Thursday, June 2, 2016

Are we experiencing inflation?

What do you think? Are we experiencing inflation? We know that all of the economic indicators, including equilibrium real interest rate (sometimes called the Wicksellian interest rate, after the late-nineteenth- and early twentieth-century Swedish economist Knut Wicksell) are saying that the US economy is not experiencing inflation, but do you think things generally cost more today than they did five years ago?

After reading Ben Bernanke's blog it is apparent that the CPI indicators are pointing to "no inflation". At the same time, does the Fed and Bernanke live on Fantasy Island?  Besides oil (artificially low by increased domestic production to specifically pressure the Russian economy - note the price of oil at the Crimea crisis), commodities whose price base is foreign currency, and other durable goods made overseas (primarily China - manipulated Yuan), what products or service have become less expensive? Seriously - what has?

Now, we understand that economists and the Fed are confined by economic models and indices derived from years of statistical and actuarial analysis, so sometimes they cannot call "a spade a spade". But with that in mind, do they own rental property? Do they pay property taxes or insurance premiums? Do they send their children (grandchildren) to school? Do they purchase food? Do they hire labor? Do they (or their contractors) purchase building materials? Do they travel? Do they attend entertainment venues?

As you can see, this list can go on and on. The encompassing number of goods and services that have increased substantially in price is impossible to ignore (unless you live in the Ivory Tower with Ben, Jan and the gang). The CPI numbers are manipulated to the advantage of social programs and the federal government. If they CPI reflected the actual costs of goods and services of our economy, the Social Security system would go bankrupt tomorrow due to the cost of living adjustment they would need to provide to payees...among every other cost of living adjustment paid in this economy.

Yes, those on a fixed income are being squeezed more than ever with the rising cost of everyday goods and services. Big box retailers have voluntarily increased wages for employees, but it is not enough for the Fed to realize inflation. We will look back on the period from 2010 to 2016 as a period of domestic inflation shrouded by statistics and artificially priced commodities and goods.

As always, we are available to brainstorm on financial topics at

Thank you very much!