Inflation becomes the new comeback kid

An unwelcome visitor to the economy is back — inflation.

The year-end figures for 2007 show an inflation rate of 4.1 percent, up from a relatively restrained 2.5 percent for 2006 and the highest in 17 years. And another index shows that the problem isn't over yet. The producer price index, which measures inflation at the wholesale level, went up 6.3 percent, the highest since the economically awful year of 1981.

If it is any consolation — and it is only to economists — the core rate of inflation rose only 2.4 percent last year. The core rate is price increases minus food and energy but outside the cost of shelter that's where ordinary people spend their money. Food price increases last year weren't too terrible, up 4.9 percent, but gas prices were up just shy of 30 percent.

The inflation was reflected in average weekly earnings, which fell on an adjusted basis 0.9 percent in 2007. All of this detracts from what consumers can spend on other things and it is consumer spending that drives the greater economy.

The inflation rate joins a number of other unhappy economic measures. Unemployment spurted to 5 percent at year's end. Retail sales are flat; so is factory output; and so was economic growth for the fourth quarter of 2007. Job growth is anemic. The market indexes are falling and there seems no end in sight to the woes of the housing industry and mortgage market.

The tame core inflation rate suggests that this bout of inflation is nowhere near as intractable as the unrestrained price increases of the '70s. But it also suggests that Congress should take care in enacting the inevitable stimulus package that it doesn't aggravate the problem instead.

18 Responses to "Inflation becomes the new comeback kid"

  1. pollchecker  January 17, 2008 at 9:40 am

    There is a growing number of intelligent and informed people that are becoming very concerned about the focus the next election is taking.

    It seems that there is a form of class warfare taking place right under our noses.

    The rich CORPORATE FATCATS know that the GOP cannot win if foreign policy is the focus of the election. If the GOP loses, these people believe they will lose the plethora of tax cuts that GW bestowed upon them.

    Therefore the plan is simple. Recast the agenda to focus on the economy. They believe that the GOP can win if the issue is the economy. I’m not sure why except they managed to convince the public that trickle down economics works again in 2000 and 2004. So I’m guessing they believe they can fool the public again.

    So expect to hear for the rest of the year how bad the economy is. But in the meantime, the rich are buying up the bargain stocks, as well as the bargains on the real estate market, etc. etc.

    It’s all intended to use fear to control the masses.

    PS — the Feds will do everything in their power to avoid a melt down of the economy as evidenced by the following:

    Bernanke may be open to economic rescue
    http://www.msnbc.msn.com/id/22705103/

    After all, it is an election year !

  2. Steve Horn  January 17, 2008 at 9:49 am

    Interesting – in Zimbabwe (another nation run by a nutcase who thinks he is without flaw) their inflation has topped 8000% – yep – you read that right. Something to shoot for, I suppose. Starting tomorrow they’ll be putting 10,000,000.00 bills into circulation.
    So the chimp in charge may, in time, say “hey, we’re doing better than Zimbabwe” …..

    Seriously, what do you expect? The price of oil impacts every segment of the economy (except wages, apparently). Add to that the diversion of food/feed crops to produce bio-fuels (which has driven the cost of feed crops and food on down the production stream) and we’re energying ourselves into recession.

    Of course, as we all know, so long as the stock market is doing well, the economy in general is just fine …
    (yeah, right).

    Peace

    Steve

  3. LurkingFromTheLeft  January 17, 2008 at 10:29 am

    Nice to see someone

    …else mention the crops issue –

    …too many folks seem to think this magic corn plant will fix EVERYTHING –

    …it won’t – in fact, it only eff’s up things even MORE –

    …land to grow crops for FOOD?

    …let them eat cake –

    LFTL

  4. ekaton  January 17, 2008 at 11:09 am

    I cringe and lapse into extreme profanity every time the “Federal” Reserve pumps another 20, 30, 40 billion dollars of “liquidity” into the market, literally printing more worthless paper and driving inflation higher and higher. THIS IS THE PLAN. It is the only way the 9 TRILLION DOLLAR national debt could ever come close to being paid off. Of course it will ruin pensions and savings but only the riff-raff (99% of us) worry about things so inconsequential.

    — Kent Shaw

  5. barak  January 17, 2008 at 5:29 pm

    Steve, your comment that “the price of oil impacts every segment of the economy (except wages, apparently) is wrong. Just look at the multi-million dollar salaries of the top executives of the major oil companies and compare todays wages with those of 10 years ago. If those salaries aren’t showing signs of huge impacts, I might even stop writing here.

  6. Steve Horn  January 17, 2008 at 10:43 am

    LFTL –

    Bio fuels aren’t going to “solve” anything, all they’ll do is allow us to continue to follow the same pattern of excessive consumption that we’re accustomed to.

    Plus (and here’s something that doesn’t get much mention) it takes energy and fuel to grow crops. Ok – maybe the Amish make do with horses, but to farm on a large enough scale to make it worth while, especially for grain crops (like corn and wheat, to name a couple) takes large tractors (which require fuel), irrigation sprayers (which require fuel (or electricity, which doesn’t just drop out of the sky)), processing, chemicals, then transportation from the farm to the intermediate and ultimate destinations(points of consumption) –

    The only thing that’s going to “solve” this problem is a lifestyle change, smaller vehicles, public transporation, human powered transportation – so long as we keep filling the tanks of our SUV’s a few times a week (and I’m guilty, I’ll admit it) the problem will persist.

    Of course, no politician has the courage to suggest that we, as Americans, need to give up our big vehicles. And we all know that domestic auto makers can’t make small, inexpensive, low consumption vehicles. GM, Ford and Chrysler have been telling us that since the 1970’s.

    Peace

    Steve (stepping off the soap box)

  7. LurkingFromTheLeft  January 17, 2008 at 1:22 pm

    Oh Steve –

    …you were preaching to the choir on that one –

    …I know they are far from ‘it’ –

    …and listening to NPR Wednesday afternoon hearing about the vast amounts of petrol needed to keep the Chinese and Indian auto owners running made my head spin – too bad THAT couldn’t have helped propel my vehicle –

    …no one really gets ‘it’ –

    …they think there is one magic tank SOMEWHERE that is always full – as long as the coin is there to buy it –

    …not the case –

    LFTL
    (my turn to step down from the empty drum)

  8. Steve Horn  January 17, 2008 at 4:23 pm

    The “magic tank” was supposed to be under the sands of Iraq. The access to that magic tank was supposed to come from our invasion and quick,imperialistic conquest Bush and company hoped for. Isn’t it interesting that, in the wake of the failed invasion (or at least the failed oil grab) Bush starts to push for bio-fuel. I feel reasonably certain that his buddies from the petro-fuel industries have significant interests in the bio-fuel development and distribution industry as well.

    As for China and India, well, why shouldn’t they expect to live the same way we do in the West? After all, since the dawning of European colonialism our goal has been to re-make the rest of the world in our own image, since we, as “civilized” people, obviously are superior to those who, until recently, lived in relative harmony with the land…..

    Peace

    Steve

  9. LurkingFromTheLeft  January 17, 2008 at 4:31 pm

    And with stock prices down,

    …they can buy MORE shares with LESS dollars –

    …oh MY, what a giant freakin’ cooincidence –

    …glad you figured out where the magic tank was –

    LFTL
    (sad their 401k plan has lost 20k in play paper money over the past months)

  10. ekaton  January 17, 2008 at 11:36 am

    FROM: http://www.hempcar.org/biofacts.shtml

    Fuel:

    Farming 6% of the continental U.S. acreage with biomass crops would provide all of America’s energy needs.

    1. Hemp is Earth’s number-one biomass resource; it is capable of producing 10 tons per acre in four months.

    2. Biomass can be converted to methane, methanol, or gasoline at a cost comparable to petroleum, and hemp is much better for the environment. Pyrolysis (charcoalizing), or biochemical composting are two methods of turning hemp into fuel.

    3. Hemp can produce 10 times more methanol than corn.
    Hemp fuel burns clean. Petroleum causes acid rain due to sulfur pollution. The use of hemp fuel does not contribute to global warming.

    Just think. 10 tons per acre, sucking up CO2 and releasing 02 the whole time its growing. Convert the hemp to methane for use in fuel cells for electricity production and the only byproduct is CLEAN WATER. To me this is a no brainer. Grow hemp. Absorb C02. Release 02. Release H20. This will never happen, at least until we’ve burned every last ounce of oil and made the air unbreathable and turned the rain into sulfuric acid.

    Producing biofuel from corn requires an input of 100 btu of energy to produce about 130 btu of output. If the above figures are correct then a 100 btu input would produce 1300 btu of output. Its not a “something for nothing” process which would be impossible. It is literally converting solar energy to methane and using methane to produce electricity.

    We are talking about commercial hemp here. You’ll get “higher” sniffing your own armpit than you will if you smoke a kilo of commercial hemp, but its illegal in this country. ZERO tolerance you understand.

    — Kent Shaw

    PS — Rudolph Diesel fueled his first engines with peanut oil.

  11. Carl Nemo  January 17, 2008 at 10:58 pm

    duplicate post deleted by poster

  12. Carl Nemo  January 17, 2008 at 10:56 pm

    High Kent Shaw…

    You do realize you are expressing heretical thoughts relative to the Monsanto, Dow, DuPont et. al. manifesto that all petroleum based derivatives must reign supreme over any renewable biomass derived products that threaten their synthetic based hegemony over peoples of the world…no?! ; )

    Carl Nemo **==

  13. Sandra Price  January 17, 2008 at 11:46 am

    With cost of everything rising without end and the American dollar devalued in a spin downward; I have lost a large percentage of my retirement funds. My best investment is my home and as of this morning it decreased in value by 6%. My downsizing again would be a trailer out in the desert. Every 15 years I have had to cut back on everything to keep my kids in school and my income from employment never covered much. But I saved as much as possible and now my investments are being eaten by actions from a corrupt government. I can’t even default on my mortgage because I paid cash for this house.

    I wake up every morning wondering how much longer I should live. I would rather starve than take a penny of welfare. Damn our government for this out of control deficit and debts! Every time I hear Hillary and Barak promising handouts for all Americans so they can feel secure while taking the money from me!

    I’ve worked so hard to stay independent and out of the need for others paying for my lifestyle. Living in America is too much of a strain on many of us.

    Ayn Rand had the best idea and for all of us to go on strike against the instrusive Government. When the takers outnumber the givers something has to give. I have no problem helping people who are in need but I will not give a corrupt government approval to devalue my money and destroy my investments.

    When my daughter returns home, I will ask her about my cashing out at this time and getting the hell out of America.

  14. pollchecker  January 17, 2008 at 12:01 pm

    “When my daughter returns home, I will ask her about my cashing out at this time and getting the hell out of America.”

    Sorry there is no place left to go!

  15. ekaton  January 17, 2008 at 1:42 pm

    One may get OUT of America but one cannot get AWAY from America, what with 700 military bases in 130 countries “protecting AmericaN interests” and “spreading democracy.”

    Later this winter I’m going to visit a friend in Costa Rica for a month or so. I plan to travel around the country to try to get a feel for what it might be like to live there. I might get over to Panama as well to see what its like. But its probably too late for either of those options as well. The cancer has spread too far.

    — Kent Shaw

  16. Steve Horn  January 17, 2008 at 4:27 pm

    Your dollar goes farther in Zimbabwe – ;=) although the living conditions and political corruption (which makes our government look like a troop of Eagle Scouts) may not be to your pleasure. I’m sure that there are other post colonial nations in Africa and other parts of the world where you could find similar conditions.

    One thing that I’ll give America, we can have discussions like this and not fear arrest or death. Those with opinions different from the “leaders” in other nations risk everything if they express those opinions.

    Peace

    Steve

  17. barak  January 17, 2008 at 5:55 pm

    Well, add this to Bush/Cheney’s list of “accomplishments”! Speaks highly for Yale’s MBA program or did Daddy buy that degree for W along with giving him all the other jobs Bushie Jr had from Dad.
    Perhaps we don’t need MBAs in office. Perhaps we should add “F______-up the economy” to the constitution’s list of High Crimes and Misdemeanors. Nah, couldn’t do that! Too many of our Senators and Representatives would have to fall along with Bush/Cheney.
    Maybe we should elect officials for one three-year term. Might keep them from messing things up too much. Also, we should stop electing bottom-feeding lawyers to the branches of government. We should elect people who know the jobs, but have never aspired to them because they knew politicians have to be cheats, liars, and near-criminals. Then we should demand that the President appoint cabinet members who were “on-the-job”, i.e. Department of Transportation should be a bus driver; Department of Commerce should be a woman who is married to a bus driver and has 8 kids; Department of the Treasury should be a woman married to a bank clerk who has 10+ children;Department of Defense Director should be a kid from a ghetto neighborhood; Department of Homeland Security should be a Mother of two children; Department of Justice, another mother of two children; Department of…well, you get the idea.
    The experts aren’t. The Person on the Street, well, with the exception of those interviewed by Jay Leno, shows more common sense and intellectual ability than 98% of our government officials.
    Come to think of it, even those idiots could probably do a better job than the slobs running/ruining America. Betcha none of them ever went to Yale.

  18. Carl Nemo  January 17, 2008 at 8:54 pm

    Spot-on commentary barak…! It is amazing that “we the people” entrust our lives to certifiable “village idiots”; ie., smug, very wealthy, connected idiots with lotsa bucks/euros/gold, connections or whatever in one of the most dangerous times in all of world history…?! :|

    Carl Nemo **==

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