Inflation is Dead? Part II

Monday, September 24, 2007 | 07:45 AM

Last week, we noted that Reports of the Death of Inflation Have Been Greatly Exaggerated. The greenback has been in freefall, and that means the prices we (Americans) pay for commodities just goes higher.

A few examples: Oil is at an all-time high, having broken through $83 last week. 2008 could be the year we see Crude hit triple digits. Gold is at a 28-year high, having broken through $735, with $800 a realistic possibility. Copper is soaring.

Agflation is very strong: Wheat recently made all-time highs, along with recent big moves in Orange Juice, Corn, and Soybeans. Dairy prices are out of control, up nearly 100% over 24 months.

Just last week, CNBC ran a segment titled, “Is Inflation Dead?” (It should have been titled "Is Journalism Dead?")

In light of all of these screaming prices, you know I have little faith in that BLS report of 0.1% decline in CPI. (Who are ya gonna believe, Us, or your lyin' eyes?)

Let's take a closer look at CPI:

Cpi_9_07

BLS Table A.  Percent changes in CPI for All Urban Consumers (CPI-U)

>
The BLS has transportation costs down 1.2%.Look at the above BLS table under the ‘compound annual rate 3-mos ended Aug ‘07’ column. Transportation costs are down 6.6%; energy prices are down 17.5%.

The benign CPI is due to lower energy costs over the past three months. Of course, the record surge in energy prices this month negates this. The September energy prices should be up more than the above 3-month declines.  What do you want to bet that somehow this will be dismissed?

Yet every delivery comes with a fuel surcharge, and we are told ‘motor fuel’ costs are decreasing.

It appears that some of the public is no longer buying this nonsense. Here's the results of today's WSJ survey. When asked the question "Which is most likely to become a problem with the economy?," well over half -- 63% -- said either inflation or stagflation:

Inf_rec_stag

~~~

Now that the Fed has all but abandoned their mandate of price stability, I suspect we are going to be seeing much higher costs for all commodities, foodstuffs, energy , metals over the next 12 months . . .

Monday, September 24, 2007 | 07:45 AM | Permalink | Comments (65) | TrackBack (1)
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Listed below are links to weblogs that reference Inflation is Dead? Part II:

» Bloomberg: CPI Inflation Data is a "Lie" from The Big Picture
We have long railed against the absurdity of the CPI data. The ridiculous adjustments, the lack of correlation between CPI prices and reality, as well as the Fed focus on the core (inflation ex-inflation). For the most part, the media has dutifully rep... [Read More]

Tracked on Sep 26, 2007 7:22:35 AM

Comments

I try to judge inflation from my day to day life. Buying things such as groceries, dry cleaning, etc are clearly more expensive then before.

Posted by: Banker | Sep 24, 2007 7:48:57 AM

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