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Inflation Is Too Low? Are You Kidding Us Bernanke?
Submitted by Michael Snyder via The Economic Collapse blog,
Federal Reserve Chairman Ben Bernanke said this week that inflation in the United States needs to be higher. Yes, he actually came right out and said that. It almost seems as if Bernanke is trying to purposely hurt the middle class. On Wednesday, Bernanke told the press that "both sides of our mandate are saying we need to be more accommodative".
Of course he was referring to the Fed's dual mandate to keep unemployment and inflation low, but Bernanke has a very unique interpretation of that mandate. According to Bernanke, inflation in the U.S. is now "too low". The official inflation rate is currently sitting at about 1 percent, and Bernanke insists that such a low rate of inflation is not good for the economy. He would prefer that the rate of inflation be up around 2 percent, and he is hoping that more "monetary accommodation" will help push inflation up and the unemployment rate down.
But what Bernanke will never admit is that the official inflation rate is a total sham. The way that inflation is calculated has changed more than 20 times since 1978, and each time it has been changed the goal has been to make it appear to be lower than it actually is.
If the rate of inflation was still calculated the way that it was back in 1980, it would be about 8 percent right now and everyone would be screaming about the fact that inflation is way too high.
But instead, Bernanke can get away with claiming that inflation is "too low" because the official government numbers back him up.
Of course many of us already know that inflation is out of control without even looking at any numbers. We are spending a lot more on the things that we buy on a regular basis than we used to.
For example, when Barack Obama first entered the White House, the average price of a gallon of gasoline was $1.84. Today, the average price of a gallon of gasoline has nearly doubled. It is currently sitting at $3.49, but when I filled up my vehicle yesterday I paid nearly $4.00 a gallon.
And of course the price of gasoline influences the price of almost every product in the entire country, since almost everything that we buy has to be transported in some manner.
But that is just one example.
Our monthly bills also seem to keep growing at a very brisk pace.
Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row, and according to USA Today water bills have actually tripled over the past 12 years in some areas of the country.
No inflation there, eh?
Well, what about health insurance?
Yup, that has been going up rapidly as well. Since 2010, employee health insurance premiums have been rising an average of between 8 and 9 percent a year.
So where is this low inflation that everyone has been talking about?
It certainly cannot be found in college tuition costs. Since 1986, the cost of college tuition in the United States has risen by 498 percent.
What about at the supermarket?
We all have to buy food. It sure would be nice if inflation was low there.
Unfortunately, anyone that shops for groceries on a regular basis knows exactly how painful food prices are becoming.
And over time, those increases really add up. An article by Benny Johnson details how the prices of many of the things that we buy on a regular basis absolutely soared between 2002 and 2012. Just check out these price increases...
- Eggs: 73%
- Coffee: 90%
- Peanut Butter: 40%
- Milk: 26%
- A Loaf Of White Bread: 39%
- Spaghetti And Macaroni: 44%
- Orange Juice: 46%
- Red Delicious Apples: 43%
- Beer: 25%
- Wine: 60%
- Electricity: 42%
- Margarine: 143%
- Tomatoes: 22%
- Turkey: 56%
- Ground Beef: 61%
- Chocolate Chip Cookies: 39%
So how in the world can Bernanke possibly come to the conclusion that inflation is too low?
Is he insane?
If you want to see a really good example of the impact that inflation has had on our economy in recent years, just check out this amazing chart which shows what Bernanke's reckless policies have done to the prices of commodities during his tenure.
Meanwhile, paychecks are not rising at the same pace that inflation is. In fact, median household income in the United States has fallen for four years in a row. Overall, it has declined by over $4000 during that time span.
So the cost of living just keeps rising, but the middle class is making less money than before.
That certainly is not good news.
Of course a big reason for this is because the quality of jobs in America continues to steadily decline. Only 47 percent of adults have a full-time job at this point, and 53 percent of all American workers make less than $30,000 a year.
Most families are just barely scraping by from month to month, and Bernanke has the gall to say that he needs to try to get prices to rise even faster.
Is Bernanke also going to increase all of our paychecks in order to make up for the "inflation tax" that is being imposed on all of us?
Of course not.
And sadly, it appears that the number of Americans that are losing their jobs is starting to move upward again. We just learned that initial claims for unemployment benefits rose to 360,000 last week.
That is getting dangerously close to the 400,000 number that I keep talking about.
The middle class in the United States is shrinking with each passing day, and Bernanke seems absolutely clueless.
His answer to every economic problem always seems to involve printing more money. Thankfully, about 1.8 trillion dollars of that money is being stashed away at the Fed and has not gotten out into the real economy yet.
But someday that money will be unleashed on the real economy, and it will create crippling inflation.
Unfortunately, Bernanke doesn't seem to really be too concerned about the mountains of cash that the big banks have parked at the Fed. He is just happy that his reckless money printing has pumped up the stock market to new all-time highs.
He should enjoy this little period of euphoria while he can, because this bubble will burst like all false financial bubbles eventually do.
And when this bubble bursts, the foolishness of Bernanke and the Federal Reserve will be glaringly apparent to everyone.
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Went to store yesterday, a 12 pack of weight watchers diet root beer that was 1.99 now 2.39.Bunch of other items clearly went up.Ctrl+P really kicking in.That is a 12% increase. However,the store i went to was a discounted store of a chain and people shopping there appeared not the weight concious.
I watched Berskanke make that statement about inflation, and - after I picked my jaw up off the ground - I wanted to punch the fucker in the mouth. He is pure, pitch black evil...and should be strung up by his wee willie in hell watching the bugs eat his cooter for all eternity.
But I'm not bitter.
I wish one man was responsible for the mess we're in but I don't believe that is the case. But certainly understand your disdain for the Bernanke.
"The middle class in the United States is shrinking with each passing day, and Bernanke seems absolutely clueless".
Of course the author is being rhetorical but Bernanke is not clueless. It's all theater of the absurd and he has the co-lead in this tragic play. And the middle class is not shrinking, it's merging with the lower class. It's essentially the same language but I think it's important to verbalize just where this transit ends. When you say the middle class is shrinking, that sounds like they just disappear or fall of the earth somehow. A better way to say it in my opinion is the ranks of the poor are swelling. Or the new middle class is just poor. If the middle class is shrinking then they are now among the invisible poor.
So now instead of referring to the lower class as poor, we should call them the invisible class because that is more accurate.
"So now instead of referring to the lower class as poor, we should call them the invisible class because that is more accurate."
No, no the new middle class are the poor, it's called poverty redistribution. There will be a show on TV soon telling everyone how good it is to on your knees, fronted by a Kardashian.
If inflation kicks in anymore for food and gas, people will have to stop paying their rent and mortgage and just stock up on food.
I honestly don't see the inflation you're talking about, other than gas. But wasn't gas like $4.50 a few years ago?
I think there's a difference between isolated items that are increasing in price for their own reasons and things that are increasing in price because the dollar is becoming devalued.
I think most of what you cite is the prior not the former.
Of course gas is more expensive. But then again, we now have cars that get 30-40 MPG. So in some ways that's a wash for standard of living.
I don't see the food price increases that most people complain about. Most prices now are the same as 5 years ago. But I don't buy much beef, lobster, crab, caviar, so maybe I'm out of the loop.
Health care and education are bubbles.
Housing is the cheapest it's been in 15 years. My house is now worth 20% less than when I bought it in 1995.
Bernanke should be afraid of deflation. And he is right. Inflation SHOULD be raging with all the money printing going on. And it's not. In fact we have more signs of deflation than inflation.
Don't believe me? Do you sell anything? If money is so devalued and we have such high inflation...why is it so hard to sell anything? Why are people so frugal, why do they expect discounts and wait for lower prices?
I've noticed a huge decline recently in my ability to sell anything. I have to sell well below market, blue book, whatever.
That's a sign of deflaton.
Assets values are not the determining factor of Inflation, they are merely a side-effect of it.
There has never been deflation in the history of the Fed.
This is called stagflation.
These bastards use the geometric mean to calculate the CPI, which produces a figure less than the arithmatic mean. Someome should come up with the household inflation index.
You know cut all the crap out, and report it the way it is. Include everything food, fuel, taxes, mortgage interest, credit card interest.....etc
You know it is really fucking simple.
Then there's hedonics;
Your new ipad twice as fast as your old ipad so even though it's 30% more expensive, inflation is in fact negative.
Here is what Jim Sinclair has to say about our situation in the US and why owning gold is a winner:
1. First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.
2. This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella – Goldilocks situations.
3. We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.
4. The formula economically is inherent in #2 which is lower economic activity equals lower profits.
5. Lower profits leads to lower Federal Tax revenues.
6. Lower Federal tax revenues in the face of increased Federal spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.
7. The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.
8. The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit).
9. It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.
10. If the investment by non US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.
11. Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.
12. This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.
Therefore as you get to #12 you are automatically right back at #1. This is an economic downward spiral.
I heard all this “slow business” as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now.
The only reason they say inflation is way too low is because they want another reason to go all-in on money printing/bond buying. Relative to other years, it appears we are headed for a deflationary period, but by traditional standards of calculating inflation we all know that "transitory" numbers should be included.
http://www.usinflationcalculator.com/inflation/historical-inflation-rates/
his goal, and central bankers goal everywhere has been and will always be to inflate away the debt. not debt write offs, that simple.
it's why we really have in fact stagflation
Actually, the inflation he talks about is in wages. If you watch the Fed closely, the only time they really start to panic and act is when wage rates start to rise. Laborers are not allowed to participate in the great inflation and thus when labor costs start to rise, that is when the Fed will bring down the hammer
Bernankesan calls it 'core inflation' btw. So without gasoline and food in it which is ridiculous indeed.
Bernakestan is not a carbon based unit. He has a vacuous core.
What Bernanke is not telling you is the rate of growth of debt in the current economic model is too high created by the increased efficiency of the system. They can puzzle it all they want they know full well what is happening. Just not got the guts to admit it honestly and eat humble pie.
They look for answers? Here is the thing if the answer is not what they want they will ignore it. could even argue until central banks eat humble pie on economics economies everywhere are going to lurch from one disaster to another until the new normal will be the persistant disaster.
It bugs me when people talk about the price of gas when Obama came into office. Yes, it was lower because the economy was in the toilet. During W.'s term, June 2008, price of gas, $4.05. Presidents have little control over the price of gas, yet most people blame them.
"Welcome to the real world."
They also like to keep the price of gas low during election periods so that it doesn't become a hot button issue. The last thing the oil oligarchs want is a bunch of anti oil vigilantes to invade congress
So the economy isn't in the toliet now? Seems to me we have low demand for oil products and high prices, not the same as what happened during the end of Bush's term.
We had a spike in fuel prices with HIGH DEMAND which CAUSED the housing meltdown that was just waiting for something like that to happen to overextended budgets.
Since that crash we have had reduced demand for fuel with higher prices.
"U.S. motor gasoline consumption peaked at 142 billion gallons in 2007. In each year since, American drivers have used less gasoline. In 2012, gas use came in at 134 billion gallons, down 6 percent off the high mark."
http://www.earth-policy.org/data_highlights/2013/highlights38
Yes, Presidents do have little direct control over the price of gas, but they have enormous influence on the direction of an economy and the people. By using reverse incentives such as food stamps, extended unemployment and sham disability payments a President can make it attractive for a person to not seek work. That is reality. Party neutral.
Welcome to the fact based real world, Took Red Pill.
Crazy Bennie - His prices are insane!
Moar better Inflation!
2014, Inflation was running away in America.
"Hey, Bill, you just cash your paycheck?"
"Yeah. Why?"
"Grab your wallet, it's floating off the counter."
"Damn Inflation."
"Yeah, I heard they are putting cinderblocks inside ATMs nowadays."
What the Bernank means by low inflation is that Beluga Caviar, Bugatti Veyrons, Falcon Jets, villas on the French Riviera, and Chateau Lafittes have not gone up much in price lately.
I worked with non-union welders as an electrician in 1989. They made $15/hr just like me. My son who has all the certifications was making $13/hr one month ago in NY at Mohawk Lifts. I could buy 15 gallons of gasoline for $15; he could only buy 3. HOPE the 25yr old can find a new job here in Tennessee AND I can CHANGE my food expenses. This unemployed 240lb man eats more than me and my wife put togther.
umm... any voice claiming this is poor judgement or insanity.. by the CP apparatus... is fucking ignorant.
this is by design jackwagon... they know EXACTLY what they are doing...
Im going to play devils advocate here for a moment .The are many reasons I think, Ben thinks we need a weaker $ (and when I say Ben, I mean the power behind Ben). As long as the $ is the reserve currency we can export inflation. Ask yourself this, can the world afford for China and India have a middle class as we have had here in the US? For arguments sake say both these countries have a middle class that is 25% of their respective populations. That would mean another 550 million people living as we have here in America. This would be impossible since there is no way the world could produce enough energy to sustain that sort of increase in consumption. So the banks print themselves $ to make themselves whole again and the emerging markets get beaten down by inflation. Win Win!!
the US doesnt even have 25% of pop as middle class. indian and chinese middle class is defined by people who eat 2+ meals a day and half pound of meat a week and own a bicycle free and clear.
the fantasy that a american-like middle class in china and india exists (or will ever exist) to buy US goods (what do we produce here exaclty? oh yea, movies and video games)...will never come true, their middle classes will be the producers of those goods/services themselves
the west future will be to decline and grow slower until other countries 'catch up'--relatively speaking of course. the us/west has seen peak standard of living for about two generations. the US itself will resemble the rest of the planet: major global urban centers, rural low wage/poverty where natural resources are harvested by global entities; vacation zones employing low wage, high capital cost ventures (think cozumel = orlando resort infrastructure). for those in the west today.....you must get out and stay out of debt, do not buy real estate unless you can pay it off in 5 yeears great grand pappy-style.
anyone else notice how all the packages are smaller? oceanspray now is 60 oz, not 64 oz; that bag of ground coffee? used to be 1lb; now its 12oz. we still get way more than a person needs (fat and getting fatter)....but its the trend that makes people feel uncomfortable. like the housing recovery....some are truly up from 2007, many are 'not as bad' thus its a recovery. not feeling pain feels like progress, but really its just the meds
I posted a formula to help you calculate the real annual rate of inflation from two absolute prices here:
http://www.zerohedge.com/news/2013-06-15/222-years-gold-wars-inflation-e...
The inflation rate for the last decade has been closer to 8% in reality than the 2% which is claimed.
Conspiracy theories aside, the main reason inflation is under-reported in all Western countries is simply to do with money: with social welfare adjustments, inflation protected bonds, wage increases etc. tied to CPI (or a derivative thereof) it’s in the government's interest to keep the official rate reported as low as possible otherwise budget deficits, bad enough now, would be of a significant order of magnitude higher. The people supposedly in control will do anything to hide the fact that they are not actually in control of anything. The political manipulation of CPI measurement has been institutionalized since at least Clinton, when that administration decided to strip out the "volatile" food and energy components. Like it’s not as though we need to either eat or keep ourselves warm.
Bernanke is disingenuous when he says he would like to see inflation higher and that the US risk's deflation. We know the latter is simply not true, at least for anyone who buys anything. If inflation was higher (from 1% to 2% in his world) what would that mean for the real inflation rate? Would this doubling equate going from 8% to 16% for the true rate? Is it any surprise that the number of people of food stamps has risen significantly over the last 5 years when the currency has been subject to perhaps the most significant debasement in modern times? The most serious charge is that Bernanke is either ignorant of the real world, entirely feasible as an academic, or simply a puppet of political or institutional powers.
It seems it’s been a long time since "we the people" were actually served properly and honestly by either the political class or the institutions that they created on our behalf.
Conspiracy theories aside, the main reason inflation is under-reported in all Western countries is simply to do with money: with social welfare adjustments, inflation protected bonds, wage increases etc. tied to CPI (or a derivative thereof) it’s in the government's interest to keep the official rate reported as low as possible otherwise budget deficits, bad enough now, would be of a significant order of magnitude higher. The people supposedly in control will do anything to hide the fact that they are not actually in control of anything. The political manipulation of CPI measurement has been institutionalized since at least Clinton, when that administration decided to strip out the "volatile" food and energy components. Like it’s not as though we need to either eat or keep ourselves warm.
Bernanke is disingenuous when he says he would like to see inflation higher and that the US risk's deflation. We know the latter is simply not true, at least for anyone who buys anything. If inflation was higher (from 1% to 2% in his world) what would that mean for the real inflation rate? Would this doubling equate going from 8% to 16% for the true rate? Is it any surprise that the number of people of food stamps has risen significantly over the last 5 years when the currency has been subject to perhaps the most significant debasement in modern times? The most serious charge is that Bernanke is either ignorant of the real world, entirely feasible as an academic, or simply a puppet of political or institutional powers.
It seems it’s been a long time since "we the people" were actually served properly and honestly by either the political class or the institutions that they created on our behalf.
I've added the annual inflation rate required to get the increases mentioned, over a decade 2002 -> 2012.
Apparently only tomatoes are hitting the 2% inflation target. Good for them. It should be noted though. The USA is in a very privileged position as the holder and printer of the world reserve currency... This allows the US to export it's inflation to the rest of the world..... Particularly to creditor/ trade partner nations, like China who are obliged to hold large dollar reserves.
It might be enlightening to ask the Chinese who have pegged their currency mostly to the USD what the inflation really feels like there.
Silver Dow Ratio at the 2011 Silver Top was 260:1, today it is 773:1. If that doesnt tell you the time to load up on physical silver is NOW, then you might be retarded.
The Gold/Silver Ratio at the Silver Top in 2011 was 31:1, today it is 64.5:1, another sign of a major bottom. Buy silver now.
The Gold Dow Ratio at the 2011 top was 5.79:1, today it is 11.96:1, another sign of a bottom in Gold. Time to buy physical.
What Bernanke is really worried about are the deflationary forces working their way through the system.
Money (currency) velocity is now at the lowest rate ever measured and is still dropping. It's going to drop a lot further yet. In fact, I estimate it'll probably fall for the next ten years before it starts to reverse.
http://research.stlouisfed.org/fred2/series/M2V/
Note that it peaked almost 20 years ago and has been dropping since. This is virtual deflation. This is what worries Bernanke.
Product strinkage should also be included. My washing soap powder used to give 28washes at 2.25kg. Now its 25washes at 2Kg, price is slight higher to. First they reduced the weight but kept the original box size. Now they made the box very much smaller since there used to be a lot of air. Probably reducing shipping costs. All of this is inflation.
...
And Yesterday this:http://www.foxbusiness.com/economy/2013/07/12/wholesale-inflation-rises-...
Low inflation / deflation = bankers do not benefit as much, general population does
High inflation = bankers benefit, population doesn't
That is all there is to say about central banking. It's nothing but organized robbery on the largest possible scale. Rest is BS.