Tag: inflation

The Inflationary Backlog 

Everyone looks at the headline manufacturing number and moves on, but buried inside the September ISM report is something far more important. The Prices Index surged 6.8 points to 77.9 while the Backlog of Orders Index jumped 4.6 points to 56.4. When backlogs move above 50, unfilled orders expand, meaning manufacturers are receiving work faster than they can efficiently complete it. When that happens at the same time prices are surging, the supply chain is telling us there is still pressure in the pipeline.

ISM reported that 43.5% of respondents were paying higher prices while only 2.7% reported lower prices, so this is not merely a story about stronger orders. Costs are rising sharply while unfinished work accumulates.

That combination can become inflationary because shortages change behavior. Companies begin ordering earlier because they fear they will not receive what they need later. Buyers become less concerned about negotiating the lowest price and more concerned about securing supply. Suppliers gain pricing power because customers cannot simply walk away when everybody else is waiting for the same materials. We saw precisely this during COVID when shortages encouraged businesses to order more inventory as protection against future shortages, making the bottlenecks even worse.

This is why the backlog matters more than most people realize. These are orders already sitting in the pipeline waiting to be completed, meaning they represent future production even if new demand begins to weaken. Consumer confidence can decline and the labor market can soften while manufacturers simultaneously face rising costs and unfinished orders. That is how you end up with economic weakness and inflation at the same time.

The Federal Reserve cannot fix this with another 25-basis-point move. Higher interest rates do not produce another barrel of oil, manufacture copper, eliminate tariffs, reopen shipping lanes, produce semiconductors, or build another factory. The Fed can suppress demand, but it cannot manufacture supply, and higher borrowing costs can actually make expanding productive capacity more expensive.

This is precisely why inflation can come in waves. CPI tells us what consumers have already paid, while manufacturing data can reveal pressure moving through the system before those costs reach the final customer. Manufacturers can absorb higher costs for a while by sacrificing margins, but eventually somebody pays. If the Prices Index remains elevated and backlogs continue expanding, businesses will increasingly attempt to pass those costs down the chain.

The September numbers should therefore be watched carefully. One month does not establish a trend, and backlogs could fall again, but a Prices Index of 77.9 alongside a Backlog of Orders Index at 56.4 is not a signal that inflationary pressure has simply disappeared. While Wall Street obsesses over every sentence from the Federal Reserve, the people actually producing goods are telling us something much more useful: their costs are rising while the work waiting to be completed is piling up.

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Trump Says Inflation Will Pay Off The $40 Trillion Debt “Very Rapidly”

President Trump thinks ‘certain levels’ of inflation could take care of the $40 trillion national debt. 

“You know, inflation. Certain levels of inflation will also pay off that debt very rapidly. Very rapidly,” he told TIME in an interview published Thursday, after the outlet pointed out has grown by about $11 trillion over his five years in office. In response, Trump first blamed Joe Biden, then the Fed, then hinted at a plan he wouldn’t share.

“I know I’m the best in the world,” Trump said. “The best – I don’t want to tell you what those means are, but you can pay off the debt through other means. But the one thing that you can do is pay it off through growth, and we’ve never had growth like this.”

Later he circled back, saying “the growth is going to pay off the debt” and that the Fed’s hikes were “hurting our country more than inflation is hurting our country.”

He didn’t say what level of inflation he had in mind, or whether he wants the Fed to tolerate more of it. Earlier in the same interview, though, he blamed Biden for “the biggest inflation in history” and said he “inherited the greatest inflation in history,” adding that “the only thing I have to get down now is the gas.”

Headline CPI rose 3.4% in the 12 months through August, with core at 2.4%, according to the BLS. On Sept. 16 the Fed raised rates for the first time since July 2023 – a unanimous quarter-point hike to 3.75%-4% that included Trump’s own pick for chair, Kevin Warsh – and penciled in another before year-end. Trump told TIME he “probably would have voted against the board” if he were Warsh, and has called for rates of 1% “or less.”

On Thursday, the day TIME published the interview, the 10-year Treasury yield touched 5.34%, its highest since 2002. It closed at 5.24%.

He’s Floated This Before

None of this is new for the self-described “king of debt.” In May 2016 he told CNBC the US could buy back its own bonds at a discount if rates went up. That was widely read as a default threat, so a few days later he went on CNN to walk it back. “You never have to default because you print the money, I hate to tell you, OK?” he said.

A month before that, he told the Washington Post he could wipe out what was then a $19 trillion debt “over a period of eight years” – a debt that has since more than doubled.

Buybacks are back, too. After the debt crossed $40 trillion and long-dated yields kept climbing, Treasury Secretary Scott Bessent tripled the cap on the first expanded buyback to $6 billion. As we noted at the time, yields surged anyway, since $6 billion barely registers against more than $2 trillion in gross issuance a year.

Bessent, for his part, prefers to talk about growth. In June 2025 he told CBS’s Margaret Brennan that “everything has been alarmist” on inflation and that the US would never default. And the day after Treasury reported the $40 trillion milestone, he went on CNBC to say there was “nothing magic” about the number and “we can grow our way out of that.”

The Part He Left Out

Last year we ran a piece arguing Bessent was effectively putting the national debt on an adjustable-rate mortgage by leaning on floating-rate financing, which also projected the debt would top $40 trillion by the end of fiscal 2026 – it got there in mid-August, about six weeks ahead of schedule.

Back in April 2025, Bloomberg’s Simon White made the case that higher inflation and a weaker dollar – where US policy seemed to be headed – were consistent with a falling debt burden. But he warned that unlike Britain’s post-WWII “beautiful deleveraging,” erratic policymaking could wreck trust in the dollar system, spark capital flight and end up adding to the debt.

Nick Giambruno spelled out the mechanics in July: financial repression, where the government keeps interest rates below inflation and the difference quietly moves wealth from savers to the Treasury. With 9% inflation and 4% rates, he noted, that’s a 5% transfer every year, and it compounds.

It has worked before. A 2011 BIS paper estimated negative real rates wiped out debt worth 2-3% of GDP a year in the US and UK between the late 1940s and the 1970s. But that was under Bretton Woods, with interest-rate caps, captive domestic buyers and capital controls – and the paper found financial repression works best “when accompanied by a steady dose of inflation.”

The catch is that it only works if the Treasury can borrow below the inflation rate. Right now it can’t: the 10-year yields nearly two points more than headline CPI, interest on the debt already runs over $1 trillion a year, and everything that matures gets rolled at today’s rates.

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We Are at the Mercy of the Fed, Whose Leaders Believe that Printing Money Solves Every Other Problem

I’m sure that most of the discussions in the closed-door meetings at the Fed’s recent Jackson Hole Symposium centered on the problems of printability. They certainly won’t be part of the paper presentations or press conferences.

The US government has been spending like a teenager with an unlimited credit card that they don’t have to pay off since going off the gold standard.

The Fed doesn’t even have a monetary policy in any sense. It’s been playing games for more than a quarter century, really ever since 1971, and even earlier going back to its very beginning of the Fed. These games center on the problems of printability. The Fed prints as it pleases and it wants to please its masters.

Its mandate is not CPI inflation rate target or the Unemployment Rate target of the “natural rate of unemployment”—that is a tall tale to gain public acceptance and gain credibility for itself. They are like two warning buoys in a harbor, but not their real goals.

Their real mandate is also two-fold. It’s to serve the interests of the state, especially to facilitate budget deficits and the national debt and to serve the interests of the big banks.

The only role the working-class plays is a byproduct of the real mandates: if some families temporarily benefit from Fed activities, so be it. It especially has a political role to fool the voters around election times. That is why politicians are now so “concerned” with beef prices, diesel fuel prices, and mortgage interest rates. Their real concern is to get reelected and to stay in power.

That is where “printability” comes into play. With a central bank, the Fed, all the problems of government and society can seemingly be addressed with the Fed printing more money. New spending programs, new wars, new subsidies, welfare benefits, etc. are all made possible with a few keyboard entries on a computer at the New York Fed.

The price inflation only comes later as the money makes its way through the hands of the banks, the government, and to businesses that end up driving up resource costs. Eventually, in the end, higher prices emerge and, even later, higher wages. After that, unemployment and bankruptcy result and the cycle begins anew. The citizenry is none the wiser as few people figure out the Fed’s game as it once again “comes to the rescue!” with lower interest rates.

The biggest problem with printability is how it affects political behavior and social ideology. Do you live under a budget constraint or not? Without a budget constraint, people and politicians assume that government can solve all our problems at no cost and politicians (who are very short-term oriented) spend without constraint. They vote for everything. They go along with stupid wars and policies. They pass budgets with huge deficits. They go unconcerned with the national debt. Americans and their government are now completely dependent on keeping the monetary spigot opening ever wider.

This cycle is of a historically long duration thanks to the appearance of the covid situation and the Fed’s and the government’s $10 trillion bailout. Then, when CPI inflation skyrocketed and they had to cut back a little, they started through the back door. releasing their hoard of $2.5 trillion in Repurchase Agreements through the banks and the stock market took off.

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‘Survival Mode’ – Farmers Crushed As Trump’s War On Iran Sends Diesel Cost Soaring

As Donald Trump’s war on Iran nears the seven-month mark, the economic damage is reverberating all over the world, and all across the United States. Among the Americans who are feeling the most pain from a war their federal legislators never declared are the nation’s farmers, who are growing increasingly desperate under the weight of rising costs for diesel, fertilizer and equipment.

It’s a demographic that leans hard to the right, but now feels let down by Trump and others in Washington. “It’s his war that caused this, this war in Iran. We’re not winning that war. And many farmers feel like we shouldn’t be there,” farmer John Boyd, Jr told CNN. Trump says the war in Iran is necessary to prevent the country from building a nuclear weapon. However, going back to 2007 and up to the eve of the war, the US intelligence committee has repeatedly assessed that Iran was not building one. 

“I’ve done this 34 years. I have never worried and stressed like I have the last year,” North Carolina farmer Matt Bell told CBS News. “We’ve cut everything we can cut.” Trying every option he can think of to improve his cash flow, Bell has put off replacing equipment, produced some of his own fertilizer, and opened a pumpkin patch and hayride business for the fall. The rising costs come after a difficult period had already weakened his operation’s financial security. 

“The last several years in agriculture have been terrible, and we have just cut the fat anywhere we could. But we’re just getting to the point now there’s nothing left to cut. You cannot run without fuel. You cannot run without fertilizer. You have to have that,” Bell said. 

As a result of a major reduction in oil exports from the Persian Gulf, the nationwide average cost for a gallon of diesel hit $6.49 this week, up 75% from a year ago, according to the AAA. Lately, the price volatility has led Bell’s diesel distributors to offer price quotations that are only good for a matter of hours. He’d budgeted $35,000 for fuel in 2026, but blew past that number in August. “Every piece of equipment on this farm runs on diesel,” he emphasized. 

In an interview with Sky News, Texas cattle rancher Lynn Fleming said her August outlay for few was almost double what she’d paid in recent years. “Obviously the main [factor] is what we’re facing everyday with the Iranian situation,” Fleming said. Her husband, Robert, said he felt blindsided by the war. “We had no idea that he was going to pull the prank with the Strait of Hormuz. He didn’t tell us … he was going to go do the military maneuvers and try to control the oil supply over there. We had no warning of what was going to happen.” A major cornerstone of Trump’s 2024 campaign was his pledge to be a “peace president” who would refrain from starting any new wars.    

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As Gas Prices Soar, Congress Goes Home

Instead of six more weeks of winter, we will have at least six more weeks of war, brought to us by Secretary Hegseth and his boss, President Trump, with the help of Speaker Johnson who avoided a procedural vote, taking it upon himself to adjourn, under the Rule 1, Clause 13, of the House of Representatives.

Consider. The Administration, compelled by Israeli interests, has driven America into a war of choice against a nation that represented no threat to our country. The war against Iran is becoming more dangerous every day, more casualties, more expense, and more devastating economic and moral consequences.

On September 15, the House of Representatives expressed its constitutional will and voted 220–204 to direct the President to end American participation in the war against Iran.

This constitutional crisis extends beyond one resolution or one cabinet secretary. The House exists as an independent branch of government, with its own authority over war, appropriations and impeachment.

The Speaker, by preventing a recorded vote on the Hegseth Impeachment and sending members home, prevented the House from exercising one of its most consequential checks on executive power. The practical effect was to protect the Administration from an immediate confrontation with a chamber that had voted to end the war.

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The Crippling Effects of Unnecessary War

In California, gas stations are facing a unique challenge. The station signs are only configured to go up to $9.99 per gallon and at several stations the price of diesel has reached that maximum. Diesel prices are higher than they have ever been in history.

Worse, according to some news reports the advertising of the maximum price of $9.99 per gallon is meant to signal to truck drivers that they have run out of diesel altogether. Expensive diesel is a hit to the economy, but running out of the fuel at any price is a whole different kind of crisis.

Our highways are filled with semi-trucks burning diesel to bring the products we depend on to the markets. Our freight trains use diesel to transport what is not transported by truck. When the price of diesel increases, the cost of everything moved by that diesel also increases. This is one reason we are seeing much more inflation than the government wants to admit.

The diesel crisis is getting so serious that even President Trump has been forced to admit it. Of course, instead of taking at least part of the blame over his war of choice against Iran and his continuation of the proxy war against Russia through Ukraine, he is blaming Ukraine’s military strikes on Russian energy infrastructure.

President Trump is now asking Ukraine to stop attacking Russian energy resources because diesel is a global commodity and the scarcity produced by the attacks is hitting us here at home. But the strikes deep inside Russia are guided by US intelligence, which provides the targeting data for Ukraine.

The Russia/Ukraine war is only part of the problem. Despite President Trump’s bluster about controlling the Strait of Hormuz, the fact is Iran is in control and very little oil – or anything else – makes it out without Iranian approval.

Yemen’s Iran-allied Houthis joining the fight only makes matters worse. Over the weekend they attacked Saudi Arabia’s bypass pipeline, taking much more oil off the market.

The real problem here is not oil or diesel. The real problem is that wars of choice spin out of control and destroy the economies of those who launch them. Empires throughout history have been undone by endless overseas wars. No amount of bragging about the size and strength of our military can change this reality.

Now we are seeing the chickens coming home to roost.

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Trump Promises $5,000 Dividend To Every American Adult If Republicans Hold Congress

In Dallas last night, President Trump promised the American people that if the GOP keeps the House and the Senate, every adult citizen will receive $5,000 in a direct dividend from his tariffs.

Speaking at the American Airlines Center in Dallas on Wednesday evening, Trump explained that the $5,000 payment would be issued by the President if Republicans maintain control of the House of Representatives and Senate, thanks to their America First economic strategy that globalists predicted would never work. “Very much like a successful company will do a cash distribution to its shareholders,” he said of the payment.

The reason the profits of tariffs are to be distributed to the adult citizens of the country in the form of dividends is because for decades the politicians in Washington have been running the country into the ground, waging foreign wars, spending trillions of dollars of NATO revenues and other foreign pay to conduct bureaucratic busy work and fail to enhance the prosperity of American working citizens and businesses.

“Very much like a successful company will do a cash distribution to its shareholders,” Trump said.

It has to be spent in the United States, he explained. So, no money can be spent in Canada, or China, or Germany for example. It is a closed economic system that rewards American businesses and American workers for their country’s success.

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The Rising Cost Of Electricity In The United States

Across the U.S., Americans are paying roughly 30% more for electricity than in 2020.

This graphic, via Visual Capitalist’s Cody Good in partnership with the National Public Utilities Council, uses data from the U.S. Energy Information Administration to show the change in average retail electricity prices by state across all sectors from 2020 to 2025.

Where Electricity Prices Rose the Most

Washington, DC saw the largest increase in the country, with average retail electricity prices rising 72% between 2020 and 2025. Maine followed closely at 67%, while Maryland and California rose 52% and 50%, respectively.

State AbbreviationStateChange in Electricity Price, All Sectors 2020-2025 (%)
DCWashington, D.C.72
MEMaine67
MDMaryland52
CACalifornia50
RIRhode Island47
PAPennsylvania46
NYNew York45
MAMassachusetts44
ILIllinois43
CTConnecticut39
DEDelaware38
NJNew Jersey35
NHNew Hampshire31
FLFlorida30
HIHawaii28
LALouisiana27
ALAlabama26
MSMississippi26
NVNevada26
ARArkansas25
VAVirginia25
WVWest Virginia25
INIndiana24
MIMichigan24
AZArizona23
WAWashington23
OHOhio22
TNTennessee22
VTVermont22
COColorado21
UTUtah21
WIWisconsin21
IDIdaho19
MOMissouri19
MNMinnesota18
NCNorth Carolina18
OROregon17
OKOklahoma16
KSKentucky15
AKAlaska14
GAGeorgia14
TXTexas14
MTMontana13
SDSouth Dakota13
IAIowa11
KSKansas9
NMNew Mexico9
SCSouth Carolina7
NENebraska-1
WYWyoming-1
NDNorth Dakota-18

Source: U.S. Energy Information Administration

Data shows percent growth in average retail electricity prices across all sectors from 2020 to 2025.

Many of the largest increases were concentrated in coastal and Northeastern markets, where retail electricity prices have climbed sharply since 2020.

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The Fed Still Doesn’t Understand Where Inflation Comes From

New York Federal Reserve President John Williams now says inflation has likely peaked and that monetary policy is “well positioned” to bring inflation back toward the Fed’s 2% objective. Williams acknowledged inflation remains “unquestionably too high,” but argued that the worst of the tariff effects have passed, housing inflation is moderating, oil prices have peaked, and disruptions tied to the Middle East conflict should ease over time. He forecasts inflation falling to roughly 3.25% by the end of the year and gradually returning to 2% by 2028.

This is precisely where central bankers always get it wrong. They continue assuming the geopolitical landscape will cooperate with their economic forecasts. There is absolutely no evidence supporting that assumption. If anything, the evidence points in exactly the opposite direction. The Middle East is becoming more unstable, not less. Ukraine remains a war of attrition consuming enormous military resources every day. Europe is dramatically expanding defense spending. China is eyeing Taiwan and waiting for the US to stretch itself too thin to protect it. NATO members are rebuilding their militaries at levels not seen in decades. Governments everywhere are preparing for a world of prolonged geopolitical confrontation.

Wars are the most inflationary events imaginable.

Williams argues that oil prices have peaked and that disruptions in the Middle East should gradually subside. That is an assumption, not a forecast supported by events. The ceasefire that briefly lowered energy prices has already broken down. Shipping risks remain elevated. Iran, Israel, Lebanon, Syria, and the Red Sea continue presenting risks capable of sending commodity prices sharply higher overnight. It only takes one escalation to completely invalidate months of inflation projections.

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Japan’s Keynesian Mirage: How Debt, Inflation, & A Collapsing Yen Expose A Failed Model

Japan’s yen crisis exposes the long‑running failure of the Keynesian strategy that has dominated the country’s economic policy: chronic deficits, exploding public debt, and engineered inflation are now eroding Japan’s purchasing power, competitiveness, and monetary stability.

For decades, many mainstream analysts pointed to Japan as proof that a rich, “monetarily sovereign” country could keep an extremely high public debt without relevant consequences. The argument was simple: as long as the state can issue its currency, it can always print whatever is needed to cover deficits, refinance debt, and support public spending.

In reality, that has meant public debt soaring to around 250% of GDP, one of the highest levels in the developed world, while repeatedly increasing government expenditure and leaving large, persistent deficits. Even the IMF notes that, even after several years of moderate growth, prudence is “key to keep debt‑to‑GDP on a firmly downward path,” admitting that the current level is a structural vulnerability.

Japan’s apparent stability depended on a crucial external factor, the country’s enormous exporting capacity.

As a leading exporter of cars, technology, and capital goods, the country attracted a continuous inflow of US dollars and foreign capital that supported a stable currency and kept inflation low, despite fiscal excess. That protective layer is eroding fast. Headline inflation has edged up from 1.4% in April 2026 to 1.5% in May, while core inflation has held at 1.4%, still below the Bank of Japan’s 2% target but clearly positive after three decades of near‑zero price growth.

A key factor of the Japanese model was its export engine and the “golden goose” of capital inflows.

These two factors allowed the country to live with large debt and deficits without immediately triggering high inflation. However, that mirage is vanishing as external performance falters and inflation, though moderate, bites into real incomes.

Keynesianism did not spur growth or improve Japanese citizens’ lives. It just bloated an unsustainable government machine.

Recent data show that price increases are now broad‑based, not confined to a few categories. In May 2026, overall CPI inflation was 1.5% year-on-year. However, food prices rose 3.5% year-on-year, which is a heavy burden for households. Goods inflation stood at 2.0%, while services inflation was around 1.0%.

Underlying inflationary pressures, particularly in services and wage‑sensitive sectors, are now embedded in the system rather than an isolated energy shock. Meanwhile, real net wages are stagnant or declining. Japanese citizens face an affordability crisis.

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