Friday, July 13, 2012

Interpreting the Headlines

The headline reads US Wholesale Prices Increase Slightly in June, Evidence that Inflation is largely in Check.

My first thought was "Oh, goodie ... but what about deflation", which is actually a greater concern among most of the non-economists who have been writing and speaking on this topic.

The article, though, had some interesting information. The price of both food and pick-up trucks has increased.

Well, damn. I guess that means I have to decide if I'm going to feed my family or buy that Chevy 4X4.

Decisions ... decisions.

If I pick the pick-up, I could have a pool or a mobile garden.

I like how the article spins the mild inflation in a positive light. "Modest wholesale inflation reduces pressure on manufacturers and retailers to raise prices. That helps keep consumer prices stable, which boosts buying power and drives economic growth. Mild inflation gives the Federal Reserve room to take other steps to boost the economy."

Apparently a little inflation is good for the economy, because then, the government and manufacturers have a little more room to manipulate the system. And we all know how well those manipulative measures work.

Of course, I'm still wrestling with the notion that inflation keeps manufacturers and retailers from raising their prices, because we all know if their costs increase as a result of inflation, they will, most assuredly, pass those costs onto the consumer.

What I loved was this statement: Consumer spending drives roughly 70 per cent of economic activity.

It was preceded by this one: Lower prices have yet to inspire consumers to spend more freely. In May, Americans didn't increase the rate at which they spent.

It should have been followed by, but it's likely the article's author or editor thought we'd forget about Point A (that people aren't spending more) by the time we got to Point B (that the economy is, for the most part, dependent on consumer spending).

So, what most people will take from that article is: don't worry. Things aren't so bad.

What I take is that we're in a very bad place, and in spite of (or perhaps because of) continued manipulation by the government and the pseudo-government entities, like the Federal Reserve, the economy is not improving (in fact the article points out that experts believe the economy is weakening, but it's almost just a passing observation in the article - just one sentence, thrown in there because of the need for accuracy, but with the hope that most people will skim over it, and go straight to the last sentence which claims: Inflation is good, because people will spend more money ... before it loses it's value.

And, there folks, we have it. The bottom line: our money is losing value, and we'd be best off spending it while we can.

Hey, Deus Ex Machina ... maybe it's time to withdrawal the savings ... and buy a pick-up truck :).

3 comments:

  1. At this point, I pretty much always assume that we're in a bad place, and that someone is trying to gloss over it somehow. Part of me hates thinking this way all the time, but I also realise that if I'm wrong, so be it, but if I'm right, then I've had the foresight to start changing how I live ahead of time.

    That said, I've been seriously considering spending some money on tools and other things that I think will be necessary and important before everything really devalues. But I have a pressure canner, garden tools, grain mill, extra seeds, and a few other goodies in mind, rather than what I imagine would count as typical consumer spending.

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  2. At this point I am investing in the health of my soil and expanding my food growing capacity. So we are building cold frames and amendments for the soil. We have a source for local meat bird chicks that we will using this spring.

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  3. Things in Arizona are practically at a standstill...I hardly think it could get much worse...though I know it can and will. I too do not like thinking this way but...prepare for the worse and hope for the best is all we can do.

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