WSJ Goes Inflation Crazy!

After last week’s inflation snafu, the WSJ makes up for it this week — and then some. Just in time for today’s 8:30 PPI report, the Journal’s pages are chock full of all sorts of inflation goodies:

For Many, Inflation Is the Worry:  Life keeps getting worse for the consumer, with few
signs it’s going to get better soon. That means the economy’s woes
could drag on far longer than many thought. A growing worry is inflation. Economic slowdowns and
weak consumer spending normally curb price pressures, but that isn’t
happening this time around, at least so far.   

Food Inflation, Riots Spark Worries for World Leaders: Surging commodity prices have pushed up global food prices 83% in the
past three years, according to the World Bank — putting huge stress on
some of the world’s poorest nations. Even as the ministers met, Haiti’s
Prime Minister Jacques Edouard Alexis was resigning after a week in
which that tiny country’s capital was racked by rioting over higher
prices for staples like rice and beans.

Higher Food Prices May Be Here to Stay: For all the economists and consumers who hope high
food prices are temporary, here’s one reason why they probably won’t
be: Farm costs are skyrocketing, making permanently higher prices
essential for farmers to keep expanding production.

Those articles — all from Monday’s paper — are followed today by a Martin Feldstein OpEd, Enough With the Interest Rate Cuts. Feldstein argues that "It’s time for the Federal Reserve to stop reducing the
federal funds rate, because the likely benefit is small compared to the
potential damage."

There seems to be a growing recognition amongst the cognesceti  that several of the usual plays out of the manual are not working. Consider each of the following factors (in decreasing order of dissemination), and the impact they have on the economy, the Federal Reserve, and the current US election cycle:

• Slowing economic growth is failing to slow price increases;

• There is a widespread recognition that CPI as assembled by BLS fails to adequately capture inflation pressure;

• Inflation expectations have increased, despite all of the reassurances from the usual cylons solons;

• The Boskin commissions dishonest backdoor attempt to cut Social Security is receiving increasing scrutiny for its role in understating inflation. (See Fleckenstein: Greenspan’s Bubbles)

There is a slow but steady realization coming to the fore that there is no such thing as a free lunch, and the sooner the leaders of this nation figure that out, the better off we will all be . . .

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Google Trends: Inflation, 12 months, (Worldwide)

Trends_inflation_12_months_world

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BTW, if you wish to incontrovertibly demonstrate your lack of mental acuity, place a comment stating  that price increases and/or inflation is a lagging indicator. Use the name "half wit."

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UPDATE: April 15, 2008 9:14am

Bloomberg:

U.S. March Producer Prices Rise More Than Forecast
   

Prices paid to U.S. producers rose almost twice as much as forecast in March, reflecting higher fuel and food costs that threaten a pickup in inflation. The 1.1 percent gain followed a 0.3 percent increase in the prior month, the Labor Department said today in Washington. So- called core producer prices that exclude fuel and food increased 0.2 percent, as forecast.

Rising raw-material costs are hurting profits as slowing demand makes it difficult for companies to pass increases on to consumers. The need to avert a deeper economic slump will prompt Federal Reserve policy makers to lower the benchmark interest rate again this month even as inflation accelerates.

      
      

 

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Previously:

WSJ: "Inflation is back"

http://bigpicture.typepad.com/comments/2008/04/wsj-inflation-i.html

Sources:
For Many, Inflation Is the Worry   
SCOTT PATTERSON
WSJ, April 14, 2008; Page C1
http://online.wsj.com/article/SB120813154841311575.html

Food Inflation, Riots Spark Worries for World Leaders
IMF, World Bank Push for Solutions;
BOB DAVIS and DOUGLAS BELKIN
WSJ, April 14, 2008; Page A1
http://online.wsj.com/article/SB120813134819111573.html

Higher Food Prices May Be Here to Stay
PATRICK BARTA
WSJ, April 14, 2008; Page A2
http://online.wsj.com/article/SB120811953255811087.html

Enough With the Interest Rate Cuts
MARTIN FELDSTEIN
WSJ, April 15, 2008
http://online.wsj.com/article/SB120822025943314699.html

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How Greenspan & Bernanke Invalidated Friedman

Hedge fund manager Scott Frew is a friend and occasional fishing partner. He had a few words to say about this morning’s discussion re: Volcker and Bernanke:

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I wanted to flesh out some of what Barry wrote earlier about former and current Fed Chairs Volcker and Bernanke. We must begin with Bernake’s now infamous Deflation speech. It is certainly “The Speech.”  And I think in many ways it’s a terrifying document.

I am, by the way, in total agreement that Greenspan’s the guy who’s responsible for all of this; the particularly insidious quality of bubbles is that once you’re in one, the future is more or less pre-ordained.

An ironic corollary of that thought is that it pretty much invalidates the entire, mainstream (most certainly including Bernanke and Greeenspan), Milton Friedman-inspired critique/view of the Great Depression as having resulted from bad monetary policy on the part of the Fed as the bubble burst. They needed, according to that critique, to be much looser than they were, and all the problems would have been avoided.

So, in a sense, Bernanke’s an acolyte of that same church (recall him saying to Friedman, at some dinner or something honoring him, Never again; i.e., as a result of the lessons learned, taught by Friedman, the central bank would never repeat those Depression errors,), can’t fall back himself on a “It’s Greenspan’s fault” defense, because that’s antithetical to their whole view of history.

I see The Speech itself as a terrifying document, although it’s also an
absolute blueprint for what’s going on today — you’ve got to give Ben
credit for foresight; he’s running down the checklist he provided there,
item by item, line by line. Too bad none of it’s working, at least to date, but
instead is exacerbating the problems.

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