors.

Same thing was true with big commercial projects.

Here is what happened:

 1. The price of lumber is pretty damn stable during the majority of the term of the Trump chap, but it begins to move up toward the end of his term.

Surprising given we have the most robust economy in the history of the country? Not really. Still, prices are stable.

 2. New guy is elected in Nov 2020 and makes a series of pronouncements which the world sorts out and the price of lumber takes a bit of a jump. Not the end of the world, but you can sort of see it from there — THE PRICE OF LUMBER  TRIPLED ALMOST OVERNIGHT.

 4. Comes now this Big Run Up to $1683.71 in May 2021 — which is SEVEN times the 1 April 2020 starting point. [Again, this is not Trump v Biden. This bridges the two admins.]

This feels like some very substantial inflation to Big Red Cars. You?

 5. Now, the price of lumber is “down” to $546.00 which is roughly TWICE what it was when the Lumber Story started.

OK, Big Red Car, WTF does that mean?

The Fed Reserve Chairman Jerome Powell is telling us that the upward pressure on prices is “transitory” and uses the Lumber Story as an example, but, dear reader, the Lumber Story is not a good story.

The Lumber Story shows us paying twice as much for lumber as we did back when the Lumber Story began.

Sure, it feels a lot better than when the price of 1000 bf of lumber was $1683.71, but it’s still twice what we were paying back before this upward spike began. It is not a refutation of inflation or proof that it is transitory when you are paying TWICE what you used to pay for a commodity like lumber.

Bottom line it, Big Red Car, we have to go to church

OK, here it is — inflation is here. It is going to be huuuuuuuuuuuuuuuge and anybody who is blowing smoke up your ass telling you that you should take heart that this upward pressure is “transitory” and cites the Lumber Story as evidence is full of crap.

Be well. Say a prayer for Big Red Cars and have a nice damn Sunday.

One day this lumber was worth $1683.71 per 1000 board feet. Does it look like gold to you?

(Source : https://themusingsofthebigredcar.com/inflation-head-fake-or-reality/)