Moneybeat - Policy failures and price increases

MARY REICHARD, HOST: Next up on The World and Everything in It: the Monday Moneybeat.

NICK EICHER, HOST: Financial analyst and adviser David Bahnsen joins us now for our weekly conversation and commentary on markets and the economy. David, good morning.

DAVID BAHNSEN, GUEST: Good morning, Nick, good to be with you.

EICHER: Looking at the Wall Street Journal’s “Economy” page, let me run down the headlines, from top to bottom, the first four: “Inflation to last well into next year,” “Inflation sets off alarms around the world,” “Largest cities had some of the lowest U.S. inflation rates,” “Maybe productivity will save investors from inflation.”

Again, those are the top four, skipping toward the bottom now—“Fed official sees risks of more persistent inflation,” “Fed worried about inflation risk,” “Accelerating inflation spreads.”

I think you get the picture.

BAHNSEN: Well, I don't know how anybody couldn't be talking about these price increases. I mean, it's in everybody's face. I think the stuff on the Fed is somewhat amusing because the headlines don't match what the stories say, time and time again. The people that matter at the Fed, which is essentially a person and his name is Jay Powell, has said that they believe the price increases aren't to be transitory, and very specific to the supply chain disruptions. And he's also repeatedly said that they don't believe the quantitative easing is causative in inflation. I think he's definitely right about that.

The issue, though, on the price increases, is an incredible failure of policy. I think a lot of people on the right from a political standpoint, will want to pin it on increased government spending. And they may get a little political traction out of that, although it's a wrong narrative. But the price increases that we're suffering from, I don't think American people care what's causing it, I think that they care about the fact that stuff costs more.

And to the extent that there's a supply shortage of various things that pushes prices up, when ports aren't open, running at full capacity, when ships are backlogged to get into ports to drop off cargo, when there are inadequate amount of drivers to take stuff on trucks away from ports, to take stuff to destinations, from factories, to warehouses, up and down the supply chain, most notably and felt is in semiconductors, but now really, across the board.

As you know, I have a book coming out in a couple of weeks, and I'm talking to my publisher every day, because Amazon is changing release dates on 20 titles an hour, because they're not getting into Amazon from the publishers on time as a result of this backlog. And so those things naturally push prices higher and cause incredible pain in the economy. And so it's a very real story.

It is not what people generally mean by inflation. By inflation, people usually mean the dynamic that takes place when prices go higher, because of too much money chasing too few goods. That's not exactly what's going on here. But if it looks and feels like inflation, those economic nuances aren't going to matter much to real people.

EICHER: You mentioned the supply-chain disruptions, ports not operating at full capacity: What do you think about the government’s push last week to open up the Port of Los Angeles fully to operate round-the-clock and clear out the cargo backlogs? That seemed to be the big story of the week, just saying, hey, get this port open 24-hours-a-day.

BAHNSEN: Well, of course, that port should be open 24 hours, the federal government doesn't have jurisdiction over it. So they can come in and ask them, and pretty-please ask them. And pretty, pretty pretty, please ask them. But why in the world was a port not open 24 hours already? Are there union issues? Are there other dynamics that we don't know about?

It is unbelievable to me that, given the problems we've had that didn't start this week, they started months ago. And the fact that made news that the White House was asking that port to open 24 hours, did not make news because they were asking them. It made news because I couldn't believe it hadn't been open 24 hours. And so I would imagine it comes down to labor shortage, they didn't have adequate supply of personnel to rotate the shifts that you need with 24 hours.

You know, at the end of the day, I don't think that there's one simple solution, I think it really is a calamity of errors across the board. But there's nothing the White House can do about this. They can get some press and say some things but ultimately, you have a combination of events that are gonna have to play out in a lot of different localities.

EICHER: Well, before we go, what in your view was the most important storyline of the week that we ought to be paying attention to?

BAHNSEN: I actually think you could argue it was the jobs numbers because it does feel to me now that we're getting here into October a bit, we had our lowest initial weekly jobless claims numbers it was well below 300,000—it was about 30,000 better than expected. You had the continuous claims number come in and the lowest didn't come in at. And then you saw retail sales went higher everyone expected they were going to be lower.

There's a pile-on of data now, I mean, now it's just sort of rubbing the doomsayers’ noses in it a little about how little of an impact Delta actually had on societal behavior. The Delta variant with COVID did not become the job killer did not become the economic activity killer. It definitely became fodder for a lot of I think somewhat unproductive policymaking, but it does appear that human economic activity was able to advance through COVID reasonably unscathed, and that's that's a big story for the week. And you know, it's the middle of the month but as far as weekly economic indicators go, this was a pretty good week.

EICHER: David Bahnsen, financial analyst and adviser. He writes at dividendcafe.com. David, grateful as always.

BAHNSEN: Thanks so much.

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