Thursday, June 26, 2008


Inflation is supposedly running at 3.2%. Nobody believes the government on this. Fuel prices are up 40% on a year ago and food prices by about the same. Some things have come down in price, like iPods, flat screen televisions, and other electronic goods, but these are things you buy every several years, not every week like food and fuel. Their falling prices only make consumers angry that they bought theirs when prices were still high. Clothes are also cheaper, mostly because of the employment of child labor in the far east.

More important has been the growth of money supply which was 12% in the past year. Growth in productivity was about 2%, so the true inflation rate was 10%. It may still have to work through, but that is the bottom line. Most people would agree with that figure for personal inflation. The increased cost of imported goods is really a devaluation of our currency. The so-called increase in the demand for oil and fool is illusory. It has been made up by governments and speculators; the first to disguise how they are squandering our taxes, the second to short sell and make a fast buck.

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