Will people think things will get back to normal soon, per NEC Chair Hassett (fm ABC News)?
“Well, look, in the end, people look at their wallets and they decide how to vote, and if they look at their wallets and look at how much money they have after the increase in prices, they’re going to find that they have a lot more money.”
Hassett did acknowledge high energy prices are causing a pinch but said he was hopeful that would subside soon.
“That’s extremely frustrating, and it’s something that we’re working on doing lots of different things to minimize the disruption, and hopefully again the problem of the Gulf will be over soon, and then things will go back to normal.”
I’m dubious. Expectations incorporated into a graph of the price level (in logs):
Figure 1: Headline CPI (bold black), CPI nowcast of 5/29 (black circle), implied price level from Michigan survey mean (black open circle), from NY Fed median (gray triangle), Cleveland Fed SoFIE (gray square); chained CPI, n.s.a. (green), CPI for wage earners and clerical workers (red), CPI-ex shelter (orange), PCE deflator (purple), PPI final demand (teal), PCE deflator, market prices (chartreuse), GDP deflator (pink), AIER Everyday Price Index (blue), all in logs, 2025M01=0. Source: BLS, BEA, S&P Global, AIER, U.Mich, NY Fed, Cleveland Fed, and author’s calculations.
Is Hassett on the bubble because the public is mad about the economy? I don’t remember seeing him embarrass himself this frequently earlier in the war.
Iran has resumed natural gas production at its largest field, South Pars:
https://www.aa.com.tr/en/economy/iran-resumes-gas-production-at-3-south-pars-offshore-platforms-after-wartime-disruption/3952403
While we can quibble iver whether it’s good that Iran is recovering from the war, this is good news for energy consumers.
The shutdown was caused by Israel bombing Iranian processing facilities that handle South Pars gas. Y’all remember – Israel attacked Iran’s energy infrastructure, so Iran attacked energy infrastructure elsewhere in the region. That episode did not endeared either to energy-importing countries.
Anyhow, Iran is getting around at least some of the damage inflicted during the war. I’ve seen claims that Iran is diverting natural gas to exports, replacing gas with oil in domestic markets. Not sure how much of that is possible. Gas and oil are substitutes, but not perfect substitutes, and gas pipelines only have as much capacity as they have. There is a limit to how much additional gas Iran can export in the near term. In the medium and longer term, sanctions are a big factor in Iran’s ability to boost exports. Still, word is Iran is shuffling energy resources to earn export cash.
Odd coincidence – the two countries with the largest gas reserves, Iran and Russia, both have limited exports due to geopolitics. The world’s fracking champ, the U.S., might face sharply diminished returns to fracking if Russia or Iran ever tap their reserves in a big way. Not saying that’s why they are under sanction, just that sanctions relief would be a threat to U.S. producers.
“if they look at their wallets and look at how much money they have after the increase in prices, they’re going to find that they have a lot more money.”
not sure why one would expect to have a lot more money in their wallet after an increase in prices? this is detached from reality. so I drive my gas guzzling vehicle all day, and at the end of the day it shows I have more gas than when I started? really, are these people that dumb? or do they believe their followers are that dumb?
More Hassett:
Q – “The BLS says inflation is now outpacing wage growth. How do you answer that concern?
Hassett – “That’s a technical matter. Personal income includes lots of things like transfers and food stamps that we have been reducing as part of our effort to make govt leaner and meaner.“
First off, Hassett doesn’t know what he is talking about. The question referred to BLS wages. BLS wages do not include transfers, so Hassett’s excuse of a reduction in transfers makes no sense.
On the other hand BEA personal income does include transfers, but in that case the decline is even worse. So Hassett is saying the only reason people are poorer is not inflation but because they took away peoples food stamps and Medicaid. Meaner is certainly a winning argument MAGA can rally around, eh?
The amazing thing about Hassett in these Q&As is how stupid the answers are compared to the obvious ones. For example, he could have said “A lot of recent inflation is being caused by the increase in fuel prices due to our war with Iran. When that war ends – as we expect it to very shortly – fuel prices will decrease, and those recent price changes will reverse themselves, bringing prices back down. This is the price (ha ha) we all pay for Fearless Leader’s determination to keep us safe from all those Iranian ICBMs that they were possibly thinking about maybe someday planning to make.”
Well maybe he would have modified that last sentence some. But why this nonsensical babble when something pretty much true is sitting right in front of him?