Dear Squawk Box of CNBC,
There either is, or should be, a saying that “investors never rest,” so even on my vacation I will not be able to rest until I send this. I am amazed that not one member of the CNBC panel on inflation mentioned the impact of the decreased oil and gas production in the U.S.
It is not only the Ukraine war. Inflation began in March 2021, a full
year before the Russian invasion. In addition, the U.S. does not import either energy or food from Ukraine.
The increased spending by the White House has contributed to the debt level as has the wage increases during COVID.
But the primary reason is the supply of energy does not meet the demand.
It is cumulative as every part of the supply chain adds their increase in energy costs to their sales price as do the transportation companies such as FedEx and the airlines.
This will get worse, much worse, as the producer price index being substantially higher than the consumer price index indicates. What will happen when we enter the driving season begins or China reopens or Europe reduces the supply from Russia?
The Federal Reserve cannot address the supply side of energy: period. All it can do is spank consumers by making them unable to afford energy-related costs so the demand goes down.
Since no reputable economist would ever say “let’s ignore the past,” when Austan Goolsby said, “We should not look back to March of 2021 for when inflation began” since it destroyed his assertions that the increase in energy costs began because of the Russian invasion of the Ukraine or the end of COVID. So he must not have been speaking from his position as an economics professor at Northwestern, but as a member of the White House from his time as head of the Council of Economic Advisors during the Obama-Biden years. This would be quite a tale to tell his students.
Of course, the panel of “experts” did not, and could not, offer any solutions since for whatever reason they were unwilling to even mention energy costs except to differentiate between industrial, where the costs are greatly up, and services, where they are just starting to go up. What a surprise — the providers of services are, after all, people, and as such are consumers whose own costs are rising.
Yet none of them addressed this? Was it because the only answer was energy?
It feels like Hans Christian Andersen’s “The Emperor Wore No Clothes” in that everyone knows the situation but is afraid to say it. Perhaps they are following the more recent version entitled “The Emperor Wears No Clothes,” which is based on the fantasy world of marijuana.
The White House recognizes the underlying problem as it has tried to encourage other countries to accept more U.S. taxpayers’ dollars by increasing their production of energy, including Saudi Arabia, Venezuela and Iran (who will not even talk to us).
No one even mentions Canada any more. Why?
Nor any of the costs or environmental issues in shipping oil over oceans. Why?
The White House, and only the White House, can reduce inflation by increasing drilling and pipelines.
Why is no one mentioning the amazing promise by President Joe Biden to increase energy costs to force the death of fossil fuels?
As the saying goes “we will never cure the problem until we identify it,” to which I would add “or admit it.”
At this point the optimal advice seems to be to prepare for this to continue until either a crisis for an election forces changes.
Now I can try to shift to things I can control, such as putting on the clothes for exercise and pool time.
Brent E. Zepke is an attorney, arbitrator and author who lives in Santa Barbara. Formerly he taught at six universities and numerous professional conferences. He is the author of six books: “One Heart-Two Lives,” “Legal Guide to Human Resources,” “Business Statistics,” “Labor Law,” “Products and the Consumer” and “Law for Non-Lawyers.”