Hello, inflation.

While we are told by official numbers that annual inflation hovers somewhere between 3% to 4%, prices on everything seem to by jumping at that rate monthly or daily. A recent report on CNN morning news relating to global food shortages found annual inflation on certain critical items to be as so:

• Flour    37%
• Eggs    35%
• Milk     23%
• Sugar   16%

On these four items, that's an average of 27.75% annual inflation. Meanwhile, if you take your dollars abroad to Europe - or even Asia, South America or Africa - they're growing weaker by the day.

When I lived in Colombia in 2003, the exchange was US $1.00 to 3,000 pesos. As of today, it's down to 1,781 pesos per dollar. That's more than a 40% loss in the dollar's value against the peso in only five years. During the same period, we've lost nearly 30% against the Korean Won and the Euro.

Somehow we're told that a weak value is "good for exports". Yet exports are measured as physical goods -- those often produced by low-skill labor in factories. To continue our growth, progress and advancement as an economy, we should be exporting knowledge and consulting, technology, business management skills, intellectual property, music and film, and other goods that often aren't tracked as an "export" but that sustain and grow our advanced knowledge economy, rather than our basic labor economy. While I'm not against the latter, we will see that as a nation, its growth is a symptom of economic contraction rather than growth and progress. It may appear to be good for one sector, but what it truly means is that we're failing to educate ourselves and stay on the cutting edge of the global economy.

With a weak dollar, Americans can't travel, our own domestic prices are rising rapidly, and our economy continues to teeter on an even larger looming collapse. It would appear that our real inflation rate is closer to 8% to 10% against other currencies, and perhaps even higher when considered as a CPI (consumer price index) function. Despite the common sense we see in front of our faces, the official numbers still tell us that inflation is low and will remain so.

Finally, the only price that seems to be falling is housing. The one area that we all told one another to invest - in our homes - now appears to be a significant liability. Why did we all buy too much house? Because the Fed made it cheap to get loans by holding interest rates down -- the real level of risk was hidden behind an artificially low interest rate.

And now to deepen and extend the crisis even further, we are making our dollar still cheaper -- the Fed continues to push rates downward. Heck, we're even giving the dollar away -- look for a few Benjamins in millions of mailboxes across the nation. And that's our sorry excuse for a solution?

If we'd stop giving money away, perhaps real inflation wouldn't be so high -- and the economic "cycle" wouldn't be so deep or protracted. Everyone keep your hands and feet inside the boat.

Comments

[Matt Malek]

This article reminded me of Obama at Saddleback. So nuanced but without a real position. Get a spine buddy. ;-)