Episode summary
Dylan Jovine | Inflation Is How Democracies Die
Summary
Dylan Jovine argues that the latest CPI print is a warning sign for both the economy and markets. He says U.S. Consumer Price Index inflation rose to 3.8%, its highest level since May 2023, and that the move is being driven largely by higher oil prices. He adds that U.S. gas prices have risen 65% in six months and that, for the first time in three years, inflation is now outpacing wage growth, leaving consumers with less real purchasing power.
He says that environment makes rate cuts unlikely and suggests the next Federal Reserve chairman would be constrained by inflation pressure tied to the Iran war. He also walks through why energy costs matter beyond the pump: higher oil prices raise input costs for producers, then spread through shipping, factories, airlines, and consumer goods.
Jovine then broadens the argument into history and politics. He says inflation has often preceded revolutions, cites episodes like the French Revolution and the Weimar Republic, and argues that a widening gap between asset owners and wage earners can fuel social unrest. His view is that if that gap keeps expanding, people will eventually blame the system itself.
Key takeaways
- Dylan Jovine says CPI inflation at 3.8% is the highest since May 2023 and is being driven largely by oil prices.
- He says U.S. gas prices have risen 65% in six months, pushing inflation ahead of wage growth for the first time in three years.
- Jovine argues the Fed is unlikely to cut rates, and even hints higher rates could be needed to cool inflation.
- He says energy inflation feeds through producers to consumers via trucking, shipping, factories, and airlines.
- Jovine warns that a widening gap between stock owners and wage earners can fuel political instability and social unrest.
Notable quotes
“The US Consumer Price Index CPI inflation officially rose to 3.8%, which brings it to the highest level since May of 2023”
“for the first time in 3 years, US inflation is outpacing US wage growth. Meaning that it costs more, the costs are going higher, your income is staying the same”
“You don't cut rates into something like this. As a matter of fact, you might raise rates to cool things down”
“Inflation, ladies and gentlemen, I've spent my entire adult life studying history”
“the stock market has just soared. Meaning if you own assets like stocks, you've done great”
How the episode opens
Good morning. This is Dylan Jovineaux behind the markets. Happy Thursday.
Today is Thursday, May 14th. We got a bad inflation print this week. The US Consumer Price Index CPI inflation officially rose to 3.8%, which brings it to the highest level since May of 2023.
And that's largely driven by the increase in oil prices. And just for context, in 6 months, US gas prices have risen 65%. And you know what's concerning about this is for the first time in 3 years, US inflation is outpacing US wage growth.
Meaning that it costs more, the costs are going higher, your income is staying the same. It's not keeping up with costs. Or it's even going lower.
That's really not a good place to be. And there's a bunch of reasons. First of all, what does it mean?
It means that incoming Fed chairman Kevin Warsh is going to be very unlikely to cut interest rates. That would just be crazy. You don't cut rates into something like this.
As a matter of fact, you might raise rates to cool things down. But again, he's a little constrained by the fact that this is based on the Iran war. And the question is, what happens now?
Is this a temporary increase? Is it more structural? But we have the Consumer Price Index, which is the price that people like us pay for things, right?
Consumers like us pay for the water, we pay for this, we pay for my hat, whatever. Then you have the Producer Price Index, which is the price companies that sell us things, it's the price they pay for things. So let's say I need to buy leather to make this not leather, it's not even that nice.
But I need to buy materials to make this case and then sell it to people named Dylan Jovineaux.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- inflation
- cpi report
- oil prices
- fed interest rates
- wage stagnation
Watch the episode
Watch “Dylan Jovine | Inflation Is How Democracies Die” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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