The Keystone Speculator's Inflation-Deflation Indicator; Inflation Remains Choppy Sideways for Over 2 Years with the Federal Reserve Not Making Any Progress Lower to the 2% Goal

What a tangled web we weave. A putrid mess. America's crony capitalism system is in its last throes. Keystone's inflation-deflation indicator remains in NEUTRAL territory, not inflationary, and not disinflationary. Inflation is choppy sideways for over 2 years with the Federal Reserve not making any progress lower to their 2% goal (do not confuse Keystone's non-dimensional indicator above with the actual inflation percentages).

Inflation is neutral according to Keystone's indicator and moving sideways but to correlate it to the Federal Reserve, from the Fed's perspective, inflation is moving sideways above the Fed's 2% target. The economy is not as sensitive to changes in rates as it was years, and decades, ago.

How did we get here? How much time do you have? In a nutshell, former President Ronnie Ray-gun started the destruction of America's middle class in the 1980's as high-paying jobs for common Americans were traded for slave labor in Asia and elsewhere. The lower labor costs sent US stocks to the moon over the last decades rewarding the privileged elite class, and upper middle class sycophants that service the wealthy, since they own the stock market, while screwing everyone else. One-half of Americans do not own a single share of stock. The Federal Reserve knows this but does not care because they serve their wealthy money masters.

The loss of middle class jobs were lessened by telling the unwashed masses that they would be able to buy super cheap goods at Walmart. The textile industry was first to fall in the 1970's and 1980's devastating the southern states. The Chinese and other poor folks will work all day for a hotdog and a Coke and America's middle-class cannot compete with the slave labor. No one cared about the Americans that lost their textile jobs as cheaper goods hit the shores. Other industries fell one by one over the last 5 decades including autos, steel, chemicals, tech, etc... No one was there to help them since they did not help others that lost their jobs. The greedy wealthy class sold America's soul and it can no longer be fixed. America's middle class, that was the glue that held the country together, is completely gutted. Now what?

30 million Americans, living on estates and in McMansions, have screwed the other 300 million so what do you think is going to happen going forward? Are you that dumb to not understand that this corrupt crony capitalism game does not end well? The wealthy class will pass on their dough which may keep the game going a bit longer, but even that money will dissipate over time.

Anyhoo, the chart above mainly reflects goods inflation rather than services inflation. For decades this did not matter since both moved in unison. In recent years, however, due to obscene central banker money printing that has made the wealthy rich beyond their wildest dreams, and the disruptions of supply lines due to the pandemic, the goods and services inflations have not been in sync.

The expectation would be for services inflation to roll over and come down to join goods inflation and after many months, the data is starting to hint at this outcome. After all, even when you have dough, how many trips to Europe, and how many $100K Mercedes convertibles do you need?

The oil, coal and natural gas industries are the energy backbone of the United States. President Biden's war on America's energy complex in favor of the glorified gold cart (EV) economy, along with the out of control Congressional spending (fiscal stimulus), and the Fed's money-printing (monetary stimulus), and the Ukraine War, and the ongoing supply disruptions from the pandemic aftermath, create the runaway inflation in 2022.

The 10-year Treasury note 'price' is used for the denominator (bottom number) of The Keystone Speculator Inflation-Deflation Indicator. The 10-year Treasury price is 100.78 with a yield at 4.15% on 12/8/24.

Commodities are in the numerator (top number). The CRB Commodity Index is at 286.34.

CRB/10-Year Price = 286.34/100.78 = 2.84

Above 4.20 = Hyperinflation

Between 3.1 and 4.2 = Inflation

Between 2.5 and 3.1 = Neutral; Inflationists and Deflationists Battle

Between 2.1 and 2.5 = Disinflation

Below 2.1 = Deflation

Interestingly, the indicator is at 2.84 signaling neither inflation or disinflation. The 2.84 number remains the same with the 10-year yield at 4.15% now, and in mid-November when the 10-year yield was at 4.44%. The economy is not as sensitive to changes in rates as it was years, and decades, ago.

The Fed is targeting a 2% inflation rate and since the indicator above is moving choppy sideways for the last 2 years, it can be assumed to be moving sideways above the Fed's 2% inflation target. Keystone's indicator is in a sweet neutral spot but this is viewed as too high inflation from the Fed's perspective.

Granted, the calculation above is focused more on goods inflation rather than services inflation. For many decades, you could track commodities, with the CRB, or GTX, and the goods inflation and deflation dictated the overall economy's direction. As the US politicians screwed America over the last five decades, sending jobs overseas and destroying the middle class so stock prices could move higher on the foreign slave labor, the goods production went to foreign nations while the US focused more on services as the major part of the economy.

The debate between inflationists and deflationists over the last few years has been the discussion of goods versus services inflation. The pundits looking for inflation said goods would inflate and catch-up to the rising services sector while the talking heads preaching deflation said the services inflation would drop to join the goods disinflation and deflation as the economy slumps. All bets were off and both sides ended up being correct as the COVID-19 pandemic hit knocking the world on its arse.

The deflationists were correct in 2019 and 2020. Services inflation drops to become more compatible with the goods deflation. Of course, the China Virus pandemic wiped out the airlines, hotels, travel, restaurants and hospitality and leisure industries. Services are knee-capped falling to the ground joining the goods deflation. Men turned into bush people letting their hair grow wildly outward as they avoided the barber for fear of catching covid.

Then the central banker cavalry arrives March 2020 promising to print money forever. Greenspan, Bernanke and Yellen (former Fed chairs) were already in the basement of the Eccles Building running the printing presses like mad. Helicopter Ben loaded-up his chopper with freshly printed Benjamin's dropping the money from the sky into the investment banker's hands on Wall Street.

President Biden provides way too much stimulus during the pandemic creating a lazy workforce that would rather sit home than work. The staffing shortages are a headache for employers that want to get back to normal but cannot since there are not enough workers to fill positions. Wages rise sending inflation higher. These behaviors, and the obscene amounts of Congressional (fiscal) and Federal Reserve (monetary) stimulus, send inflation to the moon.

When the Fed and Congress tag-teamed in March and April 2020 with trillions in stimulus, billions went into the US stock market pumping it to record highs. A few hundred thousand workers left the workforce either retiring or caring for loved ones after the pandemic, creating a massive labor shortage as the pent-up demand hit in 2021 and 2022.

Rising wages create inflation. The lack of inflation and ongoing persistent deflation for many years was due to the stagnant wage growth. Inflation cannot exist without wage inflation which had not occurred for many years until 2021 and 2022. 

Interestingly, as economic activity slows in the US, and some companies begin layoffs  in 2022, the wages are starting to stagnate again, helping create the current top in inflation since June 2022. This behavior continues into 2025 with wages steady and layoffs in the news. Wages are moderating which will keep inflation at bay.

The inflation in recent years is mainly due to energy, food and rent/utility costs. People notice higher gasoline and food prices more than other price changes. The wealthy class, made super rich by the Fed's money-printing over the last couple decades, continue to spend money which staves-off an overall recession in America, for now.

Inflation in 2022 ran higher to try and match the 2011 highs. Back then, traders were convinced that rates would continue higher but instead the peak was in. Time will tell if the inflation peak in May/June 2022 will hold; so far it has over 2 years later.

Watch the indicator closely to see which side of neutral it favors; once it starts rolling in one direction or the other (up or down), it will likely keep going in that direction. It would not be surprising to see it roll over as oil and commodities retreat and the economy softens. It would be a big deal falling into disinflation again since that would then open the door to deflation. If we start on the path lower to disinflation and deflation, that would likely occur with the US stock market selling off in force a la 2008/2009 and 2022 (crash).

The answer to the inflation-deflation debate is both sides are right and both are wrong since the indicator sits at neutral. The path to disinflation is more likely if the economy sours. People would lose jobs and the stock market would drop. The people propping up the economy right now are the upper middle class and wealthy because the Fed's easy money made them rich beyond their wildest expectations driving stock prices to the moon (at the expense of the rest of society).

America is the land of the have's and have not's. If you are in the elite or upper middle class that own the vast majority of stocks and made out like a bandit from the Fed's money-printing over the last couple decades, you are traveling, taking vacations, getting your hair done by fancy guys with French names, eating out at fine restaurants, and attending fun events. Keep in mind that one-half of Americans do not own a single share of stock. They be the have not's that have experienced zero benefit from the Fed's many years of money-printing. Such is the filthy crony capitalism system.

The Fed has been printing money since the 2008-2009 financial crisis (even since the 2003 crisis) sending stocks to the moon rewarding the bastard wealthy, that created the mess in the first place, with riches beyond their wildest dreams. Isn't that enough to make you puke? These have's need the rest of America to wash their sheets, clean their toilets, cook their vacation meals, style their hair, tailor their clothes, drive them around, carry their bags, and wait on them hand and foot. Such is crony America now unfixable; it is rotted to the core.

Americans are too corrupt and greedy nowadays to do what is right for the nation. Instead, they pledge allegiance to their corrupt and crony political tribes placing that narrative and agenda ahead of what is best for the country. You are watching the collapse of the crony capitalism system. It does not matter who won the presidency in November. King Donnie Trump will not be able to alter America's Destiny.

Inflationists and deflationists battle each day spewing talking points and cherry-picking data to try and bolster their narratives. You can clearly see in the chart above why analysts, and the Fed, are having a hard time at assessing inflation. There are many fits and starts and reversals in direction over the last couple years. Look at how smooth the chart indicator line is in prior years but after the jump into inflation, and now back into a sideways pattern of neutrality, over the last few years, the line is erratic, up, down, with wild moves. A lot of the wild gyrations are pivots from Fed decisions or guidance, or inflation data, as the crony capitalism system sputters along. Up, down, down, up, baby what you want me to do, as Jimmy sings.

There is good news and bad news for Federal Reserve Chairman Powell. The bad news is that the Fed is making zero progress for over 2 years at lowering inflation to their 2% goal. Oh no, well, what is the good news? The good news is that inflation is not trending higher for over 2 years. Inflation is choppy sideways for over 2 years with the boil now coming off the services inflation numbers (even the rich are running out of money they want to spend). Inflation is stuck in a sideways pattern above the Fed's target.