A Quick Glance At Real World Inflation

Tyler Durden's picture

The Casey Report provides a useful glance at the real inflation currently ravaging items that are actually purchased by Americans, not those captured by the Fed's BLS statistics: "On average, our basic food costs have increased by an incredible 48% over the last year (measured by wheat, corn, oats, and canola prices). From the price at the pump to heating your stove, energy costs are up 23% on average (heating oil, gasoline, natural gas). A little protein at dinner is now 39% higher (beef and pork), and your morning cup of coffee with a little sugar has risen by 36% since last October." Of course, the ongoing deflation in items purchases requiring leverage will continue to skew the CPI so far south to make all those who bought 5 Year TIPS yesterday at negative yields end up losing money on the transaction.

Chart of the Week: Inflation in the Real World, by Jake Webber of Casey Report

As is often the case, there is a big difference between what the
government statistics are reporting and what’s going on in the real
world. According to the most recent inflation reading published by the
Bureau of Labor Statistics (BLS), consumer prices grew at an annual rate
of just 1.1% in August.

The government has an incentive to distort CPI numbers, for reasons such
as keeping the cost-of-living adjustment for Social Security payments
low. While there’s no question that you may be able to get a good deal
on a new car or a flat-screen TV today, how often are you really buying
these things? When you look at the real costs of everyday life, prices
have risen sharply over the last year. For simplicity’s sake, consider
the cash market prices on some basic commodities.

On average, our basic food costs have increased by an incredible 48%
over the last year (measured by wheat, corn, oats, and canola prices).
From the price at the pump to heating your stove, energy costs are up
23% on average (heating oil, gasoline, natural gas). A little protein at
dinner is now 39% higher (beef and pork), and your morning cup of
coffee with a little sugar has risen by 36% since last October. 

You probably aren’t buying new linens or shopping for copper piping at
the hardware store every day, but I included these items to show the
inflationary pressures on some other basic materials that will likely
affect consumer prices down the road. 

The jump in gold and silver prices illustrates that it’s not just
supply and demand issues driving the precious metals higher – the
decline in purchasing power of the dollar is also showing up in the
price of physical goods. It is because stashing wheat and cotton in the
garage is an impractical way to protect purchasing power that
investors are increasingly looking to protect themselves with the
monetary metals – a trend that is now very much in motion.