For Most Americans Inflation Is Getting Worse, Not Better
Prices paid by U.S. consumers rose more than forecast in September as food and energy costs climbed, while core measures showed inflation remains contained.The 0.3 percent increase followed a 0.1 percent decline in August prompted by falling oil prices, the Labor Department said today in Washington. So-called core producer prices, which exclude fuel and food costs, rose 0.2 percent for a second month in line with forecasts.
With inflation under control, Federal Reserve policy makers have leeway to consider cutting their benchmark rate again later this month to keep the economy growing in the face of a deepening housing recession. Fed Chairman Ben S. Bernanke this week reiterated the central bank would "act as needed'' to foster sustainable growth along with price stability.
That's right -- inflation is under control. Well, except for the following prices from the agricultural and oil markets respectively.
Let's ignore the headline number and look at the following two paragraphs from the BLS release:
Consumer prices increased at a seasonally adjusted annual rate (SAAR) of 1.0 percent in the third quarter of 2007, following increases in the first and second quarters at annual rates of 4.7 and 5.2 percent, respectively. This brings the year-to-date annual rate to 3.6 percent and compares with an increase of 2.5 percent for all of 2006. The index for energy, which advanced at annual rates of 22.9 and 32.9 percent in the first two quarters, declined at a 14.8 percent rate in the third quarter of 2007. Thus far this year, energy costs have risen at an 11.7 percent SAAR after increasing 2.9 percent in all of 2006. In the first nine months of 2007, petroleum-based energy costs (energy commodities) advanced at a 20.6 percent rate and charges for energy services (gas and electricity) increased at a 1.3 percent rate. The food index rose at a 5.7 percent SAAR in the first nine months of 2007 after advancing 2.1 percent in all of 2006. Grocery store food prices increased at a 6.7 percent annual rate in the first nine months of 2007, reflecting acceleration over the last year in each of the six major groups. These increases ranged from annual rates of 4.0 percent in the index for other food at home to 17.7 percent in the index for dairy products. The CPI-U excluding food and energy advanced at a 2.5 percent SAAR in the third quarter, following increases at rates of 2.3 percent in each of the first two quarters of 2007. The advance at a 2.3 percent SAAR for the first nine months of 2007 compares with a 2.6 percent rise in all of 2006. The deceleration largely reflects a smaller increase in the index for shelter and a downturn in the index for apparel. Shelter costs, which rose 4.2 percent in all of 2006, have risen at a 3.2 percent annual rate in the first nine months of 2007. The index for apparel, which last year registered its first annual increase since 1997, has declined at an annual rate of 1.7 percent thus far in 2007. The annual rates for selected groups for the last seven and three-quarter years are shown below.
So -- why am I focusing on these two paragraphs rather than the headline number? I am personally having a really difficult time believing the "headline" inflation number largely because my personal experience just isn't jibing with an "inflation is benign" scenario. Here's why. I go shopping every 4-5 days. Over the last year or so I have seen chicken increase from about $4-$5 to $7-$8. Milk is now almost $4/gallon when it use to be $2.99/gallon. Simply put, the numbers just aren't adding up. While I don't know what is wrong exactly with the BLS' calculations and/or methodology, it simply isn't tracking what I am seeing at the retail level. Now I realize that the prices above are for food which isn't part of "core" inflation. This also illustrates how incredibly stupid the Fed's reliance on "core" inflation is. Core inflation is a great measure if you don't consume food or energy. For that small minority of the population that actually does consume food and energy, total inflation is a hell of a lot more relevant to daily life.
Let's look at three sentences from the first indented paragraph from the BLS report:
This brings the year-to-date annual rate [of total consumer prices] to 3.6 percent and compares with an increase of 2.5 percent for all of 2006.Thus far this year, energy costs have risen at an 11.7 percent SAAR after increasing 2.9 percent in all of 2006.
Grocery store food prices increased at a 6.7 percent annual rate in the first nine months of 2007, reflecting acceleration over the last year in each of the six major groups.
These three sentences -- which are part of the BLS report -- are not reported in the financial press. And they sure should be because they show some serious price acceleration for goods we have to buy in modern society.
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Bondad: you are a Prince for showing the obvious that is not uttered in our Corporate, rich man's media. Nobody talks about the INVISIBLE AMERICAN. But he will determine the next election.
Our elected officials are flagrantly contorting our economic data which misleads our citiizens into believing that we are strong and healthy instead of actually being in the poor house.
Our political candidates are so busy fawning over contributors who don't need assistance but are promised everything. This amounts to perpetuating the present disasterous economic policies. Thank you for mentioning the 80-90 percent of the citizentry who don't count in this campaign (except for their votes).
The Fed is understating inflation so as to have no restraint on helping their banker buddies in the mortgage crisis.
And they say they're for free markets.
Pensioners and people who can't afford cars, electronics and home improvements are the ones who suffer from the fed's manipulations. All they can think of buying are the essential items (food, energy) which are excluded from the inflation figures. It doesn't matter if wide screen TVs go down to three hundred dollars if people can't buy them anyway.
The Federal Reserve isn't interested in prices that ordinary people pay. Remember, small government.
Hello, this is the real world calling!!!
Alert there is no (minor) inflation, just because your small peep hole on the world is seeing a price increase or two does not add up to a crisis, the pie is much much bigger than your local issue.
The FED would not have lowered the FED funds rate if they were worried about the "I" word, which they were all in a tissie about until they Finally figured it out, we have a slow growth economy. Milk cost more but computers cost less this is how it goes.
PS Congress spends the MONEY, the Pres is in Office and takes the blame.
Gee, that's so reassuring. I can still afford to buy a computer. Hooray. That's much more important than being able to afford food or to heat my home in the winter or to take care of other pesky "local issues".
Let's get back to basics folks and why this is playing out EXACTLY as the Fed scripted and why we will continue to take it to further enrich the rich:
http://www.globalresearch.ca/articles/FRA501A.html
And never forget that the dollar in all actuality is worth and has always been worth NOTHING.
Inflation getting worse? Wait until oil goes over $100/bbl, very soon as a result of the increasing posture of War on Iran, and China starts to really put the screws on the US economy, over the inexplicable joint Bush-Congress very public fawning over/honoring of the Dalai Lama.
Guess the Dems have concluded, that since this is the age of massive incompetency, to jump on board. And Dems are timorous over the Armenian Genocide resolution?
Save all the graphs for the Econ 101 class. I skipped through all that mess to cut to the chase. But there was none. Here it is: you libs and tree huggers have caused all this inflation with your protectionism. We cant drill in ANWAR or anywhere else for new sources. Building new refineries is and has been off the table for years. So now our farmers are growing corn for fuel. That means anything and everything associated is affected. From tortillas to beer and everything in between. What the farmers used to grow, like hops and beans, for example, are in shorter supply. Meanwhile corn is diverted away from traditional markets in favor of ethanol. Cause and effect. Trickle down is a reality. For every action, there is an opposite re-action. Get the idea?
There is this thing called the "dollar". You might have heard of it. It's the primary currency of the US and most of the world's commodities are priced in it. There's also this institution called the Federal Reserve. Again, you might have heard of it. They set interest rate policy -- also referred to as the "cost of money". Interest rates are a strong determinant of the dollar's value. When the Federal Reserve cut interest rates, they did so when the dollar was near an all-time low. Therefore, as the dollar dropped in value, commodities had to increase in value to compensate.
You also might be familiar with "ethanol", which has completely screwed up the grain situation. Decreased supply = increased price.
Finally, there are two countries called "India" and "China". Combined they have about 2 billion people. These people like to eat food. Because they like to eat food, they happen to buy food. Econ 101 = increased demand = higher price.
As for environmental laws let me ask you this. Why don't you move to Beijing? They don't have any environmental laws there. While you're there, try walking more than a mile. By the end of that walk, you'll be coughing, largely because China doesn't have an environmental laws.
Bonddad--
There's this guy named "Bonddad," maybe you've hear of him, cuz he just schooled that right wing economics poseur Mack 20!!!
You are da Man!
"Building new refineries is and has been off the table for years."
There are stringent anti pollution laws that is true. Many older refineries shut down as it was economically unfeasible to update them. However, many refineries have expanded their capacities, something that Fox Noise ignores. If you're really against pollution controls then I invite you to: get some gasoline, add some tetraethyllead, some ethylene dichloride, a few light aromatics and a dash of benzene, put this mixture on a rag, hold it over your face and breath deeply. You can pretend that you are down wind of the refineries you long for. Enjoy!
I have a donkey, wooden hoe, and some burlap
sackcloth to sell you cheap.
Yes, the Feds are "fuzzing" (fudging) the COLA numbers. The reason is that it saves A LOT on Social Security. Federal annuitants and military retirees are just a grain of sand on the beach compared to Social Security benefits.
Seems my "cost of living" is UP in the 5-6 % range, if not more. Take a look at the increase in food prices....soybeans and wheat up since 1 Jan 07 40-60 percent. We have the perfect economic storm now....who will survive the GROSS mismanagement of the US economy....Prince of Citigroup will do just fine with his $14 million for running this company into the ground...there are many others like this on Wall St.
I started buying gold when Bush was elected. He said he would run the US like a CEO. I looked at the companies he was involved during his life to that time, and, other than the baseball eminent domain scam, every company went bust (read: Was bailed out by daddys 'friends' in Saudi Arabia, etc.). So, it was evident way back then that Bush would destroy the US economy in short order.
If you haven't bought gold, it still may not be too late. I buy Canadian Maple Leafs.
Luckily I'm essentially retired, live in a very modest home, have absolutely no debts, and I just watch as gold prices continue to climb while the dollar drops almost daily.
As to 'Core' inflation, I forget who started the measure but I remember it was evident at the time the TRUE intent was to mask 'actual' inflation. 'Core' inflation is a useless number only used for 'show and tell' to those too lame to understand what's going on.
If you can lift your safety deposit box, you don't have enough gold. I made a deposit to the box last month and the lady in charge of the vault room couldn't pull my box out. She said she was afraid the handle would come off, heh, heh, heh.
Where do you buy them from?
Almost any coin shop will sell gold coins. Maple Leafs, Krugerrands, Gold Eagles, etc. Mostly they sell for the cost of bulk gold, plus a small percentage "handling fee" if you will.
Figures lie and liars figure. Inflation doesn't count food and energy, Unemployment doesn't count people out of work more than 6 months, Petrayus doesn't count Shia on Shia violence or people shot in the front of the head, Healthy forests makes forests less healthy, no child left behind leaves thousands behind, Bush is still in office and the Deomocrats hold his pants while he gets ready to screw us again, and our government doesn't torture: our government IS torture.
you're both wrong.
...all you are playing with is an imaginary scale, tipping it back and forth along the history line, dipping here, tilting there, partisan to the end....
until we return to a sound currency, this will never, ever end.
well, guess it could end another way...
Money by fiat has NEVER worked. The Romans tried it. The Chinese tried it.
But THIS time it will be DIFFERENT....
Well, with husband and wife juggling 2 to 3 part-time jobs and falling further and further behind, guess we'll just have to take the kids out of school so they can get jobs, too.
"we'll just have to take the kids out of school so they can get jobs, too."
That's what Reagan thought when he cut orphans' Social Security benefits 20 years ago.
The latest COLA proposal for Social Security recipients shows why there should be no exclusions in determining inflation. Liars certainly figured this one, and retirees are faced with real cost increases.
The government is lying. What else is new?
Ron Paul for president.
As Paul is in the "government"...you're admitting he's a liar?
Ya see, I look at *WHAT* they tell lies about. Paul and every rethug tell lies about economics.
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