Tuesday, November 1, 2011

Quote of the Week

This one probably wouldn't be Quote-of-the-Week-worthy if it was coming from a different source, but since it's coming from CNBC, it's noteworthy.

If you've been reading me long, you know how I feel about the Fed's easy-money policies and what they do to the economy. But CNBC isn't quite the cynic I am, and the network in fact tends to be a heavy apologist for government policies and for big business in general (Rick Santelli is a notable exception, but Steve Liesman is a hack through and through). That's not necessarily surprising giving that their ultimate parent company is one of the biggest corporations around, but it's nonetheless worth knowing.

That's what made this article so striking when I came across it yesterday. The topic of the article was the Fed's insistence on focusing on "core" inflation measures which ignore the impacts of food and energy prices, which are deemed "volatile" and therefore too noisy to consider. The problem, which I first mentioned in this blog post, is that food and energy comprise the majority of American's budgets--especially for the poorest Americans.

Ultimately, the cost of fuel and food is basically all that matters to most Americans. Ignoring it is very dangerous, especially when you note the broader trend--and that broader trend is the subject of this week's quote.


"Since 1987, there has never been a five-year period where food and energy prices declined on an annualized basis... Only four years in the last 24 have seen a decline in combined food and energy prices."
                           - John Melloy, CNBC Executive Producer

Yeah, it's hard to make a case that inflationary pressures are "temporary" or "transitory" when 25 years of history suggest otherwise. We need to stop pretending that government policies aren't creating this phenomenon, or that it's somehow going to magically reverse itself now that our planet is welcoming its 7 billionth human. Keep that in mind with this week's Fed meeting ongoing--whatever Bernanke says, it's what he's not saying (or conveniently ignoring) that's arguably most important.


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