Many more people can tell you who the singer or lead guitarist of popular bands are than can tell you who played bass for the same groups.
I will cherry pick some easy examples. Most people (my age) know Mick Jagger and Keith Richards from the Rolling Stones, Roger Daltrey and Pete Townsend from The Who, Freddie Mercury and Brian May from Queen, and Bono and The Edge from U2.
However, only a true rock enthusiast could tell you that Bill Wyman, John Entwistle, John Deacon and Adam Clayton are the bass players for those bands. While not front and center, and often quiet or stoic in their demeanor, they are extraordinarily important to the music.
Try to imagine the songs 19th Nervous Breakdown, My Generation, Another One Bites the Dust, or Where the Streets Have No Name (still one of my favorite Super Bowl Half-Time performances after the events of 9/11) without the well-known and iconic base lines being provided by the musicians mentioned above. As a reminder a link to the YouTube performance from Queen is included below.
Just as bass players can have a huge but often underrated impact on classic rock songs, base effects can have a huge impact on economic measurements. Most economic measurements are done on a year-over-year basis. This means you are measuring a data point from March ‘22 against the same data point a year earlier in March ’21. The point a year ago becomes the new base.
Nowhere is this going to be seen in a bigger way over the next few months then with how we measure inflation. This is due to the fact that coming out of the pandemic, which created deflationary pressures, inflation was at a relatively low level. This is the base we will be measuring against going forward.
However, as you can see in the chart above, inflation started rising in the late spring and summer of last year. This means that as we head into the next several months, we will be measuring inflation against a rising base. This could cause inflation numbers to drop.
It is important to remember that this does not mean prices are lower, it simply means that the rate of growth of those prices has slowed. If those numbers do not start coming down over the next several months, it may be due to higher energy costs as a result of the war in Russia and Ukraine, ongoing wage pressures from employers scrambling to find workers, and from housing prices continuing to move up.
We thought it was important to share this information with you in advance, so that you can better understand the news and noise that comes from the financial media and internet over the next few quarters. It will be talked about incessantly by both economists and politicians as we move into the mid-term elections.
We wanted to give you a sneak preview of what will likely be coming to a TV set near you soon. It is important for us to stay educated and future focused as we continue “Moving Life Forward”.
© 2022 Jesse Hurst