Inflation, that is. Even the Washington Post recognizes this fact. What is worse, wages aren’t keeping up with inflation. People who work for a living are getting pinched:
Inflation is back, with higher prices for food and fuel hammering American consumers, and this time it really hurts.
It’s not just that prices are rising — it’s that wages aren’t.
Previous bouts of inflation have usually meant a wage-price spiral, as pay and prices chase each other ever upward. But now paychecks are falling further and further behind. In the past three months, consumer prices have been rising at a 5.7 percent annual rate while average weekly wages have barely budged, increasing at an annual rate of only 1.3 percent.
And the particular prices that are rising are for products that people encounter most frequently in their daily lives and have the least flexibility to avoid. For the most part, it’s not computers and cars that are getting more expensive, it’s gasoline, which is up 19 percent in the past year, ground beef, up 10 percent, and butter, up 23 percent.
Inflation is typically the symptom of an economy overheating. Workers can’t keep up with the demand for the vast array of things they make. Abundant dollars pursue scarce goods and services, forcing prices and wages up. The solution is simple enough: Central banks, such as the Federal Reserve, increase interest rates, applying brakes to the economy.
But the current price spike is in some ways more pernicious than the last great U.S. inflation — the steep increases of the 1970s — and harder for policymakers to address. Today, raising interest rates might make a weak economy even weaker, stifling what meager growth there has been in wages. Moreover, higher interest would make the nation’s massive budget deficits even more expensive to finance, taking an additional toll on the economy.
Few would argue that the U.S. economy, with its 8.9 percent unemployment rate, is overheating at the moment. Rather, the global economy — in particular developing nations such as China and India — is growing so rapidly that it’s straining the available supplies of all types of raw materials.
What he doesn’t mention is that QE2 has made the dollar worth less than it was bu essentially printing $600 billion dollars. That is a direct responsibility of Obama Administration policy. So when they throw their hands in the air and say there is nothing that they can fo, remember that they have already made things considerably worse. QE2, the “Stimulus”, and so forth have brought us to the Obama Economy. High unemployment, rising prices, stagnant wages, it is time to bring back the Misery Index. That should be a central theme of the coming election. Things are cnosiderably worse than they were four years ago. The Republicans need to drive that home. The Obama Administration is already a failed Administration. It has failed on all fronts. We need to drive this home so that it is a one-term failed Administration. We need to stop Obama from getting four more years to really drive us into the ditch.
Tags: Inflation, Misery Index, Obama Boom
