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The Real Rate Of Inflation - Daily Beast - 5/4/2011 7:07:47 AM

Sanity

Posts: 22039
Joined: 6/14/2006
From: Nampa, Idaho USA
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Thanks Heretic, for the inspiration:

quote:

ORIGINAL: TheHeretic

quote:

ORIGINAL: rulemylife

High inflation?

A 1.6% average inflation rate in 2010?

Now there is a topic worthy of a thread all by itself. So much money printed and dumped into the economy, such low official numbers, and such a change in what a trip to the grocery store is going to cost.

NEW YORK –

The Fed may deny it, but Americans know that prices are rising. In this week’s Newsweek, Niall Ferguson takes a look at the Great Inflation of the 2010s.

“I can’t eat an iPad.” This could go down in history as the line that launched the great inflation of the 2010s.

Back in March, the president of the New York Federal Reserve, William Dudley, was trying to explain to the citizens of Queens, N.Y., why they had no cause to worry about inflation. Dudley, a former chief economist at Goldman Sachs, put it this way: “Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful. You have to look at the prices of all things.” Quick as a flash came a voice from the audience: “I can’t eat an iPad.”

Dudley’s boss, Ben Bernanke, was more tactful in his first-ever press conference on Wednesday of last week. But he didn’t succeed in narrowing the gap between the Fed’s view of inflation and the public’s. I respect Bernanke. As an expert on the financial history of the 1930s, he was one of the very few people in power back in 2008 who grasped how close we were to another Great Depression. But if we’ve avoided rerunning the 1930s only to end up with a repeat of the 1970s, the public will judge him to have failed.

To ordinary Americans, however, it’s not the online price of an iPad that matters; it’s prices of food on the shelf and gasoline at the pump.

To this, the Fed has a stock response. It points to the all-urban consumer price index (CPI-U) and notes that it was up only 2.7 percent in March relative to the same month a year earlier. Strip out the costs of food and energy, and “core CPI”—the Fed’s preferred measure—is just 1.2 percent. When Google unveils its new index of online prices, it’s likely to tell a similar story.

To ordinary Americans, however, it’s not the online price of an iPad that matters; it’s prices of food on the shelf and gasoline at the pump. These, after all, are the costs they encounter most frequently. And with average gas prices hitting $3.88 a gallon last week, filling up is now twice as painful as when President Obama took office.

Sensing a threat to his hopes of reelection, the president last week called on Congress to eliminate “unwarranted” tax breaks for oil companies and set up a Justice Department task force to investigate price gouging and fraud in the oil markets. Give me a break. The spike in gas prices is the result of Fed policy, which has increased the monetary base threefold in as many years, and a geopolitical crisis in the Middle East that the president and his advisers still haven’t gotten a handle on.

Full article at http://news.yahoo.com/s/dailybeast/20110502/ts_dailybeast/13790_niallfergusonthegreatinflationofthe2010s

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