More Inflation Magic
To shed more light (well actually cast more gloom) on last week’s inflation post here’s an excerpt of an email from Chuck Butler, President of Everbank:
The Fed has turned its back on inflation folks… And here’s some items that you won’t see in the CPI data…
1. Grade-A Large Eggs – Dec. 06 $1.54 a dozen… Dec. 07 $2.10, and current $2.73 a dozen… That’s up 36% in a year!
2. White Bread – Dec. 06 $1.13 a loaf… Dec. 07 $1.28 a loaf, and current $1.62 a loaf… That’s up 12.6% in a year!
3. Whole Milk – Dec. 06 $3 a gallon… Dec. 07 $3.87 a gallon, and current $3.93 a gallon … That’s up 29% in a year!
4. Fresh Whole Chicken- Dec. 06 $1.06 per pound… Dec. 07 $1.17 per pound, and current $1.19 per pound… That’s up 10.3% in a year!
These are the things I talk about all the time, in that an individual can feel the inflation eating away at this wallet… This is just some simple food items… I’m not even talking about things like: Tuition… Insurance… Medical… Movie tickets… And so on…Your Federal Reserve has turned their backs on inflation eating your wallet folks… Isn’t that SAD?
And here’s some info on inflation in New York City. This data is from late last year.
![[Inflation stats for New York City 2007]](http://www.livingoffdividends.com/wp-content/uploads/2008/01/nyinflation2.gif)
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January 29th, 2008 at 8:45 am
I remember reading somewhere once that the Fed’s primary enemy is inflation. Looks like I must have made a mistake.
The reduction in interest rates will further drive the curency down and make imports that much more expensive. Maybe this will help to spur local purchases and help stimulate the economy.
The other thing is that all the Richie Richs from all over the world will be down in the US trying to buy up everything they can.
Not sure if all this is good or bad for the country. Certainly it will be painful, at least for the immediate term for Joe and Jane Public.
January 29th, 2008 at 9:43 am
My interpretation of macroeconomics’ theories take on inflation is that:
1) In the short-term it lowers unemployment, always a plus.
2) All the increased prices in Grade A eggs and white bread will flow through the cycle of households and firms. The increased revenue on white bread will increase the pockets of Wonderbread’s employees. Having more money to spend will cause a higher demand for U.S. products and more jobs; which in turn raise nationwide productivity.
3) Next to the “Big Apple, Big Inflation” data it may be useful to post http://www.bls.gov/ro2/fax/qcew9310.pdf, New York Cities’ Bureau of Labor statistics from 07′. The average weekly income in Manhattan rose 16.7% (the second highest increase in the nation) to $2,281, so I can understand why the price at NYC’s finest restaurants rose in four years.
I feel that either the U.S. economy can dive head first into a thundering recession with the dollar devalued by less productivity or we can keep our jobs with a weaker dollar. I prefer the latter.
January 29th, 2008 at 3:36 pm
LOD, I have to agree. I eat out for lunch all the time and the prices have just continued to creep up. Today for instance, I ate at a sub shop and it cost me $8.50 for the small sandwich with chips and drink. Last year the same meal would have been just under $7. I was comparing my electric bill to last year as well. Unreal. I used less electricity but my bill is up 20%.
January 29th, 2008 at 10:10 pm
no you read that correct. Inflation is “supposed” to be the Fed’s enemy, but it seems their actions do not reflect their beliefs.
In the eighties, the Japanese came and overpaid for trophy real estate. This might be repeated, especially if we seen a long drawn out Japanese-style recession. That’ll be bad for everyone, but it looks like the Fed’s actions are fostering this sort of environment.
Making everything more expensive will not stimulate the economy, just lower our standard of living. However, devaluing the dollar might help bring back some manufacturing jobs. But we’d have to devalue a LOT for that too happen. Again, it looks like the Fed is hoping this will happen.
January 30th, 2008 at 9:30 am
I wondered why the officially stated inflation rate was at < 4% whereas money supply was increasing at rates over 10%:
http://www.nowandfutures.com/key_stats.html
Like someone stated previously in the comments, if inflation is actually calculated by the “substitution” method it would certainly explain why the official inflation rate isn’t very practical at all.
I’ve also wondered that if the current trend continues, i.e. if the real inflation rate is closer to 10% and wage increases stay stagnant, how long would it take the poverty rates and quality of life in the US to become similar to those of 3rd world countries. My guess would be no more than a couple decades… again only if the current trend continues.
February 2nd, 2008 at 1:22 pm
[...] As a result of the debasing of the dollar, inflation is going to rise. We are soon going to see the cost of milk, vegetables, gas and everything else go up drastically(after the elections obviously). To see a few examples of rising inflation costs, read this post, http://www.livingoffdividends.com/2008/01/28/more-inflation-magic/ [...]