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| Lots of talk & disagreements about whether we are headed or inflation, deflation, stagflation, or whatever direction the speaker/writer believes we are headed. Yes, the futures markets (stocks, fx,...) are showing increased volatility & governments are failing financially around the world - all this noise is creating confusion & fueling the disagreements between differing views - After all, this is what creates a market. That is, disagreement drives people to place bets on their belief & so on..... In all this effort spent in predicting what is going to happen, I'm afraid that people are missing out on what is happening NOW.
So what IS happening? Last night I ran into town to pick up a quick bite to eat. For convenience, I went through Hardee's & was floored when after ordering a burger, fries & shake for 2, the bill came to over $17.............Just let that sink in for a moment.
Don't put me on the Price is Right because I must be out of touch. This makes me wonder what a retired person has to feel like when they get fast food. I'm (only) 27 years old & can recall this type of meal being closer to $10 (not that long ago). So where did the 70% price increase come from? is it larger servings? higher wages to employees? higher transportation cost? higher meat prices, packaging, or other inputs? higher power bill to run the restaurant?..... Most likely a combination of all of these - this is called inflation.
College economics courses will sometimes use the 'burger and beer' example for illustrating spending power & elasticity. If I look at minimum wage today & the cost of living, it paints a much more grim picture for 'getting by' than it did in the 90's (tell me about how it looked in the 50's, 60's, and so on... since I was not there). I feel sorry for the 16 year old today who wants to 'live the dream' of earning $ from a summer job or part time during school year to buy their first vehicle, put gas in it & have money to go out on dates. Somewhere we have lost this 'ideal' in the hurried rush of picking up the latest picture phone or IPOD, and didn't think about it because we were too busy with the latest 'reality tv' - the stark reality is that disposable income (especially for young & lower income people) has been squeezed tremendously in recent years. I believe the reason we haven't noticed this as front stage is a combination of factors including:
1) prosperity from elders (parents & grandparents). Thank goodness for loving family, but it makes me fearful that people are accustomed to a certain qualtiy of life that may not be sustained in the future.
2) swelling credit (debt). The average personal debt in the U.S. continues to inch higher - *who cares if it costs $17 for fast food if its on a credit card? you don't have to have the money now to buy it & besides I'll earn more money later *(sarcasm)
Maybe more detail and personal touches than necessary to illustrate my point, but this is real life & no matter what Ben Bernanke or any other talking head wants to tell us, Inflation has happened & it continues to push higher. Thankfully for all of us on this site, we've been on the right side of this wave (if there is a bright side to it) - What I mean is, those who are producing something are those who benefit from this shift in the price curve. Yes, I know that fuel, equipment, seed, & all other inputs have also seen price increases - but so have grains - cash corn was below $2 at harvest in 2005 & I'm not saying the farm economy is immune from being squeezed (just ask your local dairy or hog farmer), but judging from land prices, equipment values, & the rapid adaption of technology, I will venture to say that the past 5 years have been excellent for row crop farms. This same 5 year period has been hard on most business owners (outside of agriculture) - why has it been hard on these businesses? because they are having to pay more for what they do to operate the business & have not been able to increase their sales price or volume enough to counter the cost increase. Inflationary.
I'm still looking for a study that shows cost of living vs. wages over time, but this link does a nice job of showing how much food items cost - take special note of the jump over the past 10 years. http://www.foodtimeline.org/foodfaq5.html
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INFLATION HAS ALREADY HAPPENED
