Inflation Liftoff

Inflation Rate LiftoffGreg Hunter’s USAWatchdog.com  (updated)

The government released a nasty little inflation rate surprise yesterday.  Prices increased .4% in January, which was 33.3% higher than the expected .3% increase.  It should come as no surprise to anyone who fills up at a gas station or shops in a grocery store that prices are on a tear.

The Bureau of Labor Statistics (BLS) report said, “Increases in indexes for energy commodities and for food accounted for over two thirds of the all items increase. The indexes for gasoline and fuel oil both increased in January, continuing their recent strong upward trend. The index for food at home posted its largest increase in over two years with all six major grocery store food group indexes rising.”  (Click here for the complete report from BLS.) 

According to the latest report from economist John Williams at Shadowstats.com, consumer prices in January rose to 9.1% annually if inflation was computed the way BLS did it in 1980. ( Shadowstats.com methodology strips all accounting gimmicks out of the equation.)  Consumer prices (CPI) are not the only thing rising.  According to Shadowstats.com, producer prices (PPI) are also staging steep increases.  Williams says, “The monthly PPI finished goods increase reflected the Fed’s dollar-debasement-induced upside pressures on gasoline prices, although subdued reporting of food inflation continued to run counter to anecdotal evidence of Fed-induced spikes there.  The 0.5% “core” PPI inflation rate for January (up from an unrevised 0.2% in December) also was an upside surprise for the markets, as the effects of higher oil prices spread into broader areas of economic activity.”

To offset the bad news on inflation, retail sales gains reported this week seem to show consumers are still keeping the economy going.  Here’s the way it was reported at Marketwatch.com, “Sales at U.S. retail stores rose in January for the seventh straight month, but the increase was the lowest since last summer, government data showed Tuesday. . . .Retailers’ sales rose 0.3% last month as consumers spent more on gasoline, autos and online goods, the Commerce Department reported. It was the smallest increase since last July, however.” As I have been warning, this is the government’s distorted way of reporting inflation as growth.  In reality, there was no increase in sales at all last month.  Inflation in prices of .4% more than cancels out .3% sales growth.  This is clearly a setback for the economy and not a step forward.  (Click here for the complete Marketwatch.com story.)

It’s apparent the mainstream media (MSM) tends to paint a much rosier picture than reality.  And, if the MSM doesn’t like a topic, even if it is tremendously newsworthy, then it simply ignores it.   How else could a story not get coverage, where everything sold in America went up in price by nearly 2% since Christmas!  Do you think this information came from some crazy website in the blogosphere?  No way!  It came from the “Billion Prices Project” (BPP) at MIT Sloan School of Management, and it is totally legitimate science.   According to the MIT website, “our data are collected every day from online retailers using a software that scans the underlying code in public webpages and stores the relevant price information in a database. The resulting dataset contains daily prices on the full array of products sold by these retailers. . . . It is updated on a daily basis and leveraged to estimate annual and monthly inflation.   This index is not designed to forecast official inflation announcements, but to provide real-time information on major inflation trends.” (Click here to see the BPP interactive chart at MIT.  It’s pretty cool.)

Phil Davis from Philstockworld.com wrote his own story about the parabolic short term spike in prices that the BPP revealed.  Davis said in a post this week, “Yet the Chairman of the Federal Reserve Bank of the United States of America tells us over and over and over again that it is not happening.  He tells us that inflation was down in 2010 from 2.4% in 2009 to 1.2% last year and that he sees no inflation.  In fact, he is basing his mathematical models on it and directing our nation’s policies on this basis and he is conducting the most dangerous monetary experiment in the history of the Universe – ALL BASED ON HIS PREMISE THAT INFLATION DOES NOT EXIST!   (Click here for the complete Philstockworld.com post.  It is excellent.)

We all know here in the real world that inflation is alive and well.  The sad thing is until the Fed stops its money printing, prices of just about everything we consume will increase.  Inflation is guaranteed to hurt the people worst who can afford it the least.

Comments
  1. Jan

    I am a retailer and what we are seeing is manufacturer’s and distributors loathe to increase product prices are gouging on shipping charges. Shipping was once the flat UPS or Fed Ex rate, today it is a percentage of the invoice total, as high as four or five percent of the total invoice. We once considered shipping charges as a cost of doing business, but now must factor them into the retail price, we cannot afford to absorb the shipping cost anymore. We cannot pass the entire shipping charge on at the retail level either. They take a big bite out of the bottom line.

    • Greg

      Thank you Jan, good to know!!
      Greg

      • sky

        patriotactionnetwork artical Get ready SEIU’S purple army nation wide protest schedule teachers unions pressure members to show solidarity.

        • Greg

          Sky,
          Good to know. Thank you. The unions will not win friends with this stunt. All they have to say is raise taxes or issue more debt so they don’t have to deal with reality. The reality is the nation and most of the states are broke and many border on insolvency.
          Greg

          • Albert

            Greg:

            You can evade reality, but you cannot evade the consequences of evading reality.
            Ayn Rand.

            • Greg

              Albert,
              Good quote!!!! Thank you.
              greg

  2. Sam

    Dear Greg,

    Zowie! You sir, are not a poet, for such a word fails to describe the prose of this column. Rather, it was ballet! Bravo!

    Whom are we to believe anymore? Fox News did not report the inflation we had after the end of the last recession. This “recession” (really, depression), still winds and squeezes like a boa constrictor, yet only a few online dare report it (although Fox did a lame job of it on Wednesday). Clearly, there is not a line, but a wide divide, between the people of this country, and the government/msm alliance. It seems that the latter seem to live in what Field Marshal von Rundstedt described the world Der Fuhrer lived in: a “wolkenkuckucksheim” (cloud cuckoo land).

    Thank you Greg, for being there. Yours and a few other places are refreshingly honest. And, please continue to be “hard-hitting.” Please don’t ever be a “sell-out,” many of us need your open windows.

    • Greg

      Yes Sam, we do live in “cloud cuckoo land.”I am afraid it will get much crazier in the not so distant future. Thank you for the kind words.
      Greg

  3. Richard

    Hmm.. I’m starting to see a problem. Even those whose attempt to be critical of the way the US Government does it’s math can’t get elementary school math right. .4% is 33% greater than .3%, not 25%. A 25% increase over .3% is .375%. Those who live in glass houses shouldn’t throw stones.

    • Greg

      Yes Richard, you have exposed me for not being perfect. I was trying so hard to hide that fact. This isn’t about glass houses or throwing stones. It is about the public being lied to repeatedly by the government. I didn’t lie my friend. I made an honest mistake in my attempt to inform the public on a free site. By the way, I fixed the mistake before I read your comment. Thank you for your input.
      Greg

      • sandy

        Great article Greg. I always enjoy reading your work!

        • Greg

          Thank you Sandy.
          Greg

    • George

      Richard,
      Do you think that the Government is 100% accurate? I see a lot of BS math on their side and a lot of “restatements.” This is a common math error. I’ve seen CPAs make this same mistake. Greg, I know you strive to 100% accurate and you do a very good job accuracy wise; much better than the government numbers. Maybe Richard should review the government number with as critical eye as he does your site. I have to wonder if Richard has a body of work I can review for accuracy. It’s easy to be right all the time when you don’t do anything ;-)
      Richard,
      Can you point me to some of your work so I can fact check for perfection or are you one of those blog gnomes that expect 100% accuracy when it exists only in theory and never in reality?
      And is the quote, “Man who lives in glass house should dress in basement”?

      • Greg

        George,
        Thank you.
        Greg

      • Richard

        The truth is I am extremely critical of the way our givernment does it’s math. But, a mistake is a mistake. You corrected it. Move on.

  4. Art Barnes

    Inflation won’t stop, its too late to stop it. The Fed has no tools left to keep the economy afloat except “perpertual QE”. The U.S. created 1&1/2 million jobs overseas last year, and less that that in this country. The million jobs created here were not enought to keep up with population growth, school graduates, and the discharged arm forces, etc. – and, keep in mind, the jobs created here were lower wages than a decade ago. The permanent job is also vanishing in America. Temporary jobs are not subject to Obamacare, etc. Another term I heard the other day was the “permanent temporary” job; another mockery of the so-called recovery the government claims is under way.

    The American government and its crooked politicians with MSM’s backing, the Fed, and the Wall Street boys simply cannot be shamed.
    But don’t worry america, the Republicrats will fix it with 100 billion in cuts – wow, 0.2 percent cut in the deficit – a token play to claim they are doing something. Don’t let yourself be fooled, for years now both parties have been up to their eyeballs in the destruction of our great country while lining their pockets with our hard work. Both parties are rendering themselves irrelevant. With only a few exceptions, they are just figurheads now to support the Fed and its policies of dollar debasement which leads us down that lonely road to third world status. Remember, in third world countries they have the super rich, abeit a very small class – that’s were our figurheads are hoping to land.

    Greg, Do you want the first t-shirt “permanent temporary”?

  5. markm

    Hey Greg,

    We have been discussing food and fuel price increases for months now. An underlying theme for your article could be “this is eigth grade math.”

    The stock market gains are also driven by inflation. This is all smoke and mirrors. The academics in the administration don’t know how to lead. They have never had a real job.

    Greg, are you surprised?(That was a rhetorical question) You have been providing facts to back-up our “feelings” for years now.

    thanks,
    markm

    • Greg

      Thank you MarkM.
      Greg

  6. Mitchell Bupp

    Bernanke said that he has never seen a currency that could not be devalued with increasing the money supply. Yes Ben, You devale a currency and magically retailers are reporting increased sales !!!!

    shrewd Ben very Shrewd however there has been no new production just theft through inflation.

    Yes Greg, They just don’t get it. I had a frank discussion with my sister about the economy but she is in Glenbeckastan county at “Cloud cuckko land”

    • Greg

      Thank you Mitch,
      Greg

  7. Kaboom

    @ Richard @ 6:15 a.m.

    Hmm.. I’m starting to see a problem. Even those whose attempt to be critical of the way an astute and erudite economic blogger does his math can’t get elementary school English right.

    Once again with despair I have to write: “it’s” is an abbreviation, not a possessive case.

    Example: It’s gross to watch a dog lick its balls!

    • markm

      Kaboom,
      +1

      markm

    • George

      Kaboom! Glad you pointed out Richard’s basic elementary school grammar error. I do not like the tone of Richard’s post; you can point out a mistake without making it a personal attack. And in the tone of Richard’s post, “Let those who are error free cast the first stone around the glass house”.
      In reality, Greg does live in a “glass house”. He posts his research, opinions and articles “transparently” for the world to read, rebut and very rarely make corrections. My hat is off to you! In this instance, your comment was a “Sonic” Kaboom.

      • Richard

        It doesn’t matter whether I make a mistake or not. I don’t write a bog where people are expected to believe what I write. I am actually quite surprised that he published what I sent him. I guess even the good guys need someone to beat up on occasionally.

  8. James

    I read an article today on Barron’s:

    http://online.barrons.com/article/SB50001424052970204098404576130370708044708.html?mod=BOL_hpp_emr_3#articleTabs_panel_article%3D1

    This article states that a barrel of oil will sell at $300 per barrel by the year 2020.

    Considering all of the “Voodoo” used by our government to report economic and job/jobless numbers for the “Stock Market Followers”, I would not be surprised to see this prediction come to fruition.

    Since our country seems to be a ship without a Captain, unable to make course within the trade winds, I feel that this ship’s sailors need to hit the lifeboats and strike a new course for survival & prosperity.

    This country was founded by intelligent individuals that envisioned a better way. It’s up to the “believers” to forge a better way for our country’s sake.

    Stay informed, Question authority, Love thy neighbor, Lay up your treasures in Heaven and Keep Your Powder Dry.

    Peace,

    James

    • Greg

      Peace to you James.
      Greg

    • markm

      Hey James,

      You wrote: “…Keep Your Powder Dry.”

      I spoke with a friend the other day about nitrocellulose contained within metal viles and capped with lead. He said that another friend got stuck in civil unrest and anarchy once. His friend was able to use ammo for money. He bought food with ammo.

      Think about it. If you have gold, what are you going to do, shave-off a grain of gold from your Maple Leaf for that loaf of bread? During anarchy, people want security. A loadded gun is an equalizer, it is a force mulitplier; especially for petite woman, elderly men, and the overwhelmed.

      The relative value of ammo is:
      10 rounds of 9mm for a loaf of bread,
      6 rounds of .357 mag for the same loaf, or
      4 rounds of .44 mag for the same loaf.

      Ammo could be a good survival investment.

      markm

    • Albert

      James, very interesting. I wonder what that barrel will be worth in silver or gold, as you read your morning $5 newspaper (it there is one) and drinking your $10 cup of coffee?

  9. BigTom

    Greg – thanks and always look forward to your articles researched as well as you do. As you say, Americans increase in spending, as reported by the MSM and gov’t agencies looking thru rose colored glasses, is in actualality pure and simple inflation! way to go – love it. Thanx again……Today I picked up 2lbs of real salt from the local health food store. $10.00 – can you believe it? $10.00 for 2lbs of salt? How soon will it be before we use our paper money to blow our noses!!!!…..LOLOLOL – I hope your readership have covered their a#s……

    • Greg

      Thanks Big Tom for checking in!!
      Greg

  10. BLT

    The other day my Jack In The Box combo was $8.50. Wow. After handing her a $10, as Richard would say she gave me back EXACTLY $1.50. Not $2, not 1 dollar either. ONE DOLLAR mf’in 50 cents. The voice in my head (which sounds like Whoopie Goldberg) said “I thought this was fast food??” How can James Coney Island charge $6.80 for a combo? See (Jan), as a Freightliner Dealership employee, I can tell you that our prices have gone up and up. Trucks are made with many parts that are not “cheap” by any means, and price fluctuations in things like metal and copper and oil can really hurt trucking companies in the end. On another note, I think restaraunts have done a good job for the most part on keeping their prices low. You can get good sit down meals nowadays for 10 dollars, rather than a nasty all fat burger. Restaraunts have to have refrigerated truck loads which can consume even more fuel than non refer’s. Thanks for the dose of TRUTH today Gregums.

    • Greg

      Thank you BLT for your personal inflation report. It was good!!
      Greg

  11. FranTheMan

    Greg – this is all quite scary. There has been talk over the last 2-3 years of inflation and even talk the possibility of hyperinflation. The big difference I see is that it is now starting to happen – BIG TIME! While we are seeing inflation here, there and everywhere, Ben Bernanke and our government officials say inflation is “very low” and the stock market is rosy. Nothing to wory about!

    Here’s a very short but interesting little piece about the deception going on. It’s incredible.

    http://www.americanthinker.com/blog/2011/02/mr_president_do_you_think_were.html

    I have read that hyperinflation in Weimar Germany developed very, very rapidly. I imagine that once everyone “decides to head for the exit,” as far as the U.S. Dollar is concerned, hyperinflation/dollar devaluation can be just like a stampede – wild, crazy and fast.

    What’s also amazing is that most people I work with don’t seem to have a clue that inflation is rearing its ugly head. It will be an interesting roller coaster ride in this year 2011!

    • Greg

      Fran,
      There are $7 trillion dollars held outside the U.S.. I think you are correct when you say, “I imagine that once everyone “decides to head for the exit,” as far as the U.S. Dollar is concerned, hyperinflation/dollar devaluation can be just like a stampede – wild, crazy and fast.” Yes sir, this statement is spot on and brilliant for its simplicity!! Good stuff, thank you.
      Greg

  12. FranTheMan

    Egypt In America?

    Greg – another intersting article (you may have seen this already). Note the TITLE to the article. Although this is not about hyperinflation, it is about the economic conditions we are starting to face in this country. Check out the video on the page also. It is absolutely incredible HOW MANY people packed themselves into the capitol building in Madison, Wisconsin. Looks like a riot scene inside and outside. And just wait until those budget cuts really happen! Can you imagine this happening in Illinois, Michigan, New York, California, Arizona, etc….

    • Greg

      Thank you for the comment and the link Fran The Man.
      Greg

  13. Mufaso

    As long as the Democrats and Republicans run this country, nothing is ever going to get any better. The dumb American voter who keeps replacing Democrats and Republicans with more Democrats and Republicans election after election is to blame for the shape the U.S. is in. If you keep voting like you’ve always voted, you’ll keep getting what you’ve always gotten.

    • Art Barnes

      Couldn’t agree with you more. A third party is needed but the MSM keeps informing the nation that it just a waste of a vote.

    • SunnyCrest

      I believe that is the true definition of insanity.

  14. Samantha in Tucson

    From the apparel industry front:

    Cotton prices are at their highest point in many, many years. I heard last week that apparel manufacturers are going to raise prices by 10% due to the higher cost of raw goods – cotton, wool, silk and other fibers.

    In addition, I also read that the Chinese want pay raises. Surprise, surprise! After working in sweat shops for 16+ hours a day, I can’t blame them; it is grueling work. (Try to find the PBS DVD “China Blue” if you want the truth about how your “Wally World” jeans are manufactured.)

    With the increase in costs of apparel production and increased shipping costs (as evidenced by the first poster), could we possibly see a return to apparel manufacturing in the U.S.?

    Personal example: I just picked up bobbins for my sewing machine. The last time I purchased an eight bobbin pack (last year), it was $11.25; this time the price was $14.25! Same bobbins – no change in product; same store where I purchased previously.

    My health insurance premium just went up. Is my health care any better? No – same benefits, same health care. My doctor hasn’t improved his services or added additional “words of wisdom” when I visit him.

    I simply do not believe anything our government tells us about inflation, debt, or otherwise. The clearest way to see the TRUTH is to compare what costs were a year ago and compare to what you are now paying at the register or pump. I don’t need an M.B.A. to see what is happening.

    Great article, Greg! Good to hear you on Coast-to-Coast last night, too. :)

    • Greg

      Samantha,
      Thank you for listening and for the info from the real world!
      Greg

  15. kenny wright

    The word of God say’s in the Book of Revelations that it will take a wheelbarrow of money to buy a loaf of bread……inflation if in our future……prepare now.

    • Greg

      Kenny Wright,
      Amen brother.
      Greg

  16. nm

    Well…there is definitely food inflation and people have began to notice this. Also, gas has gone up and if the trouble in the middle east continues (Libya is the largest oil producer in Africa) I cant imagine what we’ll be paying for gas in the summer.

    However, I said in my previous post, Massachusetts seems to be doing better than other places thanks in part to the bio-tech jobs. I don’t know where these biotechs are getting the money but they’re hiring and paying quite well. Can someone explain this? All my friends and family members who live in Massachusetts are employed.

    Someone said the following:
    I have read that hyperinflation in Weimar Germany developed very, very rapidly. I imagine that once everyone “decides to head for the exit,” as far as the U.S. Dollar is concerned, hyperinflation/dollar devaluation can be just like a stampede – wild, crazy and fast.

    I suppose this is the event I’m trying to prepare myself for.

    • Greg

      NM,
      Keep on preparing my friend. Thank you.
      Greg

  17. Larry W. Bryant

    Notice how our exalted Republicrat kongress tends to cut everything in sight but the salaries of its own members? I say: trust NO kongresskritter who’s unwilling to reduce his/her salary by at least 10 percent until, say, funding for Planned Parenthood is restored. (After all, what’s the more more economical course for our overpopulated society: federal dollars applied to funding the abortion of unwanted fetuses or taxpayer funding for the care and welfare of those unwanteds?) — Larry W. Bryant (19 Feb 11)

    • Greg

      Larry,
      I agree with you that Congress should cut its pay and benefits. After all, that’s what they are asking unions and everybody else to do. I don’t agree with you on killing babies. That is morally wrong, but because of Roe v. Wade we have to abide by the law of the land. Taxpayers who are against it should not be forced to pay for it. Thank you for your comment, and please do not write back and accuse me of being a Republican. I am aligned with neither party.
      Greg

      • iknowbetter

        On everything else, Greg, I agree and am on your side.

        You don’t agree with Mr. Bryant on “killing babies.” He didn’t suggest that funding of Planned Parenthood would kill babies. He spoke of unwanted fetuses. Babies have sentience. Fetuses do not. To prove otherwise would have you recount your own womb experiences. I’ve long wondered why “sentience” isn’t part of the abortion debate.

        To stay somewhat on topic, I hope you read Matt Taibi’s article “Why Isn’t Wall Street in Jail?”

        http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216

        “…You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars? For fraud that puts a million people into foreclosure? Pass. It’s not a crime.”

        Right there is a big source of inflation. We don’t have kings and sheiks and emirs. We have bankers. And now we have the price inflation they created…”guaranteed to hurt the people worst who can afford it the least.”

        …ikb

        • Greg

          Thank you for the comment IKB. No one can agree on everything. I expect readers to have and voice their own opinions here. I pray science, birth control and technology can someday soon make abortion obsolete.
          Greg.

        • sandy

          “You don’t agree with Mr. Bryant on “killing babies.” He didn’t suggest that funding of Planned Parenthood would kill babies. He spoke of unwanted fetuses. Babies have sentience. Fetuses do not. To prove otherwise would have you recount your own womb experiences. I’ve long wondered why “sentience” isn’t part of the abortion debate.”

          So what is your earliest memory? One or two yrs of age. So should toddlers be killed now?

  18. Art Barnes

    Greg, yesterday it was reported our great republicrats are voting for a whole 60 billion in deficit cut (with more to come later of course, when and how much we don’t know). Wow, they really kept their campaign promises, didn’t they? What masters of deception they are, that figure really is the token “drop in the bucket”.

    • Greg

      Art Barnes,
      This is deception and hypocrisy, and watch them raise the debt ceiling by at least $1 trillion in the next few months. Both parties are pushing the myth that we can “grow” our way out of debt that is far too big to ever pay off with real money.
      Greg

  19. DrJim

    Hey Greg:

    Great articles. Just this week had 3 patients in the office complaining about the increase in the price of their medications. The medication in question was betamethasone dipropianate 0.05% ointment, in Dec. 2010 was $12 for a 45g tube, as of Jan.2011 is $45 at Walmart and $70 at Costco. My concern is not only getting patients better but not bankrupting them in the process. This represents almost a 400% increase in one month. Pharmacist at Costco told me it was an increase from suppliers and he had some meds go up 1000%. These are generics. Inflation? This is not what the people need at this time.

    • Greg

      Thank you DrJim for the news in inflation and maybe price gouging in the real world.
      Greg

  20. Albert

    Greg, I was born in the late ’30s and I’m afraid to tell all the younger folks that we have been living a dream for many years, actually since the credit card was invented, so you could live off future earnings. I believe we will have to learn what it is to live on what you produce. Used to be that what you earned had some relavance to what you produced. BTW, load up on peanut butter and learn how to make bread. During the Weimar inflation a loaf of bread was worth gold, silver and jewels. In the end, it all comes down to water, food, shelter and clothing. I think I see the light at the end of the tunnel and it’s a bullet train.

  21. Jan

    We see more and more MSM reports in rising prices. Better late than never. Too bad they do not dispense good solid information or even tell people this is only the beginning, it will get much worse.

  22. Gregory K. Soderberg

    When all money is created and put into circulation as loans, only the principal is created. When interest is added to the loan, the debt becomes greater than the money supply. The interest debt grows with time. The money supply only increases or expands with more borrowing. More borrowing is needed to pay th einterest on previous loans. The costs of borrowing, interest, must be added to the costs of production. What we see as ‘price inflation’ is actually a constant and growing spread between the money supply and the costs of living or a loss in purchasing power. We are living in a very mature debt-money system. The only solution is to think Freedom-Economic Freedom. Pass legislation to create and put all new money into circulation debt and interest free as a final payment for production rather than as an interest bearing obligation against a promise to do perform in the future.

  23. Reagan Grafenstein

    On the topic of real estate I think fully owned real estate may have some practical value as a space to live and produce food but may be not as an investment vehical during high or hyper inflation.The reason being that peoples pay will not rise or rise at the same rate as property prices or the rate of inflation plus there is the question of is financing a mortgage even possible. Any lender with brain stem is going to want a interest rate that exceeds the rate of inflation or its a bad deal for lenders.So that just leaves buyers with a situation where they offer a 100% down payment and nothing a month and get a roof over their head or no deal. Vendors will want immediate payment in full so that they can use the money before it loses more value. So hyper inflation and deflation would be bad for the real estate market and it is only between the two extremes that long term financing is viable.Just my thoughts FWIW.

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