Inflation May Be Worse Than We Think

I strongly recommend this editorial, published today in the Wall Street Journal, and written by David Ranson.

Inflation May Be Worse Than We Think

Perhaps many people have also noticed that the U.S. Dollar has fallen to new all-time lows yesterday and overnight, and inflation continues to surge even higher. Yesterday, wholesale inflation reached 26-year highs, but this occurred before the recent explosion of commodity prices to new records almost across the board. Inflation measures in future months are certain to rise not only higher, but considerably so. If anything, the plunging Dollar and surging commodities have baked higher inflation into the cake.

Isn't it time, perhaps, for the Bernanke Fed to stop worrying about saving Wall Street bankers, and think more about saving Main Street? Where is Volcker when we need him?

CPI Moves Higher, Stubbornly Above Fed's Target Rate!

CPI as reported for December is up, but not by amounts that set off alarm bells! December CPI was up .3%, and annual CPI was up 4.1%, the highest in 17 years. Of course, we all know that CPI is grossly underestimated, and that the Fed ignores total inflation, ignoring food and fuel costs. The real inflation rate is closer to 7-8%.

Paul Volcker has also criticized the current Fed leadership today. Where is the man, Volcker, when we need him? The Volcker Fed was far more effective, and didn't pander to Wall Street.

This CPI report will probably encourage continued Fed easing of interest rates. This alone will probably cause commodities prices to rebound higher, since continued devaluation of the US Dollar is a natural consequence.

In the minutes following the CPI data release, gold and oil prices are moving higher, and the US Dollar is moving lower. Surprised?