Monday, August 22, 2011

Bedtime Story: Inflation at 2%

Quantitative Easing 2 was supposed to revive the economy.

Declared as a failure, the US Federal Reserve will meet on Tuesday and ponder it's next steps.  Many wonder if the inevitable QE3 will be announced.

In the meantime, let's take a look at what the reality of what has happened since Ben Bernanke announced his QE2 policy in August 2010:
  • Unleaded gas prices are up 45%.
  • Heating oil prices are up 46%.
  • Corn prices are up 71%.
  • Soybean prices are up 26%.
  • Rice prices are up 13%.
  • Pork prices are up 31%.
  • Beef prices are up 25%.
  • Coffee prices are up 38%.
  • Sugar prices are up 48%.
  • Cotton prices are up 13%.
  • Gold prices are up 42%.
  • Silver prices are up 115%.
  • Copper prices are up 23%.
Never mind those figures though... officially the fictional math of the CPI says inflation is only running at 2 - 3%. 

Riiight.  Makes a good bedtime story tho.

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  1. Another bedtime story put forward by Garth Turner is that these price increases are all due to speculators.

  2. Unemployment = 10%. There's your answer.

  3. Yeah, inflation is at 2%. Does it mean prices can't go up, and up a lot? No, but that's not what inflation is about -- as anon mentioned above, if unemployment is high, wages are stagnant and in the face of high prices we simply buy less. Does it suck? Yep but it's not inflation and the long bond market concurs.