Thursday, November 11, 2010

Thanks, Ben Bernanke

Consumers are having to shell out more for everyday basics. Retail food prices have started to rise after remaining relatively flat for the first half of the year, according to the U.S. Department of Agriculture.

Be it a bushel of wheat from Kansas, a ton of rice from India or a barrel of crude from Saudi Arabia, prices for all manner of commodities are on the rise across the globe, a trend that is starting to pinch American consumers.


The effects are rippling from financial trading floors to local stores, forcing consumers to shell out more for everyday basics — a cup of coffee, a box of cereal, a gallon of gasoline.


Investors and speculators also are pushing up prices as they jump into rising commodity markets. They are being drawn to these so-called hard assets to hedge against inflation and the risk of further devaluation of the dollar and other paper currencies.

Rumblings of inflation grow louder

Sarah Palin on Monday made a speech at a trade-association convention in Phoenix urging Federal Reserve Chairman Ben Bernanke to “cease and desist” his “pump priming”. Palin said the United States, “shouldn’t be playing around with inflation.” She went on to say, "All this pump priming will come at a serious price. And I mean that literally: everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher."

After obtaining a copy of her speech, the Wall Street Journal's Sudeep Reddy wrote an article criticizing Palin's comments about food inflation, saying that, "Grocery prices haven’t risen all that significantly, in fact. The consumer price index’s measure of food and beverages for the first nine months of this year showed average annual inflation of less than 0.6%, the slowest pace on record." NIA finds it unfortunate that Reddy has been brainwashed into believing the government's phony consumer price index (CPI) numbers.


NIA estimates the real rate of annual food inflation in the U.S. to already be 5% and projects that this rate will rise above 10% in early 2011. NIA believes the BLS has been using both geometric weighting and hedonics to artificially manipulate the CPI downward.


When calculating food inflation, the government uses deceptive geometric weighting, which gives a lower weighting to goods that are rising in price and a higher weighting to goods that are falling in price. If the price of steak is rising while the price of hamburgers is falling, the CPI will give a lower weighting to steak and a higher weighting to hamburgers. The government justifies this by saying that expensive steak prices mean Americans are more likely to eat hamburgers. Therefore, the CPI no longer accounts for the price to maintain the same standard of living. The CPI is now calculated based on the realization that America's standard of living has been in decline and the expectation that it will continue to decline in the future.

Americans subconsciously realize that it is becoming a lot harder for them to make ends meet and put food on the table, but they don't realize that inflation is the cause of it. All Americans have heard stories from older relatives about how Hershey bars 45 years ago cost only 5 cents. Americans are aware that the U.S. has already experienced massive price inflation, but they don't look at inflation as a problem because these food price increases occurred over a very long period of time. NIA estimates that at a very minimum, the same U.S. price inflation that occurred over the past 100 years, will occur again over the next 10 years as the Federal Reserve's money printing causes the world to lose confidence in the U.S. dollar.-Sarah Palin Food Inflation Controversy

There's also an interesting picture of the real rate of inflation at the above article, and that is, based on real figures, and not the government's phony ones, an income of $11,800 in 1975 would equal $154,000 in 2010 dollars. The dollar today is virtually worthless compared to its value 100 years ago when the Federal Reserve was created. The inflation has been going on all along, sometimes at a more rapid pace, as in the 1970s, sometimes much slower, as in the period since then, but still ever eroding the purchasing power of American consumers.

The Hershey Bar is a good indicator of price inflation since everyone can easily relate to it. My dad has told of being able to go into the corner market when he was growing up and walk out with a bag full of candy for a quarter.

Here's a "Hershey Bar Index" showing the price of a simple chocolate bar over the decades:

[1908] 9/16 oz.....2 cents
[1918] 16/16 oz.....3 cents
[1920] 9/16 oz.....3 cents
[1921] 1 oz.....5 cents
[1924] 1 3/8 oz.....5 cents
[1930] 2 oz.....5 cents
[1933] 1 7/8 oz.....5 cents
[1936] 1 1/2 oz.....5 cents
[1937] 1 5/8 oz.....5 cents
[1938] 1 3/8 oz.....5 cents
[1939] 1 5/8 oz.....5 cents
[1941] 1 1/4 oz.....5 cents
[1944] 1 5/8 oz.....5 cents
[1946] 1 1/2 oz.....5 cents
[1947] 1 oz.....5 cents
[1954] 7/8 oz.....5 cents
[1955] 1 oz.....5 cents
[1958] 7/8 oz.....5 cents
[1960] 1 oz.....5 cents
[1963] 7/8 oz......5 cents
[1965] 1 oz.....5 cents
[1966] 7/8 oz.....5 cents
[1968] 3/4 oz.....5 cents
[1969] 1 1/2 oz.....10 cents
[1970] 1 3/8 oz.....10 cents
[1973] 1.26 oz......10 cents
[1974] 1.4 oz.....15 cents
[1976] 1.2 oz.....15 cents
[1977] 1.2 oz......20 cents
[1978] 1.2 oz.....25 cents
[1980] 1.05 oz.....25 cents
[1982] 1.45 oz.....30 cents
[1983] 1.45 oz.....35 cents
[1986] 1.45 oz.....40 cents
[1986] 1.65 oz.....40 cents

Of course, since 1986 the price has doubled or more. But look how stable pricing remained up until about the point that the dollar was removed completely from its last remaining ties to gold (by Richard Nixon in 1971). For almost 50 years the Hershey Bar stayed at 5 cents, but look what happened in less than 20 years, from 1969 (10 cents) to 1986 (40 cents)- a quadrupling of the cost.

All of this illustrates perfectly an answer to a statement in the comments
here by cjackb: "I don't understand the whole obsession on the far right with returning to the gold standard...Also, if you look at it from a "who benefits" perspective, the people with the economic power under a gold standard are the people who control the price of gold. The people with the power under a loose standard are the people who control the printing of money. Now you cannot tell me that the same people would not be in control in both situations. In other words, it does not matter what the standard is because Goldman Sachs will control it no matter what."

Well, the ordinary working person can't have their income and their savings destroyed by inflation when a currency is based on something that has real value, like gold. So indeed, it does matter, and it's so simple I don't understand the whole blase attitude of someone like cjackb to what amounts to Monopoly money being printed by the central banks of the world.

Here's a quote by moron Paul Krugman:

The current world monetary system assigns no special role to gold; indeed, the Federal Reserve is not obliged to tie the dollar to anything. It can print as much or as little money as it deems appropriate.

It's called counterfeiting if you or I do the same thing, though.


  1. I've asked this before and I got blank stares, but I'll try again...

    How are you going to go to a gold standard with a currency that has more money printed than enough gold on the planet to back it?

  2. You first end central banking, then one possiblilty is a transition to a system of private currencies. If you want Zimbabwe play money, fine, but at least let the rest of us opt out of the con game.

  3. If you want to return to something "real" on which to base our currency, then at least make it something sustainable-- something that does not ruin the planet when it's harvested. Base the currency on trees, or on a biomass index.

    Not that I favor such a monetary standard. The truth is that Bret is right. We have created a detached, inflated currency, and to return to something real would be devastating for the middle class.

    But this is all irrelevant. In both the short and long terms, we have bigger problems than inflation. In the short term, the danger lies with deflation-- the sort of deflation that Japan has experienced. In the long term, the problem is that we are creating a vast underclass in the U.S. with no opportunity and few educational prospects. We also are in the midst of a worldwide ecological crisis. So yeah, this gold standard debate seems really silly.

  4. We have created a detached, inflated currency, and to return to something real would be devastating for the middle class.

    Working people can't truly save or plan for the future when inflation destroys their dollars, and inflation further promotes a dangerous mentality of "spend now". It's also corrosive of the basic values of a society. That's what is devasting to the middle class.

    I don't buy the deflation fears (we need deflation in an economic downturn, it's a positive when you don't have to pay as much for stuff!), but the Fed will make sure that doesn't happen. Devastating inflation is coming, I believe within two years or so.

    As for fiat currency, it's on its last legs.

  5. The “detached” inflated currency is a fraud, always was.

    As long as the banking system can create “new” debt based money via the fractional reserve and the Fed can continue to devalue the money by adding more zeros into the system we are going to see this ponzi scheme fail.

    Inflation is the theft of value by the powerful banking elite it is theft pure and simple. John Maynard Keynes was a fraud his collectivist approach now almost worshiped is based on the worst of stupidity - in our case that “elected” officials voted into office by idiots actually have the talent to produce anything other than greed, theft, graft, and increased wealth and power for the oligarchy.

  6. I realize that a big theme of this blog is that government and corporate power are the same. I do not agree with this conflation. You also seem to think that switching to hard currency would take away a critical tool in the oligarchy's tool chest. It won't. The gold standard did not limit oligarchical control during the Gilded Age. Instead, the oligarchy thrived, and workers were treated like slaves. You want to go back to those times? Then give up on democratic action and demonize government.

    Like it or not, government power is the only check on the oligarchy. If you are worried about government abusing its power, then fine, but at least you have a voice in government. You have no such voice in the oligarchy. And Keynes? Keynes simply discovered a way for governments to control market forces, so that the people would not have to submit to the "will of the market". And you know what? We still do not have to submit. We still have power. Why don't you libertarians want to use it?

  7. cjackb has a point; at least you have a voice in government.

    Keynes is irrelevant now. You can't "control" market forces anymore you can't "gravity." It's a myth. Unless of course, you take over the markets outright at which point it ceases to be a market.

  8. Of course, we can debate the effectiveness of that voice.

  9. at least you have a voice in government.

    Oh come on, T.C.! Have you learned nothing from all your visits here?

  10. Heh. "Technically" you have a voice.


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