"The BAD Stage of Inflation Has Officially Hit"
by Phoenix Capital
"The BAD stage of inflation has officially hit. As I have noted previously, inflation enters the financial system in stages. The first stage involves a jump in prices paid by producers. This means that those firms responsible for manufacturing goods and services suddenly see a sharp spike in the cost of the basic materials they use to build/ manufacture finished products. That process began in early 2016 and accelerated throughout 2017 into this year.
The next round of inflation… the BAD one… occurs when these prices remain elevated long enough that firms are forced to raise the prices of their finished goods/ services in order to maintain profits. The BIG tell on this is when you start seeing wages jump. This means that the cost of everyday items is rising fast enough that employees start demanding raises in order to maintain their quality of life.
We have officially hit that point with Year over Year wages jumping 2.9% in the first quarter of 2018. This is the largest jump since 3Q08, when the US was completing a MASSIVE credit cycle and about to plunge into the worst recession in 80 years.
Put simply, inflation has officially seeped into the economy in a MAJOR way. We are now at the point at which wages are rising... and the Fed is hopelessly behind the curve. Small wonder the bond market is blowing up. Bond yields rise along with inflation. Does this chart look like inflation is "contained" to you?”