So where is the inflation?

Sadie has another good suggestion:

“Need another’s one.  Anyone else notice the cost of gas and food lately. The food doesn’t get to the shelves by magic wand or windmills. The rise in the cost of a barrel effects everything and everyone.

“Five dollars per gallon of gas by 2012! A former president of Shell Oil considers this likely.
The average price on Christmas Day for a gallon of regular gas reached $3.28 in Los Angeles County, the highest price since October 2008. In one month, the price rose 13 cents, up 35 cents year to year.

“Read more at the Washington Examiner:

When the stimulus bill passed several conservatives I know predicted massive inflation before 2009 ended.  Here we are at the end of 2010 and we haven’t seen much of it, except in food and energy.  Even there, the price of oil has increased 2 1/2 times over its lows and the price of gas has not (I don’t believe; I haven’t looked it up) kept pace.  So, where is the inflation aside from in oil and oil-reliant produced and services?  When will it get here and, when (and if) it does, what will it look like and what effects will it have?

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  • 11B40

    As for food inflation, I attribute it in part to a bit of governmental finagling a while back in which food items were either de-emphasized or removed from the data used to calculate the published overall inflation rate. Since I retired, most of my retired business skills end up being re-activated in my food shopping.  Besides the overt price increases, there have also been many of the surreptitious kind, like the incredible shrinking container size and my current personal favorite re-pricing Bell peppers from by the pound to each. Similarly, I have a sense of a quality fall off at Safeway which gets most of my business.  Green onions (scallions), in particular, really seem to have deteriorated quality-wise in spite of increasing prices.
    As to fuel inflation, you start incurring a few trillion per year in debt and the world tends to devalue your money, thus increasing prices.  Similarly, our Arab/Muslim brothers have no reason to fear the old USofA getting back into the oil business in a big way as long a President Obama (peace be upon him) is sitting in the big chair.  As soon as President Obama started closing down the Gulf (of Mexico, that is) and the Federal Reserve started talking about printing another trillion funny money dollars, the sheikhs went ahead and put a little more weight on the old price accelerator pedal.


    Here’s your handy dandy gas buddy chart.

    114B – you’ve covered it. Those of us who are retired and actually have the time to pay attention have, indeed, noticed that costs rising and the packaging shrinking in weight. I’d suggest a food cooperative, but already can second guess that the FDA would find a way to regulate that as well and muck it up.

  • Old Buckeye

    What gripes me about the rise in gas prices is that, under Bush, all we heard when prices went up was that it must be because Bush owned oil stock and Cheney’s Halliburton was involved. Now that prices are back up, we hear no “reason” for it. Given the current regime’s alliances, it seems there could be some not-so-purely-economic reasons for price increases that make more sense than what Bush and Cheney were maligned about.

  • snopercod

    First of all, the CPI is pretty much bogus for most people, and in no way reflects your personal experience. If you look at <a href=””>how it’s weighted</a>, 43% of the CPI-U is made up of “housing costs”. 17% is transportation. 3% is education – but only 15% is food. So for retired guys like me who own our home outright, don’t commute to work, and don’t attend school, over sixty percent of the “official” inflation number is meaningless. OTOH, the prices of all the stuff I do use – food, heating fuel, electricity, etc. – is increasing rapidly.
    Have you seen the price of beef at the supermarket lately? Two days ago I saw a standing rib roast on sale for $65!!! Rib eye steaks now cost $10-$12 each. Even the lowest grade of ground beef is over $2.00 per pound. The price of fish is outrageous as well. $7.50 for two servings of fish sticks? When I was a kid, we ate those because we were poor. I remember back when my grandparents were alive, they used to eat Gruyere cheese as a snack quite frequently. They were both retired and didn’t have a lot of money, but they could afford Gruyere cheese. I saw it in the same supermarket two days ago for $17.50 per pound!
    Thank goodness chicken and canned goods are still cheap, and we have lots of squirrels in neighborhood. If the price of meat goes up much more, it may come to that.

  • David Foster

    The astute analyst John Mauldin has lots of thoughts about inflation/deflation and other matters. (easy registration required)

  • MacG

    Old Buckeye,

    back in mid Decenber I sent this to the Marin IJ;

    Back in 2006 Pelosi said that they a had a common sense plan to control gas prices.  She believed the $2.60 or so was price gouging it is now about $3.40+.  Good thing she put that plan in place otherwise it would be $10 so she is actually saving us $6.60 per gallon right?.  Right?

    I never saw it printed.

  • Spartacus

    Come now, everyone!  Let’s think happy thoughts!
    A former president of Shell says $5 per gallon by 2012.
    If he’s right, there will be another former president in 2013.
    Happy New Year!


    A healthy, happy and joyous year to all and  Bookworm and Family.

  • suek

    Happy New Year to _you_!!
    And You and you and you….and everybody else!!

  • JKB

    MaxedoutMama explains it best.  Food price increases have been eaten in the grocery store margins since they know higher prices will bring reduced sales.  But that buffer has been used up.   farm-prices-dudes-and-dudettes.html
    “Now integrate that with the last few posts showing that over 40% of consumers next year will have less (higher taxes, constrained or reduced nominal incomes) money to live on. Remember that the SS recipients haven’t received an increase in two years. You can throw them all in the barrel with that bottom 40% of earners who got a federal tax increase. And most people are paying higher local fees and taxes.

    …But with the bottom 50% in trouble, don’t expect to see a wave exuberance sweep through the economy. When prices go up for producers but prices cannot go up for consumers (consumers have to restrict purchases because of higher prices), production goes DOWN.”

  • Mike Devx

    No one has yet addressed DQ’s question: Where is the inflation?  I know I expected it to happen very quickly, and I’m shocked that it hasn’t happened yet.  I don’t have an explanation.
    On the other hand, perhaps the fact that we’ve increased the national debt radically is the reason we haven’t yet seen inflation.  Our government budget sits at 3.6 trillion for 2010; The deficit for 2010 was 1.2 trillion.  That’s one third of the budget!  If deficit spending means we hide the problem; if it means we kick the problem into the future the way you kick a can down the road, then we’ve simply managed to defer the inflation beast for another year.
    If that’s true, then it’s profoundly irresponsible, because when reality crashes in upon us, the further you kick the can down that road, the more severe the crisis will be when it hits.  And when the house of cards built on sand collapses, the collapse will be horrifying swifter.
    But I can’t really explain the absence of inflation, because I do hear we’ve been printing extra money as well as relying on that 1.2 trillion in new debt for 2010.  Can any of Book’s readers explain the lack of inflation?

  • JKB

    The “inflation” hasn’t arrived because it is illusionary.  What we are seeing is the attempt by the FED to spur “inflation” to generate a sense of recovery by promoting higher prices.  But the rising prices are due to the Quantitative Easing and the FED targeting inflation.  Food prices have also been impacted by certain failed crops in Russia and other places.  But there is no corresponding ability, will or desire by consumers to spend.  Instead the response to the artificial price hikes is to cut back, thus no inflation, just speculation.  Remember, inflation is a response to an overall increase in “money” available in the market.  But as fast as the FED has been printing, credit has been collapsing.  So the aggregate “money” has remained the same or fallen.  The FED and Obama administration are trying to buy their way out of this hole rather than let prices fall to the point that people start buying again.  The longer they try to prop up housing prices, the longer this lasts and the more painful it is when they do collapse.
    There will be price increases but it isn’t real inflation until enough people start paying them without taking from other spending, i.e., people have jobs, confidence and trust.  Until then it is just speculation churning taking money from food to pay for fuel, taking money from household to pay for food, taking money from recreation to pay for clothes, etc.

  • Charles

    An economist I am not; but here’s my take on this:

    It is not just ONE thing (i.e. oil prices) that can lead to inflation; but several things.  The basic idea behind inflation is that money has less value and therefore people (i.e. business, employees, etc.) want more of it.

    In this economy that has not happened.  What worker (beside a government employee of a union thug) would even try to demand a salary increase when companies are laying off?  Therefore, there is one less reason for inflation – no increase in employee expenses.  In fact, with the many layoffs companies are lowering costs.

    Low interest rates are keeping costs for companies down, way down.  To borrow money today is relatively cheap; again another reason for prices to not increase. If I borrow money to run or start a business then I will have to charge prices to reflect that interest. High interest, then high prices; But, low interest, then low prices. These low interest rates are a good bargain if a business can foresee doing well enogh to pay back the money.

    Consumers are not spending much on “luxury” items.  Despite the MSM claiming that (under Obama is what they seem to imply) consumers are spending more, and have spent more this Christmas season that in the past; I believe that folks are still not spending much on items beyond the basic necessities.  Lower demand is keeping prices down as sellers try to entice buyers to buy.

    In addition, the housing situation is such that folks are not buying homes, instead many folks are moving in with family members to save on rent. or in the very least many are putting off buying homes for fear of what has happened in the housing market in the last couple of years.

    That’s my “uneducated” guess as to why we are not “seeing inflation.”  My real concern is will we soon see a deflation?  That could be worse.


    Suggested read with special emphasis from comment No. 3 ‘eon’ in the link.

  • snopercod

    Charles writes: “Consumers are not spending much on “luxury” items.”
    Howard Davidiowitz proposes at 2 minutes in this video  that there are “two Americas” when it comes to consumer spending. He claims that luxury stores (Tiffany’s, Sachs, etc.) did extremely well this Christmas due to big bonuses on Wall St., plus good times for lawyers, and accountants.  He claims only 30% of America accounted for most of the retail spending in the U.S.
    Then he goes on to explain how Wal-Mart, Sears, Best Buy, Toys ‘R Us, A&P, Loughmans (sp?), Charming Stores, and TJ Maxx (where the rest of us shop) did poorly this year.


    Believe this and I’ll tell ya another story at bedtime. Don’t tell me, these numbers are correct, because we all know they constantly make ‘corrections’ to their corrections.

  • snopercod

    That USDA link is hilarious! Obviously, the folks who came up with those numbers never set foot in a supermarket. For just one example, take apples. Here where I live in the apple-growing area of NC, they’re going for $2.68 per pound at the moment. In the fall of 2007, they were “only” $1.00 per pound. (I know this because I refused to pay that much and planted my own small apple orchard instead.)
    So in reality, the price of apples went up 168% in three years, or roughly 50% per year. The UDSA claims the price of fresh fruits actually went down over the same time frame. I can’t name any fresh fruit that have gone down in price over the last three years, and I do the grocery shopping for the family. I call BS on the USDA.
    Thanks for posting that link.

  • Ymarsakar

    Once people are starving, they’ll bend knee to the authoritarian regime. Darou. Isn’t that the plan.


    Apples up: 168%
    USDA Prime B.S.: up 2000% adjusted for inflation and corrections.
    …and that $65 standing rib roast, was actually sitting – it had a heart attack was in a coma from sticker shock. LOL


    Since there is no thread for Ripley’s Believe it or Not, I thought I’d share this ditty here. President Ponzi and his team (strike team insert scheme) have come up with the perfect catch phrase for 2011 – This is not a game.  Really, does that mean there are no rules either?
    Top White House economic advisor Austan Goolsbee warned Sunday that a congressional failure to rise the nation’s debt limit early this year would be “catastrophic.”
    “It pains me that we would even be talking about this,” Goolsbee told ABC’s “This Week.”
    This is not a game. You know, the debt ceiling is not something to toy with. … If we hit the debt ceiling, that’s essentially defaulting on our obligations, which is totally unprecedented in American history. The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008.”

  • snopercod

    Sadie– “This is not a game”. I think you’ve discovered the latest Democrat talking point there. Anthony Weiner said the same thing in this video:

  • Danny Lemieux

    It may not be a game, but the Democrat Left certainly has made the national debt the stuff of late-night trash-comedy these past four years.

  • suek

    The correct pronunciation of Weiner’s name (assuming a German derivative) is “whiner”.
    It’s _so_ right!


    It’s so right! And he’s sooo left.