Double Digit Inflation has Arrived

By Greg Hunter’s USAWatchdog.com

New inflation figures were released by the government last week, and the news was not good.  The headline inflation number was 3.2% in the 12 months that ended in April.  That is more than a percent above the Federal Reserve’s “target” rate of 2% and the first time it has been more than 3% in over 2 ½ years.  Of course, the accounting gimmicks used by the Bureau of Labor Statistics (BLS) understate true inflation, so things look better than reality. Nonetheless, in the latest report from economist John Williams of Shadowstats.com, even the government’s own “official” numbers will likely show double digit inflation in the next three months or so.  The reason is continued money printing in the form of another round of Quantitative Easing (QE) by the Fed to prop up the struggling economy.  Williams said, “The underlying pace of official inflation is accelerating, and could move into double-digits in third-quarter 2011.  Preceding or coincident with that likely will have been some move to QE3 by the Fed and intense—if not panicked—selling of the U.S. dollar and dollar-denominated assets.  Such a circumstance could be a base from which a hyperinflation might begin to unfold with some rapidity.”

And get this, inflation is already in double digits, according to Williams, if it was calculated the way BLS did it more than 30 years ago.  Williams said, “. . . based on reporting of 1980, the April 2011 annual inflation rate would have been about 10.7%.” But, the double digit inflation story is not the one the mainstream media likes to tell.  Instead, it usually focuses on what the government calls “core” inflation that excludes food and energy.   The “core” inflation rate is .2%.  Who lives in a world where the core of existence is not food and energy?  A .2% core inflation rate is both preposterous and insulting to anyone living in the real world.

Inflation isn’t always easy to spot these days because manufacturers are packaging things so you pay the same but get less.  Last week, a Marketwatch.com report said, “While prices for many goods are rising, in cases where prices are steady, the packaging frequently is smaller. It’s an unmistakable trend for grocery shoppers these days: every other package seemingly has a ‘great new look’ for the ‘same great price.’  The problem is that the new look is a few ounces smaller than the old packaging. Or there has been some other creative way to have shoppers pay the same money as always without recognizing that they are bringing less home.” (Click here for the complete story from Marketwatch.com.)

And even though recent consumer sentiment numbers are up, the economy grew a disappointing 1.8% in the first quarter.  Bloomberg reported on Friday, “Another report showed consumer sentiment climbed more than forecast this month, signaling improving job prospects will help sustain spending even as household expenses climb. The pickup in inflation has yet to concern some Federal Reserve policy makers, including Chairman Ben S. Bernanke, who predicts the acceleration will be temporary.” (Click here for the complete Bloomberg report.) “Temporary”?  We all know Mr. Bernanke’s track record on market calls.  He said the sub-prime housing crisis would be “contained” and predicted the economy would “improve” just before it fell off a cliff in 2008. (Click here for a compilation video of Mr. Bernanke’s incorrect market calls over the past several years.)

This acceleration in inflation could not be coming at a worse time because the economy appears to be decelerating.  Williams says, “The underlying fundamentals here of persistent U.S. dollar debasement; a federal government with its fiscal conditions out of control; a U.S. economy not in recovery but heading into renewed contraction; all remain in play.” Unlike Mr. Bernanke, Mr. Williams’ track record on market calls is spot on, and he has it documented on his site (Shadowstats.com) for his readers and subscribers.

I close this with this quote from Milton Friedman, Nobel Prize winner in economics.  He said, “Inflation is the one form of taxation that can be imposed without legislation.”

 

 

Comments
  1. iknowbetter

    All good stuff, and spot on.

    A more thorough assessment would include the economic effects of early tornado massacres, floods, blizzards, and storms racking up several billion$ in losses. Also factor in that the current flood mayhem in Missouri and Arkansas is now destroying large parts of Lousiana.

    The hurricane season is on the horizon. And a bad earthquake might top it all off. A country that can’t cover its current obligations will need a huge increase in the debt ceiling to cope with the environmental messes that keep piling up.

    When you consider all possiblities, is inflation or devastation more likely?

    …ikb

    • Greg

      IKB,
      Good question but you can count on inflation for sure, we just don’t know how bad.
      Greg

      • iknowbetter

        Bzzzt! I think I may have asked a trick question and posed a metaphor you didn’t grok. Inflation is not one of the possibilities. It is here and now. Yes, we don’t know how bad inflation will get, yet it is a devastation to be potentially realized.

        The flood devastation is not a possibility. It’s here and now. And I didn’t mention dollar devaluation, which is also here and now and potentially devastating.

        In blunt terms, those who suffer devastation don’t give a rip about inflation. Devastation has already happened to them and they know inflation will make their situation worse, but they can’t do a damn thing about it.

        Despair is a word the media shuns. It’s also a word the media will propagate when people stop sleeping and realize we have a bad economy, bad congress, bad policy, bad wars, bad money, bad employment outlook, bad prospects, and bad (fill in your contribution).

        Inflation is just bad piled upon bad.

        …ikb

  2. MasterLuke

    Saw an article on CNN the other day about housing prices are expected to plumet this year. I shook my head and thought of the movie groundhog day. Anyways, if housing prices are plumeting and inflation is going up, it makes you wonder what is offsetting the housing to cause the inflation? {Food? or maybe we have Tax Inflation?:)

    • Jim in GA

      Falling house prices are a sign of deflation but are only a factor if you sell your home. Your mortgage payment is not going down with the house value, right? The core cause of our current inflation is the continuing debasement of the dollar. It takes more dollars to buy the same thing. Also, the CPI is based on a “shopping cart” of items that has been contually downgraded over the years (substitute ground beef for steak, cheese product for real cheese, etc.) and the current cart has not been altered yet to make the numbers falsely better. Not to worry, they’ll “adjust” the cart soon so they can publish better BS numbers.

  3. James M

    There is deffinately going to be some big problems coming down the pipe in the not so distant future as long as Bernacke is in the drivers seat. Not that there is much of anything he can do about it. If he stops printing the economy collapses and if he keeps printing the dollar collapses. Not a very good position to be in if you ask me and either way we are going to have to face the music of our governments decision to follow the path of bogus Keneysian economic policy. It is funny that I was reading earlier that some gas stations are selling gas at $.20/gallon if paid for in pre 1964 silver coin. That is at $27/oz silver so they are actually making a dollar/gallon profit at the $.20 price so it is more like $.16-.17/gallon at $35/oz silver. http://theinternationalforecaster.com/International_Forecaster_Weekly/Massive_Debt_Means_Weaker_Dollar_for_Years_to_Come Here is some more good reading on the subject of inflation.

    • Greg

      I saw the sign too James M. It is a great gimmick for those who do not realise that a dime is a 15th of an ounce of silver. Thank you.
      Greg

  4. Art Barnes

    Its all bad news with good news spin. Simply put, we can’t pay our debt, that’s all! Not going to pay it either but will try to inflate it away with a debased currency. Raise the debt ceiling (a done deal) and pay it back or just sustain it with low interest inflated dollars is the game; (all to the expense of the middle class who are the loses of that game plan). Its going to get interesting when the Ben and the boys won’t raise interest rates to slow down inflation, the only tool thay have by the way, as to what the economy does then. I predict you will be writing an article about double digit inflation as the good old days.

  5. Sam

    Dear Greg,

    Good article, spot on as usual.

    We have a replay of the late 1970’s, when even WIN buttons were going up. At that time we managed, as long as you filled up when your tank was half full, and you developed a taste for hamburger (I ate for free, I was a dishwasher and then a chef at a Mexican Restaurant!). We had manufacturing then, along with a deflationary recession. However, this is no longer the case.

    Today we have service sector jobs which cannot pull us out because services produce nothing that can be exported and sold. Manufacturing is largely gone, exported not only because of no unions and lower wages in other countries, but also because of excessive government regulation. The latter was created by both the “good intentions” of former hippies who became environmental lobbyists, but also by large corporations who wanted to suppress smaller companies whilst ensuring that they remained on the playing field. Add to this an administration that knows NOTHING about business, and that is the mess we have now.

    Today the debt ceiling has been breached, all thanks to Geithner who wants to force Congress to do as he wants. We also have double-digit inflation, and something else the lame stream media will not mention: we are in the beginning stages of hyperinflation.

    Hope y’all got your stash and supplies.

    • Greg

      Sam,
      Ah yes, WIN. I think it stands for Whip Inflation Now. It didn’t work. I hope they don’t try price controls again but you know what they say about history. Thank you for the comment!
      Greg

    • Greg

      Sam,
      Ah yes, WIN. I think it stands for Whip Inflation Now. It didn’t work. I hope they don’t try price controls again but you know what they say about history. Thank you for the comment!
      Greg

    • Greg

      Sam,
      Ah yes, WIN. I think it stands for Whip Inflation Now. It didn’t work. I hope they don’t try price controls again but you know what they say about history. Thank you for the comment!
      Greg

  6. nm

    At this point, I think you are preaching to the choir. The only complaint I’ve heard so far (from people on main street) has been the rising cost of food. For some reason, main street doesn’t seem to be complaining about $4 dollar gas (yet). Wonder why?

    Anyway, for average people like me, I’m now looking for some practical advice. I bought physical silver and have stored it away, but I need to do more.

    So, if one is looking to make more money in this recessionary climate, what would you recommend they sell? It’s nice to say buy more silver and gold, but before you can do that, you need to accumulate some extra cash. I’m trying to save, but it’s difficult to do. So, I need some revenue generating ideas. Anyone have any?

    • Sam

      nm,

      Please read “The Richest Man in Babylon,” by George Clason. The overall theme of the book is, “A part of what you earn is yours to keep.” That is, set aside ten percent of whatever income (net paycheck, garage sales, and so on).

      I was once very poor, and it did not make much sense to me, but savings is a powerful thing. Once I saw how my savings was growing (I had to save a pile of cash just to have a bank account!), I soon did all I could to increase my savings.

      Hope this helps you.

    • Tom H

      Yes I have a couple of ideas. You need look no further than your government for some revenue generating ideas. And, since no one in government is above the law, it now appears that outright theft of money and counterfeitting are two stellar options for you nm! Another great way is to run for office. People will throw money at you. And if you win? Paydirt baby! Then you can sell your soul to the richest banker and turn a blind eye to criminal manipulation and fraud in the markets. Or, you can schill for the drug company that wants approval for the latest pill to solve some “syndrome” that they just made up with the long list of side effects; oily gas discharge is my personal favorite. Or, you can accept a big donation to turn a blind eye to irradiating perfectly good food or poisoning the food with genetically modified, round up resistant beans. Come on nm, just look around! The recession has not hit Washington DC. What are you waiting for? The possibilities are endless when the rule of law disappears.

      • Tom H

        And by the way nm, if money is getting too tight for you, just say “fuck it” and raise your debt ceiling! Everybody’s doin’ it!

        • Tom H

          Oh, and don’t forget those introductory 3.9% checks that come in your credit card statement; GREAT source of revenue there!

          Steroid baseball, antibiotic hot dogs, insecticide laced apple pie, and government owned Chevrolet!

          We’re livin’ the dream baby!

  7. Vess

    Shadowstats shows the difference between the current CPI and the one that was used years ago, before the inflation-understating gimmiks were introduced to it. But, in reality, both are fundamentally wrong.

    They both measure inflation by the increase in prices. This is wrong. Price increase is only a symptom of inflation and does not always describe it properly. (For instance, prices can increase or decrease because of market conditions of supply and demand – case in point is the housing prices nowadays.)

    The proper way to measure inflation is from its definition – the increase of money supply. And not the M2/M3 crap, but by using the True (Austrian) Money Supply. By that criterion, the US (and pretty much the rest of the world) has had double-digit annual inflation for more than a year already…

    This WILL end in tears…

    • Greg

      Yes it will Vess! Thank you for the comment.
      Greg

  8. nm

    Greg,

    What’s this story I’m reading about where the government is going to start tapping pensions in order to fund it’s expenses?!

  9. chris-dee

    Like Japan we are debt saturated.Debt can no longer be paid. Thus weaker participants be it homeowners, corporations, governments go bankrupt. QE will become a permanent program. In the mean time the FED has no choice but to devalue the $ in order to devalue the real value of unpayable debt and to increase GDP. A dollar item costing two dollars is supposed to increase GDP. Every 7 to 8 years our debt doubles. If you take our present debt of private, corporate, government and off balance sheet debt of 100Trillion, it must double to 200Trillion to keep the system going. That is because no new dollars are allowed to enter into circulation debt free. All money enters into circulation enters as a debt. Any one attempting to enter money into circulation in debt free form will be killed.

  10. Tod Nguyen

    I talked to my brother who lives in San Diego a few weeks back, he owns a furniture store and he told me that many of the items has been going up double-digits percentage wise in recent months. He currently has to “eat” some of the costs increases to keep the prices low, but that can’t continue too long. Eventually, he’ll have to pass the costs to his clients and they’ll see the inflation that is taking place right now. Merchants are trying to gradually pass the price increases to the consumers to lessen the ouch factor. It’s only a matter of time when the $#!%$ rolls down hill…

    • Greg

      Thanks for the reporting from the real world Tod!
      Greg

  11. Marcel

    We don’t have a thing to worry about as we have the experts in government and media looking out for us.
    All is well and they know what they’re doing.
    We have the best and brightest minds in Washington,all above reproach,honest and very moral people at the helm of the ship of state.
    And we know that not even God can sink this ship.

    Now if you believe any of this you probably voted for the latest liar and wanna be dictator in the White House.
    The globalists are intentionally bringing down the U.S. and have successfully dumbed down most of the population and flooded the land with illegal’s to ensure their never ending control.

    • Greg

      Marcel,
      You may be right. Something is going to blow up, that’s for the sure.
      Greg

  12. Magnix

    So, going to Cancun for our 15th anniversary this summer is a bad idea after all?

  13. Larry W. Bryant

    == Our Debt-laden Ship Already Has Sunk =

    It all boils down to trustability: if you trust our current current government’s two-party political system now purchased by the highest bidder, then go ahead and vote for the incumbents of your choice.

    On the other hand, if you can find some reasonably priced ranch land in, say, Paraguay, then shouldn’t you start amassing the necessary gold coins/silver dollars by which to buy it?

    The U. S. steamship Amerika already has sunk below the horizon — with no life vests except for those ultra-rich crew members who, conveniently, had a hand in its scuttling. — Larry W. Bryant (16 May 11)

  14. billybonesIII

    It’s scary Greg, how easily we are manipulated. As you pointed out, auto fuel is not part of the calculation.
    Even here in Canada, we’re being conned that way. On top of that we we were converted to metric back around the end of the Viet Nam era. Don’t think that wasn’t a bit of fun for those of us who grew up with pounds and ounces and miles! Now we get shafted by oil companies and manufacturers. Add to that the graft (or whatever it’s called) now that our money is at par we’re still getting taken!

    • Greg

      Yes it is Billy. Thank you for the comment.
      Greg

  15. David

    Thank you Greg,
    We are absolutely bathed in lies and disinformation from the “so called” government and MSM paid liars. Thank-you for telling the truth.
    Please keep it up. I hope that more people are waking up the reality that the “official story” does not line up with life in the real world.
    I am sick to death of being forced to fund these crooks through ever increasing taxation. We must reclaim our Constitutional Republic !!!

    Please,keep writing and watch your back………….

    David

    • Greg

      “bathed in lies ” I love this quote David!!! Thank you.
      Greg

  16. Dave

    How do you cut a budget with double digit inflation? Even big cuts would not be enough. I believe this is the real dilemma as the appropriated money even if kept the same is just not going to be enough to keep buying gas, electricity, etc. which continue to rise. The cuts would have to be extreme or better yet maybe someone should stop the dollar slide.

    • Greg

      Dave,
      They will stop the dollar slide with some sort of gold standard in the next 5 years!!
      Greg

  17. Anonymous

    Wanted to let you know that you are correct. I work for a major food company and we have been reducing the contents of our bags by a .25 oz. and .5 oz., on top of raising prices. We have also dropped the number of our promos and coupons. People don’t think that much about .25 oz. but when Lance or Frito Lay does it on a national level, it adds up to millions in savings. We have already changed UPC codes several times as the weight changes for each bag or package. And one must remember, the first priority of any publicly traded company is to maximize stock holder profits.

    The public is beginning to take notice. I’ve heard complaints about bags filled with lots of air but not chips. Frito lay is keeping bags the same height but producing them with a smaller, thinner circumference which gives the appearance of a full bag. Others will soon follow.

    • Greg

      Anonymous,
      Thank you for the inside information!!
      Greg

    • Art Barnes

      Yea, I’ve seen it too! Sugar is sold in 4lbs bags now instead of 5, thats 20 percent less for the same price – meaning, a one time 20 percent increase; lots of short term profits keeping the market up, but not for long.

  18. nm

    “The debt can no longer be paid”.

    I suppose this is the key phrase that most people don’t understand yet. The implications of what this means haven’t hit main street yet.

  19. markm

    Hey all,

    I enjoyed reading the article and the thread.

    Thanks,
    markm

  20. g.johnson

    anonymous,

    you hit the nail on the head. it’s all about maximizing stockholder profits. this is not anything close to free market enterprise. when shareholders demand profits, strange things happen to what used to be good companies. a good axample that i have been paying close attention to, as it has a direct effect on my personal life. i am, what is known as, an ebay power seller with preferred seller status. done correctly, this can be lucrative. but it is becoming less so with each passing year. in 2007 we the sellers (who actually pay the freight) gave ebay over 14 billion dollars (their best year) they were so overcome that they thanked us by raising seller fees first thing in 2008. profits dropped. 2009 another rate hike. again profits for ebay dropped. same in 2010. this year they presented another tricky little wrinkle. they removed the fees for posting an auction completely. trick is they now take a full 11% off the final selling price of an item. this is up by 2% over last year. (2007 was just under 4% total cost to seller including listing fees to sell an item)
    of course, every time they raise fees they discourage x number or sellers and there overall volume goes down accordingly, thus lower profits than the year before. the really crazy thing is that they, with all their mba and lawerly talent. do not seem to see this corollary. so, they will continue to raise fees in a desperate attempt to satisfy investors and they will continue to lose profits for doing so. and they will continue to be the only game in town because they are a defacto monopoly and we do not have antitrust anymore. there was a time a few years ago when it looked like overstock.com was about to become a viable competition for ebay and a vast number of sellers were licking their chops getting ready to jump ship. somehow, ebay manage to get overstock into a non competition contract which put an end to that. they have also bought out craig’s list and several other online marketers. if they had just kept their 2007 fees intact, they would have grown nearly exponentially by volume sales alone. instead of profits falling year by year, they would have risen and the business, due to it’s nature, would have been virtually recession proof. corporate insanity fueled by investor demands? you betcha!

    ok, that said. the only investments today that stand a snowball’s chance of making significant profits are: oil, food, weapons and jails. if privately owned jails in the land of the free is not a concept that unsettles you, then you are in desperate need of serious reprogramming.

    if you invest in food or oil that means that the price of these commodities has to go up for your to make good on your investment. this means that someone has to suffer for your profits. if you are ok with that, then please get off my planet.

    the only solution to the overthrow (yes dear, that is what we have here) of the constitutional republic of the good ol’ usa is simple adamant justice. a lot of vicious sociopaths are going to have to be rounded up, thrown in a deep dark hole and the key to that hole is going to have to be melted down. problem? oh yeah. ya see, included in the round up of evil folks would have to be most of the justice department and a major fraction of law enforcement. not to mention most of congress and the executive branch. so, good luck with that one.

    real things you can do for peace of mind if nothing else. (most of you won’t) dumpp your entire portfolio. keep your physical commodities, take your money out of multinational banking systems and put it into small local banks and credit unions and cut up your credit card. get a debit card for real time purchases but buy nothing on time. shop at yard sales and flea markets. you will be amazed at how you can get virtually everything you need for pennies on the wal-mart dollar. co-op with your commuity to buy food wholesale and grwo what you can (and while you can as there is already legislation in place to prevent this). get to know your neighbors. and get involved with your city government.

    if you do nothing else today, watch this film. seriously watch this film. it is full length feature, so make some popcorn and take the time. the film is put out by “inflation u.s.” and is a very concise and educational, expertly produced tour de force on what is happening to humanity on planet earth.

    http://inflation.us/videos.html (looks like yer gonna haft cut an paste, sorry)

    go to the link above and scroll down to the film titled “the end of liberty”. watch the film. i cannot stress enough, watch the film.

    you will not be dissappointed, but you will be changed.

  21. nm

    Article in the New York Times saying the dollars decline is over. No evidence to support their theory (they say) but it’s over nonetheless.

    http://www.nytimes.com/2011/05/18/business/global/18dollar.html?adxnnl=1&ref=business&adxnnlx=1305662528-bL21/P9f3cmmd/kEct0pcA

  22. Jan

    This article on the Google Pharma Case backs up the New Corporate America article: http://www.financialsense.com/contributors/lew-rockwell/the-google-pharm-case.

    We all need to remember our companies are “American” in name only. They hold vast sums of money outside the US and pay little if any taxes. Their greatest profits are made overseas where they can manufacturer goods cheaper and sell them to us and to other countries. I would bet the CEO’s, CFO’s & upper management hold vast amounts of their personal wealth outside the US as well. These companies are no longer vested in the good old USA. They will chase profits to the ends of the earth.

    There are billions of dollars in pension funds tied up in a manipulated stock market, government pensions, private 401k’s & IRA accounts. The powers that be can wipe that out in nanoseconds. Imaine how warm and fuzzy the Federal employees must feel with the government dipping into their pension funds to pay the nations debts. They will follow the European counties and take over all pensions after the 2012 election. We have time to prepare and do what we can to protect ourselves.

    Another great article Greg. Keep them coming.

    • Greg

      Thank you Jan for the comment, your support and the link!!
      Greg

  23. thor

    @G.johnson said:

    “they (ebay) have also bought out craig’s list”

    That is NOT true- they simply bought shares worth approx 23% from a former CL employee…Craig’s List is now suing to get them back:

    http://www.auctionbytes.com/cab/abn/y11/m02/i04/s01

    • g.johnson

      thor,

      thank you for pointing that out. my mistake. normally i would go click on the link you provided and check the facts. in this case i will take your word because, well because it’s not that important. can’t believe that you got hung up on that.

      your next two posts show that you are waking up. we are in a time when a lot of people are waking up. they are waking up because they are getting slammed in the pocketbook. slameed hard enough to finally figure out that things may be a little more contrived than they used to think. unfortunately, it may be a little late in the game. i have been watching this scenario unfold for over 45 years and i am just a rookie. i have enough pieces of the puzzle to form a pretty good picture. i had the luxury of time. most people don’t. but it’s all there to be found in a hurry now if you don’t mind doing the research.
      a good place to start would be to put into your google box. spend a couple hours going through the results. probably gonna have more questions than answers. that’s a good thing.

      hold on tight to your sense of humor and don’t let your sacred connection to your own species slip from your consciousness.

      don’t lose faith in humanity.

  24. nm

    Tom said:

    if money is getting too tight for you, just say “fuck it” and raise your debt ceiling!

    What about with student loans? Those are never forgiven and have to be repaid. So, as long as people’s debts can never be forgiven (remember, they changed the bankruptcy laws in 1996 and made it tougher to write off debts) as long as you have to keep servicing your debts, you’ll have less money.

    This is why the bailouts to the banks were so morally unfair. The bailouts were like a blank bankruptcy filing for the banks that just wiped out their obligations AND gave them free money. Unbelievable.

  25. Brenton

    Any sell-off of US Treasuries, stocks or bonds will raise the US dollar exchange rate – albeit temporarily – as these instruments are converted to cash. So don’t be surprised if the exchange rate heads higher; it’s just a temporary situation.

    • Greg

      Thank you Breton for the heads up and analysis.
      Greg

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