I believe that food inflation is in the midst of its greatest run-up (by one measurement of a basket of basic foodstuffs) since 1974. The lead story on Drudge reports on the most recent data.
Under the rubric of QE2, the Federal Reserve Bank is engaged in the venture of increasing the money supply with the goal of moderately increasing inflation. I fear that this venture is misguided and destructive. I believe it will result in inflation exceeding the Fed’s goal, if it has not done so already, and that the Fed will apply the brakes well after the damage has been done, as is its style.
What sayeth the Fed? If you missed the Wall Street Journal editorial on this subject yesterday, now may be the time to take a look:
The Federal Reserve has been on a media campaign to sell its monetary policy to average Americans, but this hasn’t always gone smoothly. Witness last week’s visit to Queens, New York, by New York Fed President William Dudley, who got a street-corner education in the cost of living.
The former Goldman Sachs chief economist gave a speech explaining the economy’s progress and the Fed’s successes, but come question time the main thing the crowd wanted to know was why they’re paying so much more for food and gas. Keep in mind the Fed doesn’t think food and gas prices matter to its policy calculations because they aren’t part of “core” inflation.
So Mr. Dudley tried to explain that other prices are falling. “Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful,” he said. “You have to look at the prices of all things.”
Reuters reports that this “prompted guffaws and widespread murmuring from the audience,” with someone quipping, “I can’t eat an iPad.” Another attendee asked, “When was the last time, sir, that you went grocery shopping?”
I first expressed my concerns on the subject this past January in “Memphis Blues Again.”