Thursday, March 03, 2005


US Inflation Rate (1875-2004)

I have been posting about inflation the last few times, ever since Kudlow opined that there was no connection with the CRB and inflation in the US, reported by the government, to be 2%. Again, pictures show so much more than words.

This chart is included in a paper by Antony P. Mueller presented at the recent Austrian Economics and Financial Markets conference in Las Vegas, titled The Anguish of Central Banking 2005.

Antony Mueller teaches economics at the University of Caxias do Sul (UCS) in Brazil. He is an adjunct scholar of the Ludwig von Mises Institute and serves at the program "International Political Economy" of the Universidad Francisco Marroquin (UFM).
The Gold Standard was abandoned in 1971, and since then the US central bank has inundated households, companies, government and the globe with dollars.
What is going on currently is global debt creation at an unprecedented pace, and the major players in this game are central banks under the obvious or implicit tutelage of their governments.
Sure we see prices fall in some areas, like electronics and that HDTV-ready flat screen we want to buy. There is over capacity in some areas and companies are competing with foreign built products or sending factories off shore. If you manufacture here, your raw material prices are going up and to keep from getting squeezed, you need to raise prices, as Caterpiller announced. The trick is, will the prices stick. If they don't some say, "see there is no inflation".

However, raw material prices are going up. Our houses cost more. Our lot prices cost more. Our food costs more. Our gasoline and heating oil and natural gas costs more. And, our cars cost more. This chart shows that prices are up almost five-fold from the mid-70's. If, you are my age you remember when a 2500 sq. ft. house on NE 63rd was purchased for $14,000. The median house now is, what, $250,000. A fine wool suit, when I started working, was $35. A brand new '79 BMW 5 Series was $20,000.

To think that a small group of men and women, governmental bureaucrats, can manipulate interest rates and the exchange rates and presumably know what they are doing is ludicrous. The facts speak for themselves.

Mover Mike

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