The Bureau of Labor Statistics’ index of meats, poultry, fish and eggs just hit an all time high. Nor are these higher prices confined to just food items. Consumer prices across the board are registering their sharpest price increases in over15 months. Inflation is accelerating on a variety of goods, from airline fares to vegetables. This must be good news to the Fed, as it has unleashed the most expansionary monetary policy of all time over the past five years. The explicit goal of all the QE programs was to prevent prices from falling. According to USA Today, it’s not just the Fed that should be happy with higher prices. Consumers too should be upbeat about the rising cost of living:
The recent pick-up in consumer prices is generally considered good news for the economy because annual inflation was well below the Federal Reserve's 2% target last year. Low inflation reflects a weak economy and can lead to deflation, or falling wages and prices, which often foreshadows recession.
Never mind that low inflation would be the norm if the Fed wasn’t constantly inflating the money supply. And never mind that deflation is beneficial as it means we can buy more goods with the same amount of money (who doesn’t love sale season?). We’ll also overlook the fact that there are many workers who can’t get a job because minimum wage bars them from lowering their wages to a competitive level. Deflation in wages would vastly improve these peoples’ lives by getting them off the dole.
Lastly, while the Fed may think rising prices are a boon to the economy, perhaps Janet Yellen should trying telling that to the masses of unemployed Americans. Over 10 million Americans are officially unemployed today, and millions of others are discouraged and have given up all hope of finding a job. Rising prices for the food they buy is anything but positive news for this sizable group. (Originally posted at Mises Canada.)
