Consumer Prices: Ugly


This looks interesting….

The Consumer Price Index for All Urban Consumers (CPI-U) increased  0.4 percent in January on a seasonally adjusted basis, the U.S.  Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.6 percent before seasonal adjustment.

Increases in indexes for energy commodities and for food accounted for over two thirds of the all items increase. The indexes for gasoline and fuel oil both increased in January, continuing their recent strong upward trend. The index for food at home posted its largest increase in over two years with all six major grocery store food group indexes rising.


Naw, nobody needs to buy those things, right?  Ha!

The energy index has increased 7.3 percent over the last 12 months, with the gasoline index up 13.4 percent.

Gee, that’s not a big deal, right?

Now let’s look inside the PDF version and see what sort of surprise is in the table?

Let’s see…. we commonly hear that monetary policy has a lag.  Like, oh, six months or so. 

Well, we’re about there, right?  So let’s see, if we take those last two prints and annualize them (1.004 ^ 12) we get a 4.91% annual “inflation” rate.  Is this “stable” prices Ben?

You folks know my view on this.  Inflation is manifested in prices but it’s not prices.  That is, CPI is a horsecrap measurement, because inflation and deflation is defined by the change in money and credit compared against GDP.  The Austrians will tell you it’s just money supply.  I argue that this is a bad definition because money and credit spend the same, and fungible things must be counted equally.

In any event there are some real stunners in the unadjusted numbers, which I’ll highlight for you:

These are big annualized changes, and they’re in places where the lower-income people in this nation cannot afford them.

Food, particularly healthy food, cooking oils and similar essentials for preparation, heating fuel, water, sewer and trash collection, gasoline, used cars and public transport are all places that hit the lower income American (those at the 50th percentile and below) radically hard.

The brainstems in Washington DC, including Bernanke, will never get their arms around these numbers and recognize that they are absolutely destroying the majority of the population – which, incidentally, have to be able to function and keep their cool in order for all the fatcats to be able to keep their jobs and keep the economy “moving.”

When you look at the actual percentage of income that these people spend in this area – virtually all, when you get down to it – this is the sort of squeeze that, if it continues, has the potential to produce severe political and civil problems.

No, we’re not Egypt. 


The Market-Ticker