On his Contra Corner this week, David Stockman, former budget director during the Reagan administration and author of “The Great Deformation,” published a series of charts illustrating the fact that the United States has undergone serious price inflation since the year 2000.
Despite the Federal Reserve and Wall Street experts arguing that the U.S. is experiencing deflation, Stockman utilized economic data to highlight the fact that the average household has had to deal with immense price inflation for everyday products for the past decade.
“Inflation has continued to run below the committee’s two percent objective… the FOMC continues to expect inflation to move gradually back towards its objective….(but)… is mindful that inflation running persistently below its objective could pose risks to economic performance,” said Fed Chair Janet Yellen.
This is no accident of course. The Federal Reserve’s money printing ways have caused the rising prices of meat, oil, coffee and eggs. The ultra-rich might not be suffering from this price inflation, but the low- and middle-class are. When the central bank prints obscene amounts of money, it benefits the well-connected, the affluent and the elite, but as the money trickles through the system the rest of us are stuck with devalued money.
Here are some of the examples Stockman provided readers with in his “Let them eat iPads” blog post:
– Barrel of oil: $24.11 in Jan. 2000 | $100 in Mar. 2014 | 314.8 percent increase
– Gallon of gas: $1.27 in Jan. 2000 | $3.51 in Mar. 2014 | 176.4 percent increase
– Dozen eggs: $0.97 in Jan. 2000 | $2.00 in Mar. 2014 | 106.2 percent increase
– Movie ticket: $5.25 in Jan. 2000 | $10.25 in Mar. 2014 | 95.2 percent increase
– Postage stamp: $0.33 in Jan. 2000 | $0.49 in Mar. 2014 | 48.5 percent increase
We reported this week that the U.S. Department and Agriculture projected higher price food inflation this year and pegged the number between 2.5 and 3.5 percent. For the past six to eight years, food price inflation was higher than overall price inflation.
Here is what Henry Hazlitt had to say about inflation from his 1964 work “What You Should Know About Inflation”:
“Let us see what happens under inflation, and why it happens. When the supply of money is increased, people have more money to offer for goods. If the supply of goods does not increase — or does not increase as much as the supply of money — then the prices of goods will go up. Each individual dollar becomes less valuable because there are more dollars. Therefore more of them will be offered against, say, a pair of shoes or a hundred bushels of wheat than before. A “price” is an exchange ratio between a dollar and a unit of goods. When people have more dollars, they value each dollar less. Goods then rise in price, not because goods are scarcer than before, but because dollars are more abundant.”
So when Fed Chair Janet Yellen promises the American people that she will “do all that I can,” be afraid. Be very afraid, especially when you look at your wallet and the devalued funds in your savings account.