The Central Bank Dilemma and Songwriter Cost of Living Increases

As readers will recall, I’ve been beating the drum about inflation and stagflation coming home to roost for many months, nearly a year now. These posts are in the context of the compelling need for a cost of living adjustment for songwriters’ statutory rates and the absurdity of a frozen mechanical for the booming vinyl and CD configurations which thankfully has now been rejected by the Copyright Royalty Board once and for all.

When you force songwriters to license and also force them into accepting a government rate for mechanical licensing set by a little intellectual elite in a far-distant capitol, the last thing that’s fair or reasonable is to unilaterally freeze those rates when songwriters are staring down the worst inflation in 40 years. This is particularly galling when rampant inflation was all entirely predictable and the smart people and the economists they supposedly consult with just missed the boat.

Why do I say that the current inflation was entirely predictable? I’ve promised a few times to discuss quantitative easing so here it is. As you read this post, remember that both the current story on inflation and the need to index the statutory mechanical rate started in 2008 with the Great Recession and has been coming for at least fourteen years–plenty of time to recognize that the answer to inflationary destruction of a rate songwriters are forced to accept was not to freeze the rate to make the inflationary destruction even worse. Rather, the answer was to index the rates to inflation at a minimum. Indexing would at least preserve purchasing power if the government was not willing to provide an actual increase based on value. The central bank policy known as “quantitative easing” and its corresponding zero interest rate policy guaranteed the rot of inflation was inevitable.

Printing Too Much Money

Start with the definition of inflation we all have probably heard: Too much money chasing too few goods. When you hear this, some people think of the transaction on the consumer level, as in too much consumer money chasing goods in a productivity decline, aggregate inventory mismatch or raw supply shortage.

But that’s not the fundamental question–how do you get “too much money” in the aggregate across the entire economy at the same time? The way you always do; the government increases the money supply by putting too much money into circulation. The old fashioned way of doing this was literally printing paper money, but the terribly modern digital way of doing it is called “quantitative easing” which has the same inflationary effect because it is effectively the same thing as printing paper money. (The powers that be also refer to it as “QE” like it’s a cute little puppy or a Star Wars android. It’s not so we won’t.)

The difference between old school and new school is that instead of printing money that ends up in bank accounts of those guarantors of the full faith and credit of the United States–that guarantor is the person you see in the mirror–the Federal Reserve created digital money and they gave it a Fedspeak name that conveyed no information about what was really going on. They called it “quantitative easing” which is right up there with “Department of Defense” and “late fee program” in Orwellness. It’s quantitative because it digitally creates money on the books of the Federal Reserve and it’s easing because easy money. The Fed also cut interest rates to near zero (the “lower bound”) and some would argue they essentially created negative interest rates, all in the name of financial stimulus that Congress–i.e., elected officials we vote for–didn’t vote for.

This quantitative easing started out in 2008 to be an emergency method of propping up the economy after the last time that Wall Street screwed things up on a grand scale in the 2008 financial crisis.

What was supposed to be a short term fix is still going on to this day 14 years later. So the unelected smart people who deal with the Copyright Royalty Board (also not elected) must have known this was coming and that the last thing you would want to do was freeze rates when the watchword in the general economy was “stimulus”.

The combination of the Fed’s quantitative easing and the Fed’s zero interest rate policy caused one of the greatest asset bubbles in the history of mankind. And when you hear that the Fed is now increasing interest rates and simultaneously “reducing its balance sheet” by selling about $1 trillion of government and corporate bonds, this is what they are talking about. Many think that the only way of getting out of this bubble is to either raise taxes–fat chance–or raise interest rates and reduce the money supply. The truth is, the U.S. has never been in this exact situation before so no one really knows what will work, but we do know what has worked before. And wage and price controls such as freezing the statutory rate does not work (as President Nixon discovered in 1971). Of course if you wanted to fix the problem by properly aligning incentives, songwriters could have told their publishers that for every 1% increase in inflation, they could reduce the salaries of the smart people by 1% until the freeze comes off. That’s called incenting the wrong people to do the right thing. Like that will happen.

So time for charts. Back to the “too much money”, let’s look at the basic money supply often called “M1” and remember–inflation is not a cause of the growth in the money supply, it is a symptom of the government printing too much money. Because you have to have money to chase goods, right? And the money only comes from one place.

As you’ll see in this snapshot of the growth of M1 since 2008, there’s fairly steady growth until it hockey sticks in 2020 and continues after the $1.9 trillion American Rescue Plan passed in March of 2021. More on economist Steve Rattner’s take on that coincidence later.

Remember, the U.S. central bank (called the “Federal Reserve” or “the Fed”) has two tasks in its mission:  Keep inflation and unemployment low.  The Fed historically has two “weapons” to control the economy to accomplish its mission: interest rates (especially a targeted “federal funds rate”) and the money supply.  

The money supply is going to be our focus in this post, but it wasn’t much of an issue at the Fed until the financial crisis of 2008 when the Fed introduced “quantitative easing.”  The growth of the money supply has become a significant issue since COVID and especially since 2021.  

How the Fed Injects Too Much Money in the Economy

The way the Fed typically increased the money supply before quantitative easing was by buying Treasury notes or other liquid assets in the open market or by actually printing more currency which was distributed in the real economy through retail banks.  (Remember we separated banks between retail and commercial during the New Deal in the Glass Steagall legislation.  Read up on that separately, beyond our scope here.)  Most of the Fed activity before 2008 has been focused on tinkering with the interest rates that the Fed controls, often the “Federal funds rate”.

Increasing the money supply before quantitative easing typically lowered interest rates, put more money in the hands of the consumer and stimulated business activity—including loaning money to other retail banks–through an increase in aggregate demand.  Lowering interest rates expands the economy by making money cheaper; raising interest rates contracts the economy by making money more expensive.  The Fed can decrease the money supply by selling Treasuries in the open market which is another way to control inflation, or try to anyway.  This is also called reducing the Fed’s “balance sheet” (securities held by the Fed) and tends to raise interest rates. If you follow the financial press, you’ll hear a lot about that currently.

When demand is high, i.e., economic activity heats up, the Fed typically raises interest rates to avoid high demand becoming hyper inflationary.  (People often use post WWI Germany as an example of hyperinflation when workers were paid a few times a day to avoid their money losing value by the time they got off work–yeah. Think on that when you buy gasoline or groceries this week.) The Fed also may largely leave the money supply alone.  When demand is low or collapses, as has happened in various financial crises such as the Great Recession, the Fed may lower interest rates to encourage demand with debt-driven economic activity by consumers and firms—and, of course the government.  We’ll come back to the government part.

The Fed historically has let the money supply grow at a relatively steady rate.  The growth of the M1 (M0 plus demand deposits less reserves) looks something like this which makes that 2020-2022 hockey stick look even more pronounced:

What do we remember most about the financial crisis?  I don’t know about you, but the event I remember most was the first time I heard one of the newsreaders utter the word “trillion” as a modifier for “dollars.”  I remember that like I remember where I was on 9/11.  And I also remember what I thought at that moment—these numbskulls are going to bankrupt the lot of us because it’s the government.  When it comes to a trillion dollars, it’s betcha can’t spend just one. (Fast forward a few years to the Speaker of the House saying with a straight face, “if they come up a trillion, we’ll come down a trillion.”  And they give you that look like they just said something smart. Insane.)

But I digress.  Quantitative easing was a workaround to get more cash into the financial markets.  Not in your bank account, but into Wall Street.  How so?

Some Mechanics on Quantitative Easing

Remember, the Federal Reserve is responsible for controlling the money supply.  The civics class version of this story is that the Treasury Department prints the money.  When the Federal Reserve actually prints currency, it submits an order to the Treasury Department’s Bureau of Engraving and Printing then distributes that newly printed currency to the thousands of banks, savings and loans and credit unions in the banking system.  But you see the problem there?  Someone at the Federal Reserve Board of Governors has to submit an order (which must be voted on) to the BEP, and then all those bankers know what’s going on.

Does that sound easy?  Does that sound like a politically costless transaction? Why no, it does not.  And that may be why that process is called printing money.  So it’s not quantitative easing.

When the U.S. Government spends money—and it spends lots of money—it does it in two ways at a high level.  It either takes in money in what are euphemistically called “revenues” or it borrows the money backed by the full faith and credit of the United States. Which means you and me.  “Revenues” are also called “taxes,” paid by you and me.  Borrowing means that you and I promise to pay interest and principal on U.S. Treasury bonds.  But that means someone has to buy the bonds.

And therein lies the rub.

If the U.S. Government needs to sell $X in bonds but only has buyers for say 2/3 $X, what happens?  Does the government say, I better cut that spending by 1/3?  Oh, no, no, no.  It doesn’t do that.  What happens is that indirectly, the Federal Reserve buys the bonds that the government can’t sell to unrelated third parties.

Wait you say—do you mean that the Government is borrowing from itself?  How can that be legal?  Good question.

And here is where we need to understand an entity called a “primary dealer.”  According to Wikipedia (because why not):

“A primary dealer is a firm that buys government securities directly from a government, with the intention of reselling them to others, thus acting as a market maker of government securities…. In the United States, a primary dealer is a bank or securities broker-dealer that is permitted to trade directly with the Federal Reserve…. The relationship between the Fed and the primary dealers is governed by the Primary Dealers Act of 1988 and the Fed’s operating policy “Administration of Relationships with Primary Dealers.” Primary dealers purchase the vast majority of the U.S. Treasury securities (T-bills, T-notes, and T-bonds) sold at auction, and resell them to the public.”

The Federal Reserve Bank of New York says in Fedspeak:

Primary dealers are trading counterparties of the New York Fed in its implementation of monetary policy. They are also expected to make markets for the New York Fed on behalf of its official accountholders as needed, and to bid on a pro-rata basis in all Treasury auctions at reasonably competitive prices.

Any guesses about which banks might be “primary dealers”?  That’s right.  Wall Street banks, like JP Morgan Chase (or JP Morgan Securities, more precisely), and that would not be the First Bank of Your Town.

Let’s say the New York Federal Reserve Bank has some treasury bonds to sell.  A trader at the Fed calls a trader at JP Morgan to place an order to buy the treasuries for say $1 billion.  (It will be a lot more but humor my dread of the “T” word.)  The Fed then futzes with the JP Morgan reserve accounts and presto-changeo JP Morgan has more of this digital money to buy the bonds the government can’t sell.

Printing money? I think it is, but people will quibble about it, particularly people who could get blamed for that whole hyperinflation thing. And then there’s that whole Constitutional speed bump, but let’s not worry about that. I’m sure there’s no legal problems with the authority for quantitative easing. The smart people in the Imperial City said so and that must be true. Remember, the Federal Reserve isn’t directly elected by anyone.

The Fed’s Balance Sheet

But that’s not the only thing the Fed has been doing during this 14 year period of quantitative easing. In addition to government bonds, the Fed has also been buying mortgage backed securities and other corporate debt in the open market. (That’s right–mortgage backed securities as in The Big Short. Feeling nauseated yet?) The Fed’s balance sheet since 2008 has looked like this:

The Fed actually publishes its balance sheet so that the taxpayers who can do little to nothing to affect the Fed’s decisions can at least see where the Fed spends the full faith and credit of the United States. A recent balance sheet looks like this:

After 14 years of quantitative easing, cutting interest rates to 1/4% (aka the “lower bound”) and buying securities we still have extraordinary inflation at rates not seen in 40 years. All of this was predictable as soon as the Fed started the quantitative easing program after the Great Recession and did not stop.

Various COVID relief spending programs compounded the inflationary effects as Steve Rattner stated in a widely-read op ed (Rattner was an Obama Treasury official and is a frequent go-to for the New York Times, Morning Joe and other programs):

[The Biden Administration] can’t say they weren’t warned — notably by Larry Summers, a former Treasury secretary and my former boss in the Obama administration, and less notably by many others, including me. We worried that shoveling an unprecedented amount of spending into an economy already on the road to recovery would mean too much money chasing too few goods….

The original sin was the $1.9 trillion American Rescue Plan, passed in March. The bill — almost completely unfunded — sought to counter the effects of the Covid pandemic by focusing on demand-side stimulus rather than on investment. That has contributed materially to today’s inflation levels.

Focused on the demand side, even most pessimists — me included — missed a pressing problem. Supply-chain bottlenecks have led to shortages of many goods, a crisis that has been exacerbated by the reluctance of Americans to return to work. The worker shortage has also hurt the service sector. Many restaurants, for example, remain closed because they can’t find workers. Both also spark higher prices.

Now, between the government payments and underspending during the pandemic, American consumers are sitting on an estimated $2.3 trillion more in their bank accounts than projected by the prepandemic trend. As they emerge from seclusion, Americans are eager to spend on everything from postponed vacations to clothing. But the supply chain breakdown has turned the simple act of spending money into a challenge.

Mr. Rattner was writing in November 2021 before the onslaught of inflation in the first few months of this year and before Russia invaded Ukraine. The most recent inflation rate, a lagging indicator, tells the story (and notice the higher lows and higher highs over time):

The Easy Money Tax Comes to the Kitchen Table

After inflating asset prices (like stocks and real estate) through quantitative easing, the easy money bubble is now coming to consumer goods. And what happens to consumers when there is a sudden price shock for consumer goods? They have to cover those goods in the short run in one of two ways–take on more debt (usually credit card debt) or spend their savings (called “dis-saving”). And a couple last charts:

12-month view of personal savings

Savings shot up in March 2021 coincidentally at the time of the American Rescue Plan passing in March 2021 and have decreased ever since, and the saving’s rate is headed toward zero or at least the lower lows that it hit in the recession.

2008-present view of personal savings

And of course when savings decline to zero, out comes the credit card. What else does the Fed tell us will be happening starting this month? Interest rates will increase, which means that credit card interest rates will may well trend higher interest rates just at the moment that consumers will be increasing debt.

Remember, savings deposits were made in historical dollars but are spent on goods and services in inflated dollars, so there is essentially a implied tax on dis-saving. The same is true of running high credit card balances on inflated goods, particularly at a time of higher credit card interest rates. A good example of paying higher interest on inflated prices is filling up the van with $5-$7 gas for a tour and financing shows on the credit card.

To be continued…

Do I Feel Lucky: Increasing Economic Justifications for Abandoning Frozen Mechanical Rates at the Copyright Royalty Board

We hear from an increasing number of songwriters who are learning about what is going on in the current rate fixing movements at the Copyright Royalty Board, some for the first time. In a nutshell, the Copyright Royalty Board rate fixing is a hugely expensive process that puts generations of children through university among the participating lawyers and lobbyists. By the time the money gets through the snake, so to speak, that process results in what are, frankly, scraps delivered to the kitchen tables of songwriters at the end of the day.

The rate fixing proceeding sets the statutory rate for certain times of song uses that are mandated by the federal government. There are two main categories of statutory rates under that compulsory mechanical license: physical (sometimes called “Subpart B” rates) typically paid by record companies, and interactive streaming (sometimes called “Subpart C” rates) typically paid by services like Spotify. (At least theoretically paid–often not judging by the size of the $424 million black box that is still just sitting under the collective’s five year plan.)

We all know that songwriters have been crushed by the failure of streaming mechanical rates to keep pace with streaming’s cannibalization of physical carriers. What many songwriters do not know is that one reason why their mechanical royalty income has dropped is due to an agreement among the major players to freeze the physical mechanical rates at the 2006 level of a minimum rate of $0.091 (currently worth approximately $0.06), and then to extend that freeze several more times for a total of 15 years so far. (The freeze essentially codified the controlled compositions rate but applied to all songwriters in the world.) There is a current proceeding at the Copyright Royalty Board in which the major players have reached an agreement to extend that 2006 freeze for another five years starting in 2023 and running to 2027. Shocking, I know.

In fact, the majors have now got themselves boxed into a corner on the interactive streaming rates that they are trying to increase. Why boxed? Obviously because the services are not stupid and if they see physical mechanical rates frozen when the record companies are paying, they ask why should the streaming rates increase when the services are paying? (And before you ask, this bid rigging is “legal” because everyone gets an antitrust exemption (17 USC §115(c)(1)(D). Cute.)

There is, of course, an unholy connection between statutory rates, controlled compositions clauses in record deals and mechanical royalties–see this post for the history. Let’s just say for this post that a page of history is worth a volume of logic.

The point I want to make to you in this post is that time is going by and no progress is being made in the current proceeding (styled “Phonorecords IV“) just like there’s no progress being made in the last proceeding (styled “Phonorecords III“); some people ask why these rates and appeals were not resolved in the giveaway that was part of Title I of the Music Modernization Act (aka the Harry Fox Preservation Act) which created the Mechanical Licensing Collective. If you’re going to make a major change to collectivize songwriters and vastly expand the scope of the compulsory mechanical license, shouldn’t you have gotten something for it? I’d count myself in the group that’s asking those questions so you know my bias. In a recent comment, I called the Copyright Royalty Board the “cornucopia of chaos,” which it is at least on the mismanaged mechanical royalty rates.

Inflation and Mechanicals

One thing that everyone should be able to agree on is that inflation is a major factor in determining any statutory royalty rate. This is certainly standard with the webcasting rates negotiated by SoundExchange with the same Copyright Royalty Board. It seems that if someone just asked for “indexing” the rates to inflation, the CRB just might give it. But no one is pushing on that open door except the songwriters and publishers who commented on the majors proposed settlement but who cannot afford to be part of the Phonorecords IV proceeding itself.

So leaving aside an increase in all of the actual rates that would reflect the value of songs, it does seem that we must accept the thinking of many economists that inflation is here to stay for a while and will surely extend into the 2023-27 rate period of Phonorecords IV. I’ve posted about these indicators before, but here’s some additional information. A cost of living adjustment seems like it should be a pro forma request–it only increases the rates if there is an actual increase in the cost of living as measured by an objective standard, typically the CPI-U (Consumer Price Index-Urban) measured by the government’s Bureau of Labor Statistics.

Since we are projecting at least two years into the future, let’s consider a few metrics that measure two years into the past. What is the trend line for inflation? Up and to the right, as they say.

US Inflation Rate

Equity Markets

We normally don’t spill much ink on the stock market because markets go up and down, can’t pick a top and can’t pick a bottom. But–stock markets are often a leading indicator of the direction of growth in the broader economy so let’s look at what’s been happening in a few different measures. Remember–the conventional wisdom is that a 20% correction to the downside is the definition of a bear market.

I have been beating the stagflation war tocsin for quite some time now (since May 2021), and unfortunately I think the markets are waking up to the true-1970s style stagflationary environment we may be entering. This means lower growth combined with surging prices for consumers and producers. And that is truely bad news bears. (If you don’t know about 1970s stagflation, take a few minutes and read up on it. And even if you don’t, the negotiators of the statutory mechanical rates really should know. Some of them may have lived through it the first time around.)

The tech-heavy NASDAQ index has dropped about 14% since November, returning to February 2021 levels with no end in sight.

The broader Russell 2000 is more revealing with a 19% decline over a few weeks as more inflation/stagflation confirmation data comes in:

This broader decline is confirmed by the S&P 500:

And if you were looking for confirmation of declining retail sales as a measure of growth, consider Amazon’s stock performance:

A little closer to home, consider Spotify’s recent stock performance which shows its pandemic-fueled riches coming back to reality (although not so good for any employees who got a stock option grant in the last 18 months or so):

Bond Yields

Remember, the bond market is exponentially larger than the stock market. We’ll come back to this, but consider what is happening in the bond market and think about this question: what could cause both the stock market and the bond market to decline?

US Savings Rate

The savings rate shows a couple of anomalies where the savings rate spiked to unnatural highs of 34% in a lockdown era and again to 27% after government stimulus, but–the savings rate has sharply declined to pre-pandemic 2018-ish levels Why? I would speculate that this is partly due to rising prices of goods to consumers, particularly energy, rent and food and the decline of “real” wages (nominal wages less inflation).

Commodities

Consider a couple of inputs–there are many–but note for our purposes that these commodity prices are at or near recent highs, or are retracing recent highs. The trend line is up and to the right, which suggests that these prices are likely to continue upward into at least the first year of the Phonorecords IV rate period (2023) and potentially beyond.

Energy

However you feel about fossil fuels, the reality for singer/songwriters or bands is that the way they try to supplement their declining songwriting income is by touring and for almost everyone, touring means gasoline. I don’t have to tell you what gasoline prices are doing–you know whenever you fill up the van. This chart is a measure of gasoline futures, which is the bet that the commodity traders are making on the future price of gasoline (not the price at the pump where you live). Again, the trend line is up and to the right.

And of course if you’re going to make it to the gig or the writer room you’ll need to avoid that freezing to death thing and you’ll care about heating oil prices, up 70% year over year:

To take it a step back, crude oil is closing in on $100 a barrel due in part to exogenous supply side shocks and contractions. If crude goes over $100, we are in a whole new world that we have not seen since 2014.

Conclusion

So you get the idea, right? This is all evidence supporting a cost of living adjustment for mechanical royalties. When the stock market declines, particularly declines sharply as it is currently performing, that is largely to do an expectation of slower growth in the economy as a whole. They’ve been wrong before, but the market is actually a pretty good leading indicator of the direction of growth.

Declining stock prices foreshadow declining earnings which foreshadows declining economic growth. What happens when growth decreases? Inventories may drop, and supply declines (which is already happening and you know that if you’ve been to the grocery store lately). GDP may also decline.

Remember the stagflation three point play? In this chart, Y1 GDP declines in Y2.

Lower growth or economic stagnation is the “stag” part of stagflation.

When bond prices go down, typically interest rates are trending up, which signals an inflationary outlook. If current bond prices decline because interest rates are increasing (or are anticipated to increase), that is most likely anticipating the Federal Reserve’s announced rate increases in 2022. The number of rate increases is anticipated to be somewhere between three and five (some say even six) in 2022. The Fed increases interest rates to tamp down inflation, so you can say that lower bond prices (which vary inversely to interest rates) is anticipating the “inflation” part of 1970s-style stagflation. Just to be clear, this is all readily available public information.

It’s becoming more obvious that we are watching a slow moving train wreck (cynics like me might say we’re beginning to get hit with the balloon payment for 2008 after 15 years of quantitative easing, but that’s a story for another day). The slower the train wreck, the more likely the wreck will occur during the Phonorecords IV rate period. Since the Federal Reserve is still busily printing money, these metrics are all leading indicators of how much blood will be left on the floor starting around March 2022 or so. And we haven’t even talked about what the announced Federal Reserve rate hikes will do to the housing market even if each one is a relatively small increase.

You don’t need an expert economist to produce any original research on this for the CRB–the question for songwriters is why don’t we already have a government rate indexed to inflation? The indexed rate is only paid if you actually get an increase in the CPI, which even then only preserves the value of whatever nominal rate you do have–it’s not a “real” rate increase. So why not at least try to get a cost of living adjustment? There’s no reason not to at least try to get indexing on every statutory rate which was the standard approach on mechanicals for many years after 1978 until the 2006 freeze. Unless your bonus is tied to a big percentage increase in the headline rate rather than the less obvious indexing that would actually protect the value of songs.

Which all seems to be to be so obvious that if you don’t have it you’d have to ask yourself, do I feel lucky? The odds are all on the house.

Decline in GDP Projection Increases the Importance of Inflation Adjustments in Government Song Pricing #IRespectMusic

God gave Noah the rainbow sign, no more water, the fire next time.

James Baldwin, The Fire Next Time

Remember the stagflation three point play? Supply contracts, prices go up due to those supply side shocks and real gross domestic product contracts. Stagflation also results in higher unemployment. Stagflation can take a long time to shake out of an economy once it sets in.

Stagflation’s three point play

We can learn from the economic history of stagflation, particularly in Japan and the U.S. Japan had a stagflationary period started by the economic shock of the collapse of Japan’s real estate market (not unlike what is happening in China with Evergrand and Sinic) and the follow on effect of a 60% decline in Japan’s stock market. The U.S. had a stagflationary period in the 1970s brought on by a dependence on foreign oil and predatory pricing largely by OPEC. That led to skyrocketing oil prices and gas lines. Both countries experienced a “Lost Decade” due to stagflation.

The Federal Reserve Bank of Atlanta announced this week that it projects real GDP grown in the third quarter of 2021 to fall to 0.5% with some caveats:

https://www.atlantafed.org/-/media/Documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf

The Federal Reserve Bank of St. Louis gives a longer term chart of GDPNow:

https://fred.stlouisfed.org/series/GDPNOW/

The point of these graphs is to emphasize that the US economy appears to be heading to a contraction and inflation brought on by a combination of supply side shocks (cost-push inflation) and demand caused in part by government actions (demand-pull inflation) combined with sharp increases in gasoline prices among other commodities. Gasoline prices ratchet through many products in the economy and have been sharply higher over the last 12 months as the U.S. became more dependent on OPEC production.

https://tradingeconomics.com/commodity/gasoline

All the indications are that the U.S. may be headed into a prolonged period of stagflation which is inflation combined with a stagnating economy. It seems less and less likely that inflation is “transitory” and more likely that it will last well into 2023 and possibly 2024.

How does this affect songwriters? Remember that the mechanical rates set in the current Copyright Royalty Board rate proceeding will fix prices until 2027, so it appears that there will be considerable overlap between the inflation cycle and the royalty rates–all the more reason to seek the same inflation indexing for songs as the CRB recently granted for sound recordings.