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Is Your Wallet Screaming “Inflation”?


By —— Bio and Archives--March 3, 2011

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imageI would like to start off by stressing the fact that I am NOT an economist. I am a “working Joe” that gets up and goes to work every day – as I have for thirty-five years – in order to pay my bills and feed my family. I do not profess to be an expert. However, I do know what my wallet is telling me – and it isn’t telling me anything good.

I need not mention what we are seeing at the gas pump these days. The price of a gallon of gasoline has skyrocketed (in my home state of Florida) from just over $1.50 per gallon at the end of the Bush administration to close to $3.50 for that same gallon today.

Anybody that believes that inflation is really 1.63 percent (as told to us by the federal government’s Bureau of Labor Statistics in its Consumer Price Index summary) is not living in the real world. If you shop for groceries, gasoline, insurance, or basically, ANYTHING (computers and other electronic goods notwithstanding) on a regular basis, you have seen a steady rise in prices for a number of years. 


There is a web site that offers an “inflation calculator”. This is very intriguing and allows one to determine the rate of inflation between any two dates from 1914 to the present. You can then enter that inflation rate and a dollar amount (such as the cost of goods or services) and determine what the inflated cost is. According to the information on this site, the inflation rate from January 2000 to today is 30.46 percent. This means that something that cost one dollar in 2000 costs $1.30 today.

I like to think of prices in terms of my “personal price index”. I do most of the grocery shopping in my family and I am keenly aware of the prices that I pay for the goods that I purchase regularly. Take, for instance, a popular national brand of orange juice that I was able to buy on sale (back in 2000) in half gallon cartons for three for $5.00. That same container of orange juice today will cost you $2.99 when you can find it on sale. But wait – the vendor recently reduced the package size from a half-gallon to 59 fluid ounces. This increase in price PLUS the decrease in package size yields a net increase in the per-ounce price from 2.61 cents to 5.07 cents, or 94 percent. And this has taken place since 2000.

Granted, many factors can enter into the price of orange juice including freezes in Florida. But this is a steady long-term increase – not a seasonal trend. And how many other products can you name which have seen similar increases in price along with a decrease in package size? Ice cream and coffee are two that immediately come to mind. Or have you purchased a bag of sugar lately? A four pound bag that used to be five? If not, you are in for a shock.

My 82-year-old mother told me just the other day that the yogurt that she has been purchasing for quite some time for $2.49 just increased in price to $2.79. This sounds like a twelve percent increase to me - in one fell swoop; not over an extended period of time.

We know that the Federal Reserve has been, for the past several months (and will continue doing through the third quarter of this year), increasing the money supply by a process euphemistically known as “quantitative easing”. The irony here is that they are not making it easier on the working people. Increasing the supply of money is the only real cause of inflation and this is precisely what the Fed is doing. The price of oil (as with the price of everything) is controlled by the laws of supply and demand. But with the Fed seemingly trying to destroy the dollar, investors are turning to commodities such as gold, silver, sugar, and OIL. Not only has oil seen a large run-up in price lately, but silver (from which, once upon a time, our coins were minted) has increased over twenty percent in the past month alone.

I believe that we are seeing people eager to spend their dollars while there is still at least some value left to them, albeit not much. Hence the demand, and increasing prices, for the aforementioned commodities. It is a vicious cycle. The more the Fed devalues the dollar through forced inflation, the more investors try to unload their dollars by purchasing tangible assets with real value.

We have all heard stories about Germany in the 1920’s and the inflation that that country experienced. Stories abound of people using wheelbarrows full of money to purchase loaves of bread. Such stories may seem absurd to a majority of Americans today. But think about it in the context of such inflation taking place over a period of many years. This is precisely what we have seen in this country. The dollar has lost over 95 percent of its value since 1900. This means that, what once sold for less than five cents now costs a dollar – two 50-cent rolls of pennies – or more. A forty cent loaf of bread of a few decades ago now costs upwards of three dollars. Hence it is not difficult to spend a wheelbarrow full of pennies on a single trip to the grocery store.


In my opinion, if it looks like a duck, waddles like a duck, and quacks like a duck – it’s a duck. Well, if it looks like inflation and feels like inflation, it IS inflation, regardless of what the government tries to tell us.


Fed chairman Ben Bernanke is whispering, “Don’t worry.”

But my wallet is screaming, “Inflation!”


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James Sharp -- Bio and Archives | Comments

James Sharp is a middle-aged, middle-class, middle-management salesman who believes in secure borders and fighting our enemies with a strong military.  He also believes in limited government, free markets, and unlimited opportunity and personal liberties for all citizens of the U.S.


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