My wife does the large majority of our food shopping. My son and I do the cooking. We all share working in the garden. For her recent birthday she requested a favorite veal dish I make on occasion. I splurged and went to the nice store. Veal was 20 dollars a pound. As I stocked up on other goodies, I realized how much everything had gone up in price. On the way home I got my $4 a gallon gas. Yet according to Bernanke, inflation is just a concern at this time. Core inflation is still running at 4% to 5%, so no worries yet.
Then there are these kinds of stories. Wholesale inflation at 9.2%. This is the highest rate since June, 1981. The difference between these two measurements is defined as the following in Wikipedia. “Core inflation is a measure of inflation which excludes certain items that face volatile price movements e.g. food products and energy.” “The older preferred measure of inflation in the United States was the Consumer Price Index. This is still used as the indicator for most other countries, and is presented monthly in the US by the Bureau of Labor Statistics. This index tends to change more on a month to month basis than does “core inflation”. This is because core inflation eliminates products that can have temporary price shocks (i.e. energy, food products). Core inflation is thus intended to be an indicator and predictor of underlying long-term inflation.” The Fed actually modifies the core rate to the PCE which “avoids some of the upward bias associated with the fixed-weight nature of the CPI. “
I think the key phrase here would be temporary price shocks. While I believe we may really be seeing a bit of a bubble in oil and food prices, I think that anyone who looks outside of America’s boundaries will see a number of growing economies. Big economies. China big. India big. Brazil big. Food and energy prices will be under pressure (barring recessions) for a long time. If we are to have honest discussions about our economy, let us start with honest data.
Using wholesale measures of inflation lets us understand current anxieties about the economy. The talking heads keep telling us everything is really OK. There is no recession. Those of us paying bills realize that there is a lot less money left over at the end of the month, and it is not looking temporary.
Steve
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Yeah, I think I mentioned something about this early on here, but at the time I was more concerned with Bernanke blithely cutting interest rates to appease people who borrow the capital of others.
As you point out, though, we now have two sources of inflationary pressure, rising global demand on all fundamental feedstocks as well as loose money temptations to overexpand.
I remember 18% mortgates and food costs rising at rates that, though not nearly as ridiculous as, say, that in the Weimar Republic, were enough to scare the bejeezus out of you and to leave you feeling that work itself was basically indentured servitude to a company store.
Not much we can do about the feedstocks pressure other than to try to squeeze more blood out of the turnip, but, while Greenspan may have been a half- to a point or so too high, at least he had a clear vision of the beast.
I remember student loans at about 20%. That hurt.
Steve