Even the government can’t conceal the raging inflation occuring in the US and across the world today. But, Ben says not to worry. He can rectify the situation in 15 minutes by raising interest rates. When do you think he’ll be doing that?
Below is a chart from the BLS showing the change in Producer Prices over the last year. The PPI went up 0.8% in January. For the mathematically challenged, that is an annualized rate of 9.6%. And, as you can see, this is not a one time thing. The annualized rate over the last 3 months is also 9.6%.
The amusing data point is food, which according to the BLS, only went up 0.3% in January. Those guys at the BLS are sooo funny. Their index shows virtually no food price inflation in the last year. As regular readers of this blog know, food prices are up 20% to 50% in the last year across the board.
So here is the skinny. Companies have two choices when their input prices rise 10%. They either pass them on to you or they absorb them and reduce their profits. Wall Street shills keep projecting ever increasing profits for corporate America. Ben and his minions keep projecting inflation of 2% for consumers. Who’s lying?
The truth is that your wages will continue to stagnate, the price of food and energy will continue to increase, and corporate profits will start to level off and decline. Sounds like the best time to buy stocks and a new home.
| Month | Finished goods | Intermediate goods |
Crude goods |
||||
|---|---|---|---|---|---|---|---|
| Total | Foods | Energy | Except foods and energy |
Change in finished goods from 12 months ago (unadj.) |
|||
| 2010 | |||||||
| Jan. | 1.1 | -0.1 | 4.5 | 0.3 | 4.5 | 1.7 | 8.8 |
| Feb. | -0.4 | 0.5 | -2.3 | 0.0 | 4.2 | 0.1 | -1.7 |
| Mar. | 0.7 | 2.5 | 0.7 | 0.2 | 5.9 | 0.6 | -1.0 |
| Apr. | -0.1 | -0.2 | -0.2 | 0.1 | 5.4 | 0.8 | -1.9 |
| May | -0.2 | -0.4 | -1.0 | 0.2 | 5.1 | 0.2 | -3.3 |
| June | -0.3 | -2.4 | 0.2 | 0.1 | 2.7 | -0.7 | -3.0 |
| July | 0.1 | 0.7 | -1.0 | 0.2 | 4.1 | -0.4 | 1.5 |
| Aug. | 0.6 | -0.1 | 2.5 | 0.1 | 3.3 | 0.6 | 3.3 |
| Sept. | 0.3 | 0.9 | 0.0 | 0.2 | 3.9 | 0.4 | 0.6 |
| Oct. | 0.6 | 0.5 | 3.6 | -0.4 | 4.3 | 1.2 | 4.7 |
| Nov. | 0.7 | 0.9 | 1.8 | 0.1 | (r)3.5 | 1.1 | 1.3 |
| Dec. | 0.9 | 0.8 | 2.8 | 0.2 | 4.0 | 0.9 | 6.5 |
| 2011 | |||||||
| Jan. | 0.8 | 0.3 | 1.8 | 0.5 | 3.6 | 1.1 | 3.3 |
| Footnotes (r) Revised |
|||||||
| NOTE: Some of the percent changes shown here and elsewhere in this release may differ from those previously reported because seasonal adjustment factors have been recalculated to reflect developments during 2010. In addition, indexes for September 2010 have been recalculated to incorporate late reports and corrections by respondents. All indexes are subject to revision 4 months after original publication. | |||||||
Stage-of-Processing Analysis
flash says:
Uh…..WTF ! more straw on the camels back?…I dunno’
Neo-Keynesians such as Paul Krugman insist that the deficit isn’t a problem because of this line of argument, first presented by Paul Samuelson in his landmark 1948 textbook entitled “Economics”.
“There are also burdens involved in an internally held public debt like our present one, but the burdens of an internal debt are qualitatively and quantitatively different from those of an external debt. This is the first and most important lesson to be grasped, without which nobody can go far in understanding the economics of the public debt. The interest on an internal debt is paid by Americans to Americans; there is no direct loss of goods and services. When interest on the debt is paid out of taxation, there is no direct loss of disposable income; Paul receives what Peter loses, and sometimes – but only sometimes – Paul and Peter are one and the same person. . . . In the future, some of our grandchildren will be giving up goods and services to other grandchildren. That is the nub of the matter. The only way we can impose a direct burden on the future nation as a whole is by incurring an external debt or by passing along less capital equipment to posterity.
Of course, it is probably worth considering that the situation in 2011 is not exactly the same as the situation in 1948, as can be seen in the chart below. Note the green line, in particular.
http://voxday.blogspot.com/
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16th February 2011 at 10:24 am
John Coster says:
How has it come to pass that reading the entrails of goat is more helpful to an understanding of the economic situation than listening to Bernanke, Summers and their ilk? Shortly before the financial “near collapse” in the waning days of Monkey Boy W’s reign, I read a speech by Summers about the coming prosperity that global less regulated markets were bringing to the masses. I was astonished. What planet was this guy living on? Was this another example of the educated idiot syndrome? I do recognize that some kinds of ignorance can only be aquired after long years of study, but still, do I, an underemployed musician and songwriter/carpenter/English teacher etc., have a better grasp of economics than the Head Of The Fed? And Summers? I mean, shit, I went to Harvard myself and the folks there weren’t that stupid. Has Ben B ever been to a supermarket? No, there must be some darker force at work. After much pondering, I’ve come to the conclusion that these guys are lying greedy evil bastards who simply know what the free market value of different theories are and defend whichever ideas pay the most. This is how the “Free Market of Ideas” really works in the FS of A.
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16th February 2011 at 11:40 am
Thinker says:
Asia’s poor suffer as food prices drive inflation
Surging food prices in India are forcing families to cut back on meat and vegetables. In Indonesia, they prompted the president to urge people to grow their own chili peppers. And in China, restaurant owners are feeling the squeeze.
Inflation is climbing across Asia as the cost of food jumps, echoing the previous global food crisis that peaked in 2008. While people in the U.S. and other wealthy Western nations will barely feel the effects of higher prices, getting enough to eat is a big challenge for tens of millions in Asia. Poor families typically spend more than half their household income on food and are bearing the brunt.
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16th February 2011 at 12:23 pm
Kevin Beckett says:
Just saw this on CNN.
“We were all drinking the Kool-aid, Greenspan was tending bar, Bernanke and the academic establishment were supplying the liquor,” Deutsche Bank managing director Ajay Kapur wrote in a research report in 2009
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16th February 2011 at 2:13 pm