Ben Bernanke is the Next Arthur Burns

In yet another follow-up to yesterday’s Bernanke’s Disingenuous Message to Savers, it certainly looks like Fed Chief Ben Bernanke is the second coming of Arthur Burns when looking at real interest rates (i.e., the Fed Funds rate minus year-over-year inflation).

Note that the 2012-2014 period assumes the current 3.0 percent inflation rate and zero percent Fed Funds rate continue for three more years – it might move up a little, but not much. Also, that little red sliver in 1978-1979 represents G. William Miller’s tenure as Fed chief – it hardly seemed worth it to put his name up there.







Food at Home ≈ Food Away from Home?

After looking over this morning’s report on consumer prices and examining the details in the food category, it occurred to me that either there are a lot of people in this country spending a lot of money eating out or the Labor Department’s weightings are wrong.

As shown below, the Food and beverages category accounts for nearly 15 percent of the overall price index (which seems about right), but Food at home accounts for only 53 percent of that spending whereas Food away from home accounts for 40 percent.

The Food away from home share seemed high to me, but it certainly explains how, as shown in the “from- Dec. 2010″ column, you can have  grocery prices rising at a rate of six or eight percent a year while the overall Food and Beverages category is up only 4.5 percent.

Though you can save huge amounts of money by eating at home more or packing a lunch (it always amazes me when couples lament their money troubles and their inability to save while, at the same time, noting that they eat out all the time – as if the two aren’t connected), the table above indicates that the frugal are being punished more than the spendthrifts once again… All part of Ben Bernanke’s master plan, apparently.

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Consumer Prices Flat, Jobless Claims Plunge

The Labor Department reported that overall consumer prices were unchanged in December for the second month in a row as falling energy costs offset price increases elsewhere and, for the entire year of 2011, inflation came in at 3.0 percent.

Gasoline prices that fell 2.0 percent from November to December combined with household energy costs that were down 0.4 percent to push the energy index 1.3 percent lower, however, energy prices remain up 6.6 percent from a year ago with many analysts now predicting a sharp increase in pump prices this spring.

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Prices are falling all around the world, or so it seems, and that’s a good thing for Bank of England Governor Mervyn King because every time the U.K. inflation comes in too hot – more than a percentage point above the official two percent target – he’s supposed to write a letter of apology to Chancellor George Osborne.

Based on this Telegraph story today, where it was learned that the annual inflation rate fell from 4.8 percent to 4.2 percent, another Dear George letter has likely already been delivered, but Mervyn might be able to take a break sometime this spring as some big tax hikes fall out of the year-over-year consumer price comparisons.

Like a lot of the things we do on this side of the pond, it’s all pretty silly.

I’m not sure if they still do this, but, back in 2007, the Telegraph used to publish the letter from the Bank of England along with the response from the Chancellor of the Exchequer as noted in this item at the old blog. Apparently, with all that’s happened in the aftermath of the financial crisis, no one cares as much about a little inflation.

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Another View of Stocks in 2011

In their latest Daily Chart, The Economist has another one of those “Stocks in 2011″ summary graphics that, despite all the buzz about large-cap stocks in the U.S., reinforces the point that it was a rather dismal year for equities around the world.

Don’t get too excited about equity markets in Venezuela – inflation there is running at 29 percent, a level that, according to The Economist’s weekly Output, Prices, and Jobs makes them an extreme outlier in a world of generally low reported inflation. Only two other countries have double-digit inflation – VietNam at 18 percent and Pakistan at 10 percent.

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Consumer Prices Flat in November

The Labor  Department reported that consumer prices in the U.S. were unchanged last month as falling energy prices offset gains elsewhere and, on a year-over-year basis, inflation now registers 3.4 percent, its lowest level in five months.

Energy prices fell for the second month in a row, down 1.6 percent in November after a decline of 2.0 percent  the month before, as gasoline prices followed up a 3.1 percent drop in October with a decline of 2.4 percent last month. From a year ago, gasoline prices are still quite high, up a whopping 19.7 percent.

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