Costco's Iconic Hot Dog

Around lunch time there are customers who come into Costco just for the hot dog. The hot dog and soda combination costs $1.50, the same price when it was first introduced in 1984. While the direct cost of the material ingredients could possibly be less than $1.50, Costco undoubtedly experiences a loss once one includes Food Court labor, utilities, and the capital cost of the equipment and space.

Instead of a cost-based approach, the Chronicle estimates what the price would be if it had merely kept up with inflation:

What’s still a $1.50 hot dog and soda would be setting you back well over twice as much: $3.96.

..The $1.50 hot dog deal is more about marketing than money-making, said Martha Gimbel, the executive director of the Yale Budget Lab.

“There’s so much that is changing right now in our world. Everything feels very uncertain. It sounds kind of silly, but you can rely on the fact that Costco has a hot dog for $1.50,” she said...

It’s still a soda and a hot dog, but the dog is now made by Kirkland Signature instead of Hebrew National. They were first sold at carts, then in an area dubbed “Cafe 150” (named for the price), though it’s now just known as “the Costco food court.”

At one point, the food court sodas at Costco came in cans from vending machines, but Costco switched to fountain soda to save money....And this summer, the retailer shifted from Pepsi back to Coke in yet another cost-saving move.

Even at $3.96 I would still buy the combo, but the $1.50 hot dog and $4.99 rotisserie chicken have become iconic. They're also a lifeline to those on a shoestring budget, so kudos to Costco for holding fast.

The Safer Haven

We've talked about how bad the stagflation was during the late '70's and early '80's, but don't take it from me. Here's what Federal Reserve history has to say: [bold added]

The economy was already in weak shape coming into the downturn, as a recession in 1980 had left unemployment at about 7.5 percent. Both the 1980 and 1981-82 recessions were triggered by tight monetary policy in an effort to fight mounting inflation. During the 1960s and 1970s, economists and policymakers believed that they could lower unemployment through higher inflation, a tradeoff known as the Phillips Curve. In the 1970s, the Fed pursued what economists would call "stop-go" monetary policy, which alternated between fighting high unemployment and high inflation. During the "go" periods, the Fed lowered interest rates to loosen the money supply and target lower unemployment. During the "stop" periods, when inflation mounted, the Fed would raise interest rates to reduce inflationary pressure. However, the Phillips Curve tradeoff proved unstable in the long-run, as inflation and unemployment increased together in the mid-1970s. While unemployment trended down slightly by the end of the decade, inflation continued to rise, reaching 11 percent in June 1979 (Federal Reserve Bank of St. Louis).

(WSJ graph)

In 1971 Richard Nixon canceled the convertibility of dollars to gold under the Bretton Woods system, which had been in place since 1944. The delinking of the dollar from gold and the combination of inflation and unemployment unprecedented since the Great Depression made it a period of maximum economic uncertainty. The gold price spiked from the $35/oz. under Bretton Woods to a high of $850 by the end of the decade.

The gold market is spiking again. In fact it Hasn’t Rallied This Much Since 1979. [bold added]

A modern-day gold rush is stretching from Costco store aisles to underground vaults in London to the flickering screens of Wall Street. Old jewelry now glimmers with potential dollar signs.

Gold’s value has ballooned by 40% this year, putting it on track for a greater annual price jump than during the depths of the Covid-19 pandemic or 2007-09 recession, according to Dow Jones Market Data. Futures for the precious metal haven’t surged so much in a year since 1979, when a global energy crisis fueled an inflationary shock that thrashed the world’s economy.

Costco 1 oz. buffalo gold piece

These days, it isn’t a financial meltdown that is drawing people to one of the original market refuges. The recent run-up to record prices—reaching $3,682.20 a troy ounce on Monday—instead stems in part from the White House, with investors big and small rushing to shield themselves from an uncertain outlook for the U.S. economy and its role in the world.

A lot has changed in the past 50 years. What hasn't changed over the centuries is that people flee to gold in troubled times.

High Electricity Rates: the Policies Californians Voted For

(Photo from CalMatters)

California's push toward clean energy has resulted in the second highest electricity rates (behind Hawaii) in the nation: [bold added]

“California’s electricity rates are among the highest in the country,” the Legislative Analyst’s Office reported. “On average, residential electricity rates in California are close to double those in the rest of the nation.”

The increase in electricity bills has been nothing short of shocking, especially when compared with the overall inflation rate.

“Average residential electricity rates in California have grown faster than inflation in recent years, rising by about 47% over the four-year period from 2019 through 2023 compared to overall growth in prices of about 18%,” according to the report from the Legislative Analyst, a nonpartisan group that provides the state Legislature with advice and information.

The report blames:

— significant and increasing wildfire-related costs.

— the state’s ambitious greenhouse gas reduction programs and policies.

— differences in utility operational structures and services territories.

These causes are the result of man-made policies, which means that California is getting in the way of its own green ambitions. High electricity prices discourage drivers from turning in their gas-powered cars, and homeowners from switching out their natural-gas furnaces, stoves, and water heaters. (For the record I'm not getting rid of my fossil-fueled cars and appliances unless they can't be fixed.)

They shouldn't be too upset because Californians are getting the policies they voted for.

James Earl Carter, Jr. (1924-2024)

Former President Jimmy Carter, 100, has died:

The 39th president’s sole term in office was marred by a listless economy and stubborn inflation, squabbles within his party, gridlock in Congress and the seizure of American hostages in Iran. Considered a long-shot Democratic candidate when he announced his bid, Carter would broker a historic peace treaty between Israel and Egypt and set in motion other changes that would dominate global politics in subsequent years.

Many of the achievements for which he was recognized came after he left office in January 1981. He was the most active former president in modern U.S. history, gaining renown for work over four decades monitoring elections around the world, fighting neglected diseases, working to raise living standards for the poor and advocating for human rights. He did much of this work through the Carter Center, the humanitarian nonprofit he founded with his wife, Rosalynn Carter, in 1982.

“Jimmy Carter will probably not go down in American history as the most effective president. But he is certainly the best ex-president the country ever had,” said Gunnar Berge of the Norwegian Nobel Committee in his 2002 speech presenting Carter with the peace prize.

Because of the Iran hostage crisis and moribund economy during his term, Jimmy Carter's Presidency is poorly regarded. But there were some positives:

But he had some notable successes in foreign affairs, including the Camp David Accords. Signed with Israeli Prime Minister Menachem Begin and Egyptian President Anwar Sadat, they reshaped the Middle East by bringing a lasting peace to two hostile nations. And domestically, the president was able to push deregulation of airlines, railroads and other industries. He signed a law establishing the Energy Department to regulate existing sources of energy and fund research into new sources and other technologies.

If there's one thing that I remember about President Carter, it's his outspoken Christianity. He was mocked by the Eastern cognoscenti for the Playboy "lust in my heart" interview:

"I've looked on a lot of women with lust. I've committed adultery in my heart many times."

In his defense he wasn't saying anything that most red-blooded American males didn't identify with, but back in the '70's one just didn't talk about such things in public. To his secular supporters he had committed an unforced error by bringing up one of the central struggles of being an evangelical Christian---that God judges men not by their actions but by what is in their hearts:

“You have heard that it was said, ‘You shall not commit adultery.’ But I tell you that anyone who looks at a woman lustfully has already committed adultery with her in his heart.---Matthew 5:27

Jimmy Carter spent his post-Presidency showing everyone what it was like to walk the walk over more than four decades. He and Rosalynn lived humbly in Plains, GA and gave generously of their time and money to philanthropic endeavors.

IMHO, Jimmy Carter's failures provide the answer to a question that journalists liked to ask during the recent Presidential campaign: "How can Christians vote for a rapist, serial liar, and convicted felon?" The answer is obvious: we elected a saint once before, and look where that got us. R.I.P.

Ramen Surprise

Three months ago we wrote about how the tonkatsu ramen purchased at Nijiya Market had soup that came in a plastic bag.

Perhaps enough customers complained to cause the supplier to eliminate the plastic bag; when I emptied the contents into a bowl, the gelatinized soup was on the bottom. (The soup was no longer liquid; the formula obviously had been adjusted.)

The other change was a 30% increase in the ramen price, from $9.99 to $12.99. I thought food-price inflation was over!

HENRYs

In 1980 the "young urban professional" (YUP-py) was identified as a significant cohort, and ensuing demographic acronyms have never stopped coming.

DINKs (double income, no kids), BOBOs (bourgeois bohemians), WEIRD (Western, educated, industrialized, rich, and democratic) all have had their place in the sun. Now there are HENRYs (high earner, not rich yet). [bold added]

Fifteen years ago if you’d told April Little that she’d make $300,000 a year, she would have pictured a life free of financial stress.

“The white picket fence—I have the whole visual in my head,” says Little, 38 years old, a human-resources executive turned career coach in Rochester, N.Y. “I don’t want to sound ungrateful, but when I got to that proverbial mountaintop I realized there’s a lot of expenses. And I still don’t own a home.”

So go the plush-but-not-too-plush lives of the Americans who qualify as HENRY—high earner, not rich yet.

Little makes multiple six figures running her own business but carries $90,000 of college and grad-school debt. Child care and education for her three children would be so costly that she and her husband decided the better option was for him to leave his radio job to parent and home-school full time.

New census data show 14.4% of U.S. households bring in $200,000 or more a year, a near record. Yet the money doesn’t have the buying power those earners wish it did, partly due to the rising prices hammering us all and partly due to the supercharged costs of things like houses and cars. HENRYs describe feeling stuck on a hamster wheel—a nice one that other hamsters envy—but running in place nonetheless.

Oh come on, you’re thinking. You’re asking me to feel sympathy for Audi-driving, Chase Sapphire-loving, Whole Foods-shopping consultant types with kids in private school?

Well…not exactly. But what they’re feeling is a version of what a lot of Americans at every income level face—making more money but not feeling like there’s a surplus. The essence of being a HENRY is feeling a gap between what you have and what you think you need to be comfortable.

What these high earners consider essentials might be termed luxuries (or nonsense) by the rest of us, but it’s also true that it takes more money to feel rich these days. And their great fear is becoming a HENRE: high earner, not rich ever.

The outlays for housing, private schools, transportation, and health care, not to mention education indebtedness, are often underestimated by 20- or 30-year-olds who think they have made it with a $200,000+ starting salary.

Even HENRYs whose futures look bright can't relax, since the loss of their high-paying job could be disastrous.

Speaking from the experience of being a previous generation's HENRY, I had visions of being able to quit when I was 40 but didn't achieve that psychological comfort zone until I was in my mid-60's. Hard work and technical abilities, while necessary, were IMHO not as important as finding a trustworthy life time partner and keeping one's health. (Having a little luck helps, too.)

The Spam Indicator

Costco and Hormel are again running their semi-annual Spam sale.

In March the sale price on an eight-pack was $22.99-$5.00=$17.99.

This month both the list price and the discount are a dollar higher, so the net price is the same ($23.99-$6.00=$17.99). At $2.25 per can, the sale price was the same as it was in October, 2022.

If I were part of the Biden-Harris Administration I would trumpet this as a sign that food inflation has abated, but I doubt that many of them purchase canned luncheon meat, and even fewer track its prices.

The Trump Tariffs

Republican Senators greet Donald Trump in DC (WSJ)

Donald Trump's tariff proposals--and their acceptance by the Republican Party--show how far Republicans have strayed from their free-trade principles. [bold added]

Trump floated the idea of an all-tariff federal revenue system, large enough to replace the income tax, during a morning session with the House GOP, according to a GOP lawmaker in attendance.

The presumptive GOP presidential nominee has consistently supported higher tariffs as a way to protect domestic industries. He has long backed income-tax cuts, including extensions of the ones he signed in 2017. An all-tariff approach would combine the two stances and take them to the extreme, reversing more than 100 years of economic policy that encourages free trade and requires higher-income households to pay higher tax rates than the middle class. Such a return to 19th-century fiscal policy could amount to a tax cut for high-income people and, effectively, a tax increase on consumers, who would pay tariffs passed along to them in prices.

Economic theory teaches that barriers to trade, such as tariffs, make one's own population worse off because they have to pay more for imported goods. Tariffs are typically justified to protect the home industries that cannot compete on price with imports.

One problem with tariffs is that other countries retaliate by imposing tariffs of their own. For example, a tariff on Chinese electric vehicles (President Biden proposes 100%, while former President Trump wants 200%) will likely result in Chinese tariffs, which they have imposed in the past, on American agricultural products. As retaliatory tariffs escalate, perhaps bringing in other countries, a trade war results, impoverishing everyone.

Another problem with tariffs is that domestic industries become dependent. They exert political pressure to keep tariffs in place instead of raising their own game, making it likely they will never be competitive in world markets.

One of Mr. Trump's strongest arguments for his election is that inflation will return to the much lower level of his first term. Broadly increasing tariffs will raise the general cost of living and torpedo that goal. If he is elected, let's hope that his economic advisers will talk him out of widespread use of tariffs and restrict them to products like EV's that Americans don't seem to care about.

One Sign That Inflation is Abating

Spam is on sale again at Costco. At eight cans for $17.99, it's the same price as it was 17 months ago.

For comparison sake pre-COVID prices were $14.99 in 2019 and $13.99 in 2018.

Inflation is abating, but hopes for disinflation back to 2019 price levels is not going to happen any time soon. But that's ok. I have plenty of Spam to tide me over.

Inflation Freak-Out

(Lyceum photo)

A century ago the Wall Street Journal was mostly read in wood-panelled drawing rooms by pipe-smoking men in grey flannel suits.

It was a serious newspaper that covered serious matters in a pedantic style that was far removed from the subject matter and colloquial language of popular newspapers and magazines.

How times have changed. Here's the headline in today's WSJ on the subject of inflation:

(Psychology Today image)

The U.S. Consumer Is Starting to Freak Out

The person-on-the-street examples that the article cites show that working-class people are living on the edge. [bold added]

Recent layoff trends worry Benjamin DeLong, a 32-year-old customer-account manager at an industrial manufacturer in southern Minnesota. His savings rose to $3,700 during the pandemic, thanks in part to government stimulus. He is now down to about 3 cents.

Don't you just love the "about" in front of "3 cents"?

The large stock-market declines over the past year also alarmed consumers, including Scottsdale, Ariz.-based Sara Laor, who is 57 years old. Ms. Laor said the declines depleted the holdings in her 401(k) and IRA accounts by nearly 40%.

Over the past year, her family has had to dip into their savings to pay for essential car and plumbing repairs. They are putting off other expenses, like buying a new car, and have given up ordering in meals.

She’s trying to spend more cautiously, shunning recipes involving pricey eggs and buying more canned food.

Well, at least the writer doesn't report that thousands of Americans are eating dog food, as this 1975 NY Times article said occurred during the Ford and Eisenhower Administrations (but not from the Kennedy and Johnson Administrations where the phenomenon was supposedly absent).

Jazzlyn Millberry, 33, has been looking for big ways to make cuts. One day last fall, her banking app informed her that the cost of one month’s groceries and household goods for her family of four had risen to $900, from about $600 or $700.

“I find myself now going to three or four different grocery stores just to get the best deals on things to save on costs,” said Ms. Millberry, a health-insurance claims analyst in Pickerington, Ohio.

The rosiest economic scenarios show inflation tapering (but not going to zero), and workers being lucky to maintain their pay instead of being laid off. The lower gap between income and expenses will last years, leaving little margin for error.

Now that I think of it, when the inflation squeezed us during the late 1970's and early 1980's I was a little freaked out, too.

Off the Tendon Train

2021: beef tendon was $6.99 / pound at 99 Ranch

Economists say that changes in the Consumer Price Index overstate inflation:

[the CPI] omitted consumer substitution [bold added], did not fully account for quality change, and failed to properly reflect the addition of new goods.

Last year the skyrocketing price of steak prompted me to experiment with cheaper cuts, such as brisket, and even specialty cuts like tendon and tripe.

Tendon itself had increased from $5 a pound to $6.99 (pictured), but on a relative cost basis it compared very favorably to $12 steak. Buying tendon instead of rib eye is a textbook example of consumer substitution.

I went to the store last month intending to cook and freeze another batch of tendon, which can not only be delicious when prepared properly but is also a source of collagen that strengthens aging joints.

The $10.99 price, 57% higher than last year, stopped that plan in its tracks.

And so it was that I got off the tendon train and switched to steak. Substitution circled round; I wonder if economists have a name for that.

Simplification Will Have to Wait

$10,000 will earn $481 interest in 6 months. Then $10,481
will be re-invested at a projected 6.47% p.a. for the next six.

Now that we're scratching for yield on our savings accounts, I took another look at I-bonds. The 9.62% rate on a "risk-free" investment outweighed the drawbacks: a $10,000 per year limit on new investment and an interest penalty if the funds are withdrawn before five years.

The excess return over our bank savings and money market accounts was there for the taking. Though limited to several hundred dollars per year, your humble blogger couldn't pass it up. The long-term project to consolidate and simplify our financial picture would have to be delayed yet again.

Note: after the break, WSJ experts explain I-bonds.

The Spam Signal

The Federal Reserve looks at thousands of data points to determine whether inflation has peaked. I need just one.

After 3½ years Costco has resumed its semi-annual Spam sales. While the sale price of $17.99 for eight cans was 28% higher than it was on March, 2019, Hormel's $5 price cut must have indicated a supply-demand return to normalcy. I stocked up, and I'm good through 2025.

Chairman Powell, you can stop raising interest rates. Spam has issued its signal.

Benefits and Costs

A traditional life has benefits:

Inflation Widens Married Couples’ Money Lead Over Their Single Friends
[bold added]

The median net worth of married couples 25 to 34 years old was nearly nine times as much as the median net worth of single households in 2019, according to the most recent data from the Federal Reserve Bank of St. Louis.

In 2010, married households’ median net worth was four times as much. And now, after a spell of rapid inflation and more than two years of pandemic living, single people are getting left further behind, say economists at the Fed and elsewhere.

A traditional life has costs:

It Now Costs $300,000 to Raise a Child

The cost of raising a child through high school has risen to more than $300,000 because of inflation that is running close to a four-decade high, according to a Brookings Institution estimate.

It determined that a married, middle-income couple with two children would spend $310,605—or an average of $18,271 a year—to raise their younger child born in 2015 through age 17. The calculation uses an earlier government estimate as a baseline, with adjustments for inflation trends.

The multiyear total is up $26,011, or more than 9%, from a calculation based on the inflation rate two years ago, before rapid price increases hit the economy, the Brookings Institution said.

Note that the cost does not include college tuition and expenses, which currently total $142,000 for an average four-year degree. A private college diploma costs over $200,000.

The benefits are in doubt while the costs are certain. Married-with-children may be tradition, but it is likely to be the life led by fewer Americans.

It's Very Clear

Consumer sentiment, which tracks inflation, and consumer
confidence, a jobs-based indicator, both fell in 2022 (WSJ)

Following up on yesterday's post on the prices I've been seeing at the store and at the pump, this morning's inflation report confirms that inflation is "easing":

U.S. Inflation Eased Slightly to 8.5% in July

U.S. inflation eased slightly but remained close to a four-decade high in July despite cooling energy prices.

The Labor Department on Wednesday reported that the consumer-price index rose 8.5% in July from the same month a year ago, down from 9.1% in June. June marked the fastest pace of inflation since November 1981. The CPI measures what consumers pay for goods and services.

Core CPI, which excludes often volatile energy and food prices, held steady in July, increasing 5.9% from the same month a year ago, a sign that broad price pressures remain in the economy.

Because these reports are based on recent historical data, they don't necessarily capture what is going to happen.

There are moderating trends in real estate. In June we pointed out the dramatic negative effect that interest rate hikes can have on housing prices. In the Bay Area we have seen seller markdowns, fewer bids on listings, and houses being pulled from the market.

We're hopeful, but don't break out the bubbly. Barring a severe recession, the overall price level will not be dropping. In fact, Fed Chairman Powell's goal is to get inflation down to "the Fed’s 2% target within a couple of years." With apologies to the Gershwins, it's very clear high prices are here to stay.

Prices Dropping to a Higher Plateau

A regular shopper at Costco, I was taken aback by the sight of Charmin toilet paper on sale.

Palettes and shelves of toilet paper had fluctuated between empty and threadbare since the beginning of the pandemic, and the markdown gave hope that the balance between production, inventory, and demand had somewhat normalized.

However, the sale price of $19.49 was about 10% higher than the comparable sale price at the end of 2019.

The price level of toilet paper, in fact everything, appears to have reached a higher, permanent plateau.

We were pleased to see that gas had dipped below $6 a gallon at the end of June. During our round trip to Seattle at the end of July the cost in California was $5.20, while in Washington it ranged between $4.50 and $4.80. In the Bay Area this week we paid $4.95 (picture).

I like the downward trend, but I doubt we'll ever see the $3.20/gallon we paid at the end of 2019 in a "normal" economy or the $2.80 at the end of 2020 when activity had slowed to a crawl. Like I said, a higher, permanent plateau.

A Wealthy State of Mind

One way for a San Franciscan to become wealthy: leave.

San Francisco residents say they need $5.1 million (including the net value of their home) to feel wealthy: [bold added]

Respondents to the 2022 Modern Wealth Survey said it will take an average net worth of $5.1 million to be considered wealthy in San Francisco in 2022, compared to $3.8 million in 2021 — that’s an increase of 34% in one year, and more than double the national average. In 2020, respondents said it took $4.5 million to feel wealthy in San Francisco. The nationwide average also increased from 2021 to 2022, but by only 15%.

To be “financially comfortable,” a San Francisco resident would need a net worth of $1.7 million, versus $1.3 million in 2021 and $1.5 million in 2020. Nationwide, respondents said it takes $774,000 to be financially comfortable.

Being financially wealthy is subjective. For us it wasn't a specific number. We got there a few years ago when income exceeded expenses and appeared that it would for the foreseeable future, even allowing for emergencies. It helped a lot that we have a middle-class lifestyle and that the house was paid off in 2016.

A good chunk of our assets is in the stock market, which has fallen by 21% in the first half of 2022, the worst drop since 1970. We're being squeezed on the other end, as inflation over 8% has caused expenses to rise alarmingly.

I'm beginning to feel nervous....and not so wealthy.

Will the Dip Stick?

For the first time in a month, I paid less than $6 a gallon for gasoline.

This could be one of those good news/bad news moments, the good being that gasoline prices have peaked, and the bad being that a recession is becoming more probable.

Headline: Consumer Sentiment at Record Low Is Another Ominous Sign for Economy

The University of Michigan’s gauge of consumer sentiment reached a final reading of 50 in June. That was the lowest reading on record going back to 1952, and down from both an initial reading earlier in the month and May’s 58.4 reading.

A souring mood for consumers, who face the highest rate of inflation in four decades, is a concerning sign because household spending accounts for about 70% of U.S. economic output. Retail sales fell in May, the first decline this year, and job and wage growth slowed last month. Economists surveyed by The Wall Street Journal have raised the probability of recession.

When consumers think that a recession is on the horizon, many will cut back their spending to build a financial cushion, all but ensuring a recession will occur. We may even see sub-$5 gas, but it won't be because more supplies are coming online but because the economy is slowing.

Interest Rates and Housing Prices

The unit is on the 2nd floor.

In yesterday's post I noted:

We are already seeing early signs of a recession with layoffs in tech and a cooling housing market (mortgage interest rates have risen above 5%).

Saturday's mail included a flyer for a new listing in a nearby development.

A two-bedroom, two-bath condo has been offered at $829,000 (pictures right) when one year ago similar units had sold for over $1 million.

But could a mortgage-rate change by itself explain a $200,000 drop in price? Yes.

The table below compares the monthly payment on a $1.02 million property versus one that costs $800,000. Both are financed with an 80% 30-year loan, the former at 3% and the latter at 5%.

The 20% down payment is $44,000 ($204,000-$160,000) less on the lower-priced example, but the focus of this exercise is the monthly payment.

(Of course, in real life a $44,000 down payment difference can be a huge factor.)

There's less than a $5 difference in the mortgage payments, confirming the effect that interest rates have on the size of mortgage loans and ultimately real estate prices.

The drop in house prices will be felt immediately after existing "loan-lock" commitments expire, and the ripple effects through construction, labor and the building materials supply chain should manifest before year end.

The coming slowdown in real estate is obvious, while the ultimate recessionary effect on the economy is unclear. Let's hope that the battle against inflation succeeds, else the cost will not have been worthwhile.

Note: below is a chart from the St. Louis Fed. It shows that mortgage rates have risen from 3.0% to 5.2% during the past year.

They Learned Nothing from the Experience

Now that's a hockey-stick (WSJ graph)

The 1970's-type inflation that we've been predicting for over a year is here with a vengeance.

U.S. Inflation Hit 8.6% in May: Energy, groceries, shelter costs drive fastest rise in consumer-price index since December 1981

U.S. consumer inflation reached an 8.6% annual rate in May, its highest level in more than four decades as surging energy and food prices pushed prices higher...

May’s increase was driven in part by sharp rises in the prices for energy, which rose 34.6% from a year earlier, and groceries, which jumped 11.9% on the year, the biggest increase since 1979. But inflation pressures were distinctly broad-based in May, said Sarah House, senior economist at Wells Fargo Securities.

“Inflationary pressures were seen nearly everywhere,” she said.

Prices for used cars and trucks—a key engine of the past year’s inflation surge—rose 1.8% in May from April, reversing three months of declines. Shelter costs, an indicator of broad inflation pressures, accelerated on a monthly basis in May and were up 5.5% compared with a year ago.

Airline fares rose 12.6% on the month, the third straight double-digit rise.

The younger folk who have never lived through high inflation may be forgiven for not seeing the warning signs, but the gerontocrats who run the country have no excuses.

But wait--it could get worse. We are already seeing early signs of a recession with layoffs in tech and a cooling housing market (mortgage interest rates have risen above 5%). The dreaded stagnation + inflation = stagflation is possibly looming. It will require skilled economic leadership to engineer a "soft landing," i.e., reduce inflation without cratering the economy.

Based on their performance so far, how would you bet, dear reader?