Tuesday, August 15, 2006

DON'T BELIEVE THE HYPE

AP's "Economics Writer" reports that according to the Labor Department, "inflation at the wholesale level edged up by the smallest amount in five months in July as falling food prices helped offset another rise in energy costs."

Blah, blah, blah.

He continued, noting that, "wholesale prices increased a slight 0.1 percent in July, far below the 0.5 percent jump in June. The improvement reflected a retreat in food prices, which fell by 0.3 percent in July, after having surged by 1.4 percent in June, which had been the biggest increase in nearly two years."

Blah, blah, blah.

Two things, and two things only, are important to remember when you hear these stories & figures: they come straight from the same government that engineered the inflationary mess we're in; and they're complete bullshit.

Inflation: an increase in the supply of money & credit. Period. The Federal Reserve causes inflation. Foreign Central Banks cause inflation. Privately-owned banks extending credit cause inflation. Various derivative schemes that add "potential" or "future" value to balance sheets cause inflation. Why? More money chasing a static amount of goods & services means prices will go up.

Wholesale food prices, or whatever other prices, go up or down based on the amount of "money" or "credit" available to purchase the goods in question. And with a halt to the rate hiking occurring last week, expect the flow of money & credit to continue unabated through November . . .

. . . when a strong stock market & a recovering real estate market will surely boost the fortunes of any & all incumbents. And inflation? It won't show up in the statistics til after the election. Not that the statistics need to be accurate, or true, or based on reality anyway.

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