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.

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.

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.

Food & beverage prices rose 0.2 percent last month and were up 4.5 percent for all of 2011 while apparel prices declined 0.1 percent in December but gained 4.5 percent for the year in a report that was almost a carbon copy of the November data released a month ago.

In a separate report from the Labor Department, jobless claims plunged from an upwardly revised, seasonally adjusted 402,000 to 352,000 for the week ending January 14th, the lowest level since April 2008.

Claims for six states were estimated due to the Martin Luther King holiday and seasonal factors  are having an outsized impact on the data at this time of the year as unadjusted, holiday-related cutbacks came in at 521,613.

But, looking at the four-week moving average, the trend remains down, this smoother gauge of jobless claims falling from 382,500 to 379,000 last week, up from 374,000 at the end of last year.

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.

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.

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.

Food prices rose just 0.1 percent and are now up 4.4 percent from this time last year and the important “food at home category” fell 0.1 percent in November, but remains uncomfortably high on a year-over-year basis with a gain of 5.9 percent.

Clothing prices continue to push higher, up 0.6 percent last month and 4.8 percent higher than a year ago, and steady increases in medical and education costs (that would appear to be rising faster in the real world than in the government’s price data) continue to take a toll on consumers.

Driven by a 3.1 percent decline in gasoline prices, overall energy prices fell 2.0 percent last month following an increase of 2.0 percent and, on a year-over-year basis, the energy index is now up 14.2 percent, down from an annual increase of 19.3 percent in September.

Food prices rose 0.1 percent in October and are now 4.7 percent higher than a year ago, the important “food at home” category now 6.2 percent higher than last year at this time with dairy products up a whopping 9.0 percent.

Medical care costs continued to rise, up 0.5 percent last month and 3.1 percent higher on an annual basis, while education costs also moved higher, the price of books up almost 6 percent from a year ago while tuition costs rose 4.7 percent.

The senior lobby AARP’s latest television barrage is just part of the larger grass roots campaign that was launched recently by an array of senior citizen and public interest groups aimed at beating back any attempt by members of the Super Committee to change the cost-of-living adjustment factor for Social Security. Shifting to a less generous measure of inflation would cut  $112 billion or about 7 percent from projected beneficiary payouts over the next decade.

The proposal — popular with many policy analysts as a more accurate portrayal of consumer prices — remains one of the most attractive revenue raising measures in some politicians’ and deficit-cutters’ playbooks. Beyond cutting Social Security costs, it would reduce future claims in a wide range of government programs that benefit mostly the poor, including Head Start, school lunch programs, and home heating assistance. It would also raise $72 billion in new tax revenue by slowing upward adjustments in income tax brackets, thus throwing more taxpayers into higher brackets.
…
While Democrats on the committee are staying mum on the issue, the grassroots campaign by key elements of their political base has made it extremely difficult for them to embrace the proposal. Last week, thousands of demonstrators marched on the Boston office of Sen. John Kerry, D-Mass., demanding he reject cuts in Social Security and other social programs. “Though we don’t have armies of corporate lobbyists, we have passionate people who belong to all political parties, including independents, who don’t want to see their benefits cut,” said Joshua Rosenblum, a spokesman for Social Security Works, which helped organize the demonstrations.

This should be a pretty interesting ten days between now and the time the supercommittee’s plan is due on Capitol Hill on the day before Thanksgiving. By all accounts, their chances of producing any kind of agreement are less than 50-50 and financial markets now seem to be sniffing this out, reacting in advance of any August-style U.S. budget deficit debate.

The amount of student loans taken out last year crossed the $100 billion mark for the first time ever and total outstanding student loan debt will exceed $1 trillion for the first time this year.

Americans now owe more on student loans than on credit cards, reports the Federal Reserve Bank of New York.

Students are borrowing twice what they did a decade ago after adjusting for inflation, the College Board reports. Total outstanding debt has doubled in the past five years — a sharp contrast to consumers reducing what’s owed on home loans and credit cards.

Taxpayers and other lenders have little risk of losing money on the loans, unlike mortgages made during the real estate bubble. Congress has given the lenders, the government included, broad collection powers, far greater than those of mortgage or credit card lenders. The debt can’t be shed in bankruptcy.

The credit risk falls on young people who will start adult life deeper in debt, a burden that could place a drag on the economy in the future.

While this is surely part of “The New Road to Serfdom” here in the U.S. or, more simply, “wage slavery”, as noted in the article, it is true that the unemployment rate for those with college degrees is less than half of what it is for the rest of the population. For many marginal college prospects, this amounts to a high-stakes roll of the dice as to whether it makes sense to take on so much debt.

Paced by a 2.9 percent rise for gasoline, up 33.2 percent on a year-over-year basis, overall energy prices jumped 2.0 percent last month and are now up 19.3 percent from a year ago.

Food & beverage prices rose 0.4 percent in September and are now 4.5 percent higher than last year at this time while the “food at home” subcategory rose 0.6 percent for the third month in a row, now up a stunning 6.3 percent on a year-over-year basis.

Elsewhere, price increases were more moderate and clothing prices reversed their recent trend by dipping 1.1 percent last month, however, apparel prices are still 3.5 percent higher than a year ago, down from the August year-over-year rate of 4.2 percent that marked a 20-year high.

Amazingly, up until this summer, apparel prices had been 10 percent or more below the highs seen in the mid-1990s, this 15-year trend due largely to the rise in inexpensive imports. However, from April to August of this year, apparel prices have surged more than five percent, cutting this gap almost in half.

Here’s a long-term chart showing this recent dramatic increase:

Americans can now add clothing to two other categories where prices have been rising sharply lately – food and energy – as these indispensable items put more pressure on consumers despite assurances from the central bank that inflation is under control.