On Wednesday, April 27, 2011, for the very first time in history, the Chairman of the Federal Reserve held a press conference and took open questions from journalists representing prominent news organizations and prestigious financial publications.
During his opening statement, the Chairman denied that the liquidity being added through the quantitative easing program and the purchase of hundreds of billions in Treasury debt has contributed to inflation. He further asserted that the current rise in prices was a temporary phenomenon and that they would revert to historical norms in due time. The Chairman also reiterated the Federal Reserve’s commitment to maintaining a strong dollar. When Treasury Secretary Geithner made a similar statement in 2009 during an address to students at Beijing University, he elicited loud bursts of laughter from the audience.
These rosy predictions fly in the face of what ordinary consumers are experiencing on a daily basis when they shop for basic necessities. Just as the US Department of Agriculture predicted in October of last year, retail prices for fresh fruit and vegetables, bread, dairy products and meat have gone up dramatically, some of these registering annualized increases of as much as 14%.
The Consumer Price Index published by the Bureau of Labor Statistics concedes a 3.6% inflation rate over the last 12 months for food purchased for consumption at home, and this is likely to be understated. Even McDonald’s Corporation announced last week that it expects inflation in food costs this year, and everybody knows that when the clown speaks, people listen.
Also, people need to get to the store and to their place of employment, assuming they are lucky enough to have a steady job. Over the last six months, gasoline has increased at a rate of more than 6% per month from $2.82 to $3.87 per gallon and there is no relief in sight from the destructive impact wrought upon budgets of families already stressed by the long recession the country has been experiencing.
Maybe the government really does have inflation under control as we’re being told, but more likely, the wooden man with the nicely trimmed beard and the prominent nose hasn’t filled up his car or been to the grocery store lately.