Our Inflation Nation

 Financial FAQs

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.9 percent on a seasonally adjusted basis in March, after rising 0.3 percent in February, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.3 percent before seasonal adjustment. BLS.gov

FREDcpi

We knew it was coming. Not just when. The Iran war is in its second month and has already produced the largest supply shock to the global oil market in history, the IEA said last month.

On Tuesday, the head of the group, Fatih Birol, told French newspaper Le Figaro as reported by several news agencies that the current crisis is more severe than the oil shocks of 1973 and 1979, and the 2022 Ukraine-war shock, combined.

And there’s no end in sight as the world’s largest economy is making the supply shortages worse. It’s an incredible reversal of our standing in the world.

The high spike in the CPI inflation graph above is a disheartening picture of what happens when mad kings attempt to control economies and countries that have a chokehold on supply chains needed by the world economies.

This is just the latest mismanagement by the Trump administration—and Republican Party also has allowed, let’s not forget—of the American economy. President Trump wanting to pay for his tax cuts with higher tariffs had already snarled supply chains and caused a second post-COVID inflation round.

The Biden administration had wrestled annual CPI inflation below 3 percent in 2024 from the earlier COVID-19 pandemic spike, where it stood until now.

And Trump apparently thought attacking a country that bordered a waterway through which 20 percent of petroleum supplies and products flowed would not do further damage to the world’s economies.

So what was he thinking? The problem is he doesn’t bother to think things through at all. This is the second spike that has raised the cost of living since the tariff induced inflation. So why would polls show a majority of voters believe Republicans are better at economic growth?

Is it because Trump runs the federal government from Mar-a-Lago, or one of his golf courses (That’s a joke.)?

The all-items consumer index rose the most—3.3 percent for the 12 months ending March, after rising 2.4 percent for the 12 months ending February. It rose 2.6 percent less food and energy over the year. The energy index increased 12.5 percent for the 12 months ending March, as a result of the Iran war.

And American consumers are already feeling it. The University of Michigan survey of consumer sentiment fell to a record low of 47.6 in April from 53.3 in the prior month.

“Consumer sentiment sank about 11% this month, extending a decline that began with the start of the Iran conflict, and is currently about 9% below a year ago. Demographic groups across age, income, and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month’s fall,” said Survey Director Joanne Hsu

It doesn’t mean consumers will shop more once they receive their Trump tax refunds. But inflation is a growth killer, and countries such as Russia or even Turkey that are experiencing one-man rule have had nothing but double-digit inflation for decades, because their leaders thought they knew better than anyone else how to run their country.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Start A War?

 Financial FAQs

“The Producer Price Index for final demand increased 0.7 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.5 percent in January and 0.4 percent in December 2025. (See table A.) On an unadjusted basis, the index for final demand rose 3.4 percent for the 12 months ended in February, the largest 12- month advance since increasing 3.4 percent in February 2025.” BLS.gov

FREDppi

Why start a war when President Trump’s tariffs are already raising the cost of everything? Because “The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money,” Trump said in a post on Truth Social last week.

Who makes a lot of money? Most Americans could be losing a lot of money over the sudden rise in energy prices it is precipitating, but not his family and oil buddies, obviously.

His thoughtless remarks have put him in a bind, which is why he is lashing out at allies and enemies alike because they don’t want to fix the damage it is causing.

Right now it is the boost it has given to wholesale inflation. The Producer Price Index for wholesale goods, imported goods in the main, is climbing again.

And the tariff question is far from settled with the Trump administration required to pay back much of the $1.4 billion in tariffs that were illegal, according to the Supreme Court.

We add to that the resignation of Joe Kent, Trump’s top counter terrorism appointment, who said Trump attacked Iran because Netanyahu told him to, not because of some imminent danger. The former Director of the National Counterterrorism Center said “I cannot in good conscience support the ongoing war in Iran. Iran posed no imminent threat to our nation”.

So with the Strait of Hormuz closed that is choking off 20 percent of the world’s oil supply from going anywhere, the PPI wholesale cost of things is now the highest since February 2025.

This is probably why Fed Chair Powell announcement after Wednesday’s FOMC meeting that there was little chance of more than one rate cut in 2026, and maybe even a rate hike if Trump can’t stop the bombing and find a way to call the bombing campaign a victory. He must also find a way to open the Strait of Hormuz, of course.

The Federal Reserve stuck to its guns that one interest-rate cut this year was likely, but stressed conflict in the Middle East made its forecast uncertain. The Fed voted 11 to 1 to leave its key rate unchanged in the range of 3.5% to 3.75%.

BEA.gov

The Fed Governors also predicted overall GDP growth of 2.4 percent in 2026, even though Q4 2025 Real GDP growth slowed to just 0.7 percent. So I don’t understand the Fed’s optimism over economic growth.

The real culprit behind slowing GDP growth is less consumer spending. Fewer consumers are holding jobs for starters, and essentials like gas and electricity prices are soaring because of the Iran war as well as the tariffs.

So, the Fed wants to lower rates further to encourage more hires but rising inflation is holding them back. And Powell at his press conference said that conditions would have to be much worse for signs of stagflation such as occurred in the 1970s with the OPEC oil embargo.

Powell and the Fed Governors were surprisingly upbeat about our economic future, which is strange when Trump has started a war he never really planned or adequately prepared for.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Gulf War?

 Financial FAQs

“From the preceding month, the PCE price index for January increased 0.3 percent. Excluding food and energy, the PCE price index increased 0.4 percent. Excluding food and energy, the PCE price index increased 3.1 percent from one year ago.” BEA.gov

FREDBrentcrude

Oil prices spiked again on Thursday morning (to $94.35 per barrel) per the above graph on Brent crude oil prices, after Iran’s new leader said the crucial Strait of Hormuz should remain closed and that Iran will continue attacks on its Gulf neighbors,.

And the Fed’s favored inflation index, the Personal Consumption Expenditures core rate of inflation, which omits food and energy, rose by 0.4%. The core rate rose 3.1% in the 12 months ended in January, up from 3.0% in the prior month. It’s the highest rate in almost two years and decidedly not what the Fed wanted to see.

So, this is causing all the financial market indexes to plunge once again as it’s becoming increasingly obvious that Trump has no good reason for attacking Iran that is now morphing into another Gulf War.

“The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” said the IEA in its March report released on Thursday that was cited by MarketWatch. Disruptions in the Strait of Hormuz have caused Gulf countries to cut total oil production by at least 10 million barrels per day, the energy body added.

So why shouldn’t President Trump’s new Gulf War repeat the 1970’s Arab Oil Embargo (OPEC) stagflation—slowing economic growth + higher inflation—that caused several recessions and resulted in the double-digit inflation of the era, I said last week.

I’m not the only one bringing up the similarities to 1970’s stagflation. Nobel economist Joseph Stigliz, a Clinton economic advisor who won the Nobel prize for economics in 2001, said in a podcast interview with Jack Farley of “Monetary Matters” released on Wednesday, that “We are facing a risk of stagflation with prices going up because of tariffs and war while growth is slowing.” The 92,000 nonfarm payrolls contraction in February was evidence for the slump in economic activity, he said.

And it’s beginning to show up in slower GDP growth. Real gross domestic product (GDP) barely increased at an annual rate of 0.7 percent in the fourth quarter of 2025, revised downward from 1.4 percent, according to the second estimate released today by the U.S. Bureau of Economic Analysis. In the third quarter, real GDP increased 4.4 percent.

BEA.gov

Oil prices had spiked earlier in June 2025 to $80 per barrel because of the short-lived Israel-U.S. strikes on Iran’s military and nuclear facilities. That should have been a warning of the potential economic damage from a longer war.

The other shoe to drop will be job creation. We are already in a stagnant job market with the loss of -92,000 jobs in February that basically erased the +126,000 job gain in January. Further losses are being hinted at by other indicators, such as the government’s JOLTS report that has shown no net growth in new hires for months.

It’s becoming more obvious that President Trump’s seeming incoherence over the reasons for his new Gulf war is hiding the real reason he started another Gulf War that he blurted out recently:

“The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money,” Trump said in a post on Truth Social.

The sad truth is that Trump and his oil buddies are profiteering from a war that Americans, and much of the world, will end up paying for.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Stagflation --II?

 Financial FAQs

“The Producer Price Index for final demand increased 0.5 percent in January. Prices for final demand services advanced 0.8 percent, and the index for final demand goods declined 0.3 percent. On an unadjusted basis, the index for final demand rose 2.9 percent for the 12 months ended in January.” BLS.gov

FREDbls

Why shouldn’t President Trump’s new Gulf War repeat the 1970’s Arab Oil Embargo (OPEC) stagflation—slowing economic growth + higher inflation—that caused several recessions and resulted in the double-digit inflation of the era?

Iran has said it is closing the Gulf of Hormuz. It has been producing three million barrels of oil daily, has 24 percent of Middle East oil reserves and 12 percent of world reserves, and 30 percent of the world’s oil supply goes through the Gulf, according to the U.S. Energy Information Administration.

Though oil is not as important and energy source now as it was then, says Paul Krugman in Substack, it will still cause higher energy prices—maybe 10 percent higher or more, according to the experts—and oil and gas prices are still a major factor in the inflation equation.

The Producer Price Index measures wholesale prices for products and services that go into finished products have been rising throughout last year. So it is the first place economists look to see the direction of inflation.

Wholesale inflation is surging in large part because it measures the import prices of the raw materials, such as auto parts, that have been boosted by Trump’s tariffs.

Defense Department Secretary Hegseth was quick to say in the first press conference that the Iran war wouldn’t be a repeat of the Iraq war that would mire US in another long war.

But the 1970’s era of stagflation was caused by more than scarce oil. Labor unions were stronger then and could lobby for higher wages to pay for the higher prices, which in turn kept inflation rising in a wage-price spiral until it reached an eye-watering 14 percent

And we have a similar labor problem today. Workers can lobby for higher wages today because there are fewer of them in the workforce. Trump is deporting many of the undocumented workers that work in construction and agriculture, and many of the rest of the estimated 11 million are hiding rather than going to work. Also AI, CHAT GBT, and the like are causing more layoffs at major employers such as Amazon, for starters, further shrinking our workforce.

The irony is that the massive investments in building out the AI energy centers is already making electricity more expensive as well as putting more white-collar employees out of work.

This means fewer consumers are shopping when 70 percent of GDP growth is generated by American consumers! So, I see slowing economic growth as well.

A declining workforce pushing for higher wages that faces higher oil, gas and electricity prices will put more pressure on inflation, and could lead to the classic wage-price spiral that was the ultimate cause of 1970’s stagflation. This is while Trump is saying the Iran war could last just weeks?

The DOW Index has plunged more than -1100 points at this writing on fears the war will spread throughout the Middle East and beyond.

So, our stock market’s behavior will probably determine how long our TACO President will want to prolong this war.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why the Inflation Confusion?

 Popular Economics Weekly

Most pundits (and propagandists) don’t know who to blame for ‘sticky’ inflation, so they blame those who haven’t caused it—such as the current administration or the Federal Reserve.

But the sudden rise in prices was caused by supply shortages and empty shelves from the COVID pandemic and lockdowns that followed. And this happened in all countries. Now add to this several wars that have disrupted more supply chains, including a developing cold war with China, and global warming which is causing massive droughts and floods that have disrupted food supplies and displaced whole populations.

Leading economists, such as Nobelist Paul Krugman, have said the Fed with its policy tools can’t bring down prices in most sectors, just slow the rise in prices, which it has done so that inflation is now rising much more slowly.

It would take another full-blown recession and the loss of millions of jobs to cause prices to return to pre-pandemic levels, as has happened in every other recession portrayed in the FRED graph from 2000 (gray bars are recessions).

FREDcpi

It happened during the brief pandemic recession, for instance, when retail CPI inflation fell to zero percent in May 2020 and everyone out of work before rising to 9% in June 2022, and the earlier Great Recession when retail price inflation fell to a negative -2% in 2009, with the loss of more than 8 million jobs.

The worldwide pandemic lockdowns and supply chain stoppages were the most obvious cause of the supply shortages that brought on inflation rise to 9% in 2022, and steady decline of inflation since then as supply chains opened again to bring it down to the present seasonally adjusted 3.5% inflation rate.

It’s not easy for discontented consumers to blame the worst pandemic in 100 years for the sticky inflation figures because the COVID pandemic was such an unusual event that the trauma of one million US deaths has been quickly forgotten.

And it’s just as difficult to for consumers to imagine how the Middle East and Ukraine wars can disrupt oil and food supplies, as well as that due to global warming.

What is the best answer to this dilemma of higher prices and looming supply shortages? Faster economic growth, which the Biden administration with some bipartisan assist is doing with its New, New Deal Bidenomic policies that have employed millions.

The CHIPS Act is bringing back manufacturing jobs, the Inflation Reduction Act is countering global warming by funding alternative energy sources to fossil fuels, the Infrastructure and Jobs Act is spending $1 trillion to fix our infrastructure and projected to create more than 2 million jobs over the next decade.

But it requires consumers to think of its future benefits to know that we are in a better place, and can positively answer the question, are we better off today than four years ago?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why the Irrational Exuberance In Such A Dangerous Year?

Financial FAQs

Wrightson.com

We are now living in a much more dangerous world, because there is the possibility of war in the Middle East that is accompanying the various trade wars waged by the “Make America Great” White House.

In fact, it may have already begun with the “revenge” missile attacks by Iran against two Iraqi military bases housing U.S. personnel—though no casualties were reported. My wonder is that stocks are rallying on the news, with the DOW Jones up 200 points at this writing. Have stockholders forgotten the irrational exuberance reigning during Fed Chairman Greenspan’s tenure in the last decade?

It was such that Greenspan, et. al., raised the Fed’s interest rates 16 times (a total of 4 percent) over 2 years, which ultimately led to a busted housing bubble and the 2017-19 Great Recession that hasn’t been a full recovery for the majority of Americans.

In fact, median household incomes are still at 1970’s levels when inflation is subtracted, because most of the growth has been in stocks owned by just 50 percent of households, not with the wages and salaries of working folk. Hence the record income inequality that isn’t getting better, even at full employment.

And what if stocks plunge again as during the Great Recession that lost an estimated $9 trillion in value, with housing values also declining almost as much (the mainstay of middle class wealth)?
Greenspan had held rates too low for too long to finance the Bush/Cheney Iraq and Afghanistan occupations while cutting taxes at the same time, resulting in rising inflation and the largest federal budget deficit of the time.

In fact, we seem to be at the beginning of another period of irrational exuberance. The Fed dropped interest rates three times last year to boost slowing economic growth.

Manufacturing activity has been declining for the last five months, per Reuter’s Wrightson ISM Manufacturing Index graph above, mainly due to the various tariff hikes that bumped up prices on European and Chinese imports.

The service industries have been declining from a higher level of activity to the current 55 percent, reflected in the latest ISM non-manufacturing survey (also see graph, where a 50 percent result of those surveyed means breakeven growth).

“The upside surprise (of non-manufacturing survey) was almost entirely due to the subjective general business activity index, which rebounded by nearly six points to 57.2,” said Reuters.  “The employment and new orders indexes both fell.  The drop-off in employment was minimal (down 0.3 to 55.2), but the orders index fell off noticeably (down 2.2 points to 54.9, versus an annual average of 57.5). ”

Also important is the effect on world oil prices and economic growth in general, as I said in my last column, since the only reason the U.S. economy is continuing to grow is the very low inflation coupled with very low, recession-level interest rates. And that can’t be maintained if oil prices spike for some reason.

FRED.gov

We are skating on thin ice, economically, as I said, even if oil prices and inflation don’t spike as they did during the early and mid-2000s. Oil may not be as important, but 39.7 million Americans still live at or below the U.S. poverty level, which is $21,300 for a family of three in 2017, per the U.S. Census Bureau, and median household incomes after inflation are not improving.

So the real question is why on earth did the U.S. kill Iran’s leading general and several Iraqi militia commanders at a time of recovery from the Great Recession, slowing worldwide growth, amid growing geopolitical uncertainty?

It has to be another form of irrational exuberance held by certain parties that believe this will make America Great Again, but without the friends and alliances that made America great until now.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

2020—A Year of Living Dangerously

Popular Economics Weekly 

FRED.gov

There is plenty of speculation on the effects of killing Iran’s Quds Force General Qassem Suleimani. Of course the first question is how Iran will retaliate? But terrorist attacks by its proxies, such as Iraqi militias that were bombed by the U.S., should be the least of our worries.

More important is the effect on world oil prices and economic growth in general, since the only reason the U.S. economy is continuing to grow is very low inflation coupled with very low, recession level interest rates. And that can’t be maintained if oil prices spike for some reason.

Texas intermediate crude prices per barrel stayed in the $100 per barrel range from 2011 to 2015, per the above FRED graph, before coming down to the $50-$60 range in 2015. It was a major reason economic growth hasn’t risen above 2 percent this decade.

I say recession-level rates, since current interest rates were last this low during the Great Recession. The Federal Reserve had to lower interest rates three times last year to boost growth since the manufacturing component has been shrinking for the past 4 months, according to the ISM’s Manufacturing survey.

Wrightson.com

We are skating on thin ice, economically speaking. There were dangerous signals in 2018 when the Fed was raising interest rates to slow down what it saw as incipient inflation and had to reverse course. The stock market plunged, because money was no longer cheap, and it raised fears of such a oncoming recession.

So the unique combination of low rates plus low inflation has kept the U.S. growing in the 11^th year of this recovery from the Great Recession, which is the longest post—World War II recovery on record.

But past history has shown low inflation and interest rates cannot last forever. In fact, as the above FRED CPI retail inflation graph shows, the Federal Reserve has been more than proactive on keeping inflation at the 2-2.5 percent range since 1980, when it reached 12.5 percent because of soaring oil prices in the 1970s 

Anyone remember the Arab oil embargo and long lines at gas stations when OPEC cut off oil supplies to the U.S.?  The result was back-to-back recessions in 1981-82, and another recession in 1991 during the Desert Storm invasion of Kuwait, and just before the 9/11 Trade Center bombings.

The question may not be skyrocketing oil prices now, since the U.S. in now domestically producing more than 7 million barrels per day. But economic growth is already slowing with the tariff wars that have cut foreign trading by almost 25 percent, the UK’s Brexit battle, and now a possible Middle East war. Iran has many ways to create more trouble.

Then why has the U.S. been killing Iran’s leading general and Iraqi militia commanders in the recent drone attacks? Reuters is reporting that Iran-backed militias had already been planning attacks on U.S. installations and civilians with advanced weaponry brought in from Iran.

Whether such intelligence is true or not, a new Middle East war may have already begun.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen