I buy the store brand butter, the cheapest available at our local supermarket. Today as I was purchasing a pound of butter, the cashier, on older woman (I’m guessing over 60, maybe over 65) asked me if I knew how much the cost of the butter I had just purchased had risen overnight?
“No,” I said.
“It’s $2.79 a pound to day. Yesterday it was $2.17 a pound.”
“Wow.” (I actually said that). I asked her if she knew why. She said she didn’t. But she also said that everyday she keeps seeing the price of food going up. “But never wages,” she added.
I went home and used my calculator to determine that pound of butter I bought had increased in price 22%. I guess I bought it on the wrong day. I live in upstate NY. Lots of local dairy farms here that provide milk, and provide dairy products. I know its not the transportation costs.
Then I looked around. It seems food prices have been rising all year. Check out this story from March:
WASHINGTON – Wholesale prices jumped last month by the most in nearly two years due to higher energy costs and the steepest rise in food prices in 36 years. […]
Food prices soared 3.9 percent last month, the biggest gain since November 1974. Most of that increase was due to a sharp rise in vegetable costs, which increased nearly 50 percent. That was the most in almost a year. Meat and dairy products also rose.
Food prices rose the highest since 1974 in February, 2011. And they haven’t stopped rising. Nor is America the only place this is occurring. In the United Kingdom food prices rose 5.7% as of June. World food prices are at or near record highs according to the United Nations:
Global food prices rose sharply in June, according to the UN Food and Agriculture Organisation (FAO), after a steep increase in the price of sugar.
The price of sugar rose by 14% last month, as a result of high demand and lower production in Brazil.
We’re told that the Consumer price index, a measure of inflation is low at 3.7%, but that is primarily due to a flat housing market. No one buys a house every year (well maybe billionaires do) but we all have eat. And when you consider the costs that most impact an individual’s or family’s budget, food, health care and energy costs are all going up at rates that exceed the official CPI. This may not mean much to rich corporate executives whose income is increasing faster than the rate of inflation, but for everyone else its bad news.
Because that cashier at the Supermarket is right. Wages for the middle and lower classes are not increasing.
Incomes for 90% of Americans have been stuck in neutral, and it’s not just because of the Great Recession. Middle-class incomes have been stagnant for at least a generation, while the wealthiest tier has surged ahead at lighting speed.
In 1988, the income of an average American taxpayer was $33,400, adjusted for inflation. Fast forward 20 years, and not much had changed: The average income was still just $33,000 in 2008, according to IRS data. […]
Meanwhile, as corporate profits come roaring back and the stock market charges ahead, the wealthiest people continue to eclipse their middle-class counterparts.
“I think it’s a terrible dilemma, because what we’re obviously heading toward is some kind of class warfare,” [Alan Johnson, a Wall Street compensation consultant] said.
So costs of basic necessities are skyrocketing, unemployment is at levels we haven’t seen for decades, but we need to consider cuts to social security and medicare? We need to cut student financial aid and spending on higher education even as student costs of tuition and fees soar? We need to provide more tax cuts for the upper 1% of Americans?
We need to pay for wasteful and expensive wars overseas to protect the profits of the most profitable corporations on the the planet? And worse, we also must continue to to provide BILLIONS of DOLLARS in tax subsidies to that industry? Meanwhile we are supposed to cut funding for the development of alternative renewable sources of energy that could save us trillions of dollars in future defense costs.
I’m confused.
Billionaires and millionaires need every tax benefit imaginable and more tax cuts even though all their wealth has not trickled down to stimulate the economy. Poor people need to sacrifice more. Old people (excuse me, old people who aren’t rich) should see their social safety net shredded. Unions need to be destroyed so the Prison Industry can employ prisoners as slave labor to take their jobs. Social Security should be privatized so Wall Street can get their hands on our retirement funds that they don’t already control?
Homeless people should not be fed and those who do feed them should be arrested. On the other hand, Banks should not be prosecuted for their illegal foreclosures. Financial reforms (what few there are) to reign in the risks run by our Wall Street overlords (corporations that nearly crashed the global economy) should be eliminated. The Consumer Financial Protection Agency should be de-funded and defanged.
Our crumbling, decaying infrastructure (bridges, roads, electrical grid) should be ignored? The EPA should be gutted so known polluters can get away with murder by illegal toxic waste disposal? Climate change should be denied despite the mounting evidence evidence that it will result in lower food production, mass extinctions, increased spread of contagious diseases, wildfires, droughts, decreased fresh water resources, heat waves, and social unrest including the increased risk of regional nuclear wars?
I guess in our bizzaro world where corporations have all the freedoms that really matter, and ordinary people do not, the answer to all those questions, is apparently “Yes.” Even though a lot of smart people know we are committing economic and societal suicide by continuing down this path, I don’t see how to stop the insanity that began when folksy (“welfare queens driving Cadillacs”) Ronald Reagan was elected in 1980. Maybe you do, maybe you have the solution. I sure hope so, but all I see is one political party (Republicans) comprised of religious extremists bent on taking over the world and Mad Hatters bent on watching it burn, and another party (Democrat–the “progressive caucus” and a few brave and principled politicians excluded) who can’t seem to say “No!” to the crazies’ ever more outrageous and destructive demands.
And I have to pay 22% more for butter today than I did yesterday. Come to think of it, that’s the least of my worries.
I noticed when the gas prices went up two years ago that the grocers all talked about how their inbound freight was going to impact costs. But now I talked to the grocer and he says yeah, gas is still a factor but product is coming in at a higher cost which he didn’t think was the answer…he’s not putting any higher mark on the product…so it sounded to me much like we were hearing from the local gas stations that they weren’t making any more money from gas hike…but someone is.
They say that sugar price increases are leading the way for the whole spectrum, which made me think about sugar futures and of course the hedge funds.
In a unhampered market, price is the indicator of scarcity amid demand, as well as a byproduct of the rate of inflation in the unit of account (e.g. the dollar).
Consider these factors:
The oil producers are making more dollars per unit of oil, yes. However, those dollars are buying less on the global markets as the U.S. has expanded its money supply so dramatically as of late.
Additionally, in the U.S. especially, do to the economic uncertainty and for a variety of other reasons, investors are increasingly less likely to start new business ventures to create wealth for fear of what lies in the future [added to the sheer ever-increasing volume of non biz hassles of running your own business (I gave in and now work for the man)]. These people see what’s happening to the dollar (thanks to the Fed and the US GVT), so they in turn protect their purchasing power by essentially locking in today’s prices forever by buying commodities, which increases demand. This always happens when governments allow for the legalized debasement their currencies.
And we all, therefore, suffer.
Boo knows I warned this would happen. Remember when I kept telling all you guys to stop buying stocks and bonds, and instead buy gold and silver — back in 2003? Purchasing power safe there…. Less and less safe when subject to the whims of the oligarchy / plutocrats. Sucks awfully for those with no disposable income who are chained to this stupid policy of print, print, print.
Yawn Go back to Lew Rockwell.
LOL. I see. The money printers are your friend, then?
The irony of the term “progressive” for so many progressives is their inability to contemplate how coddled up they are with the Status Quo of corporate cartels and the financial oligarchy who toss bones to the vast state dependent continuance ever-searching for the coming of the perfect Savior State. Funny how that’s never found, and you and I are both screwed in the process.
In all seriousness, though, Seabe. I’m not here to be disrespectful. Boo and I go back a bit, and have had plenty of great conversations / debates. While I can’t say we changed one another’s minds much, I always found the conversation respectful and insightful, worth the time.
Most certainly, though, I’m not attempting to troll you guys into a fit. There’s a lot I like about progressives, especially the anti-war / empire types. I am personally quite liberal socially / am left on many issues and vehemently dislike the republicans on most issues.
don’t worry, steven. Obama only wants to “cut” social security, he doesn’t want to “slash” it. So everything is going to be OK.
If we don’t cut social security, the wealthy might have to pay higher taxes, and as you know,, it’s very very difficult (impossible really) to get by on $250,000 or more a year. IT’S HARD, Steven. You need to accept that.
What happens if the wealthy pay higher taxes? They won’t create jobs the way they’re creating them now. Worse, they might expatriate entirely and move to places that don’t have taxes, and then the mansion foreclosure rate goes up. Dude, why do you want Warren Buffet to lose his mansion?
Steven you bought the store brand butter but noticed that local dairies are close enough that transport costs are negligible. However, my bet is the store brand butter is from somewhere farther away. there is a local dairy close to my city (Oklahoma City), and I buy their milk and butter, but the store brand milk comes from Mississippi.
Buying local is a great thing. Unfortunately around here, at least, local producers set their prices around what you’d pay at WholeFoods or the supermarket, so you don’t save any money. Still, it’s good for the cash to go to the producers instead of the long chain of leeches.
The real question is, where does the money go? The price for wheat last month was $326 per metric ton (up from about $307 in December), or roughly 7 cents/pound. Even though wheat futures are way up, what farmers get accounts for a minute fraction of what consumers pay. The rest goes for hikes along the endless gauntlet of middlemen, from various levels of wholesalers and speculators to storage facilities to retailers, until a pound of wheat flour at the supermarket reaches the neighborhood of a dollar.
Your “efficient” free market at work.
But not to worry, our beloved government informs us that there’s no significant inflation because food and fuel prices don’t count: they’re too “volatile”. So there’s no need to worry about wage earners, Social Security recipients, or other low-income folks, because, hey, the cost of iphones, flat-screen tvs, and Chinese-made candy is actually falling.
The system is rigged and always has been. But we gotta do that because otherwise everybody would catch on that the US economic system is a total failure from conception to its imminent demise. Except for that criminal cream at the top, of course.
You blame the free market, but have no criticism for the Central Bankers / banking oligarchy that just printed $3 trillion out of thin air to save their own arses? More units of currency in circulation without a corresponding increases in units of goods available will lead to price increases / higher input costs.
As for the “free market”, I can’t say for certain in your location, but in PA where I live the price of dairy things are normally only allowed to change when the central planners at the state believe they should…. Our Milk Marketing Board sets the price for milk, which I would imagine sets the baseline price for related product. This, to prevent some farmers from providing a more attractive price for milk to the consumer than others can afford.
Frankly, the market is horribly disrupted in dairy and agriculture by both subsidy and price fixing. Hard to finger the free market for doing that, other than adapting to the rules and regulations applied to it by the central scrutinizers.
There is no inflation. In fact, there is deflation. Wages are dropping relative to prices.
But resource costs are rising because of artificial and accidental constraints on resources. Supply constrained or lowered and the same or greater demand means higher prices. And in the current market, businesses have incentives to reduce supplies even more. It is that perverse a supply-and-demand curve for businesses right now.
There are several things going on.
Undoubtedly there’s been inflation of the money supply. $3 trillions worth after QE I and II are taken into account. That affects prices, never mind Keynesian / Neo Keynesian hogwash that claims otherwise. (e.g. labor slack, manufacturing capacity underutilization, etc.)
There is both inflation and deflation of prices, depending upon the price of what you’re discussing.
e.g., there’s been inflation in asset prices, which nobody seems to mind, until the bubble breaks, ala stocks and real estate… and then it hurts badly for those sucked into it who experience the ensuing deflation. Commodities are experiencing more and more price pressure as dollar holders (of which there are now $3 trillion more circulating) are looking for better places to stick their dollars vs. the artificially rigged savings / bond market, which sits at exceptionally low rates despite the risk of rising rates looming on the horizon.
At the moment consumers are squeezed on both ends. Wages have stagnated and are not keeping pace with prices going up. Unless you’re caboose is sufficiently hooked to where all these printed dollars are redirected — either to 1.) corporatists, money shufflers on Wall Street, govts, those who push paper for compliance, lawyers, govt. minefield guides, etc., or 2.) those who provide the real stuff all of us need. In many cases, 2) is filled with neo fascist corporatists who have bought and paid for the political class, both parties included.
I agree with you that this is exacerbated by artificial and untended constraints on resources. However, businesses only have incentives to reduce supply (and increase their profits) if they have some kind of monopoly. Otherwise, some sharp young buck / doe is going to step in and undermine his price with the latest technology. As a former (neutered) buck, I can tell you the big guys like as many govt. imposed hurdles against competition to hamper startups from ever getting off the ground. Keeps prices nice and high, and the plutocracy nice and fat, and its bought politicians well-oiled.
Those young bucks either have to have some pretty good credit cards, be in an expanding niche market (there is a social media bubble building), or be independently rich. Banks are not buying much risk and would rather being T-bills, thank you very much.
The issue with Keynesian economic analysis of the US economy is not that labor slack, manufacturing underutilization, etc are, in principle, wrong. It’s that there is not US economy separable from the world economy. And that labor slack and manufacturing underutilization are increasing focused on some industries and not on others.
Domestically, the monetary inflation has been taken up into inflation of paper asset prices (the stock market index is an inflated one) and not productive assets. That shows a blindness to extreme risk that Keynes would not have modeled in his theory.
Your comment about where your caboose is hooked points out another big difference that Keynesian analysis does not take into account. Labor resources are not as substitutable as they were in the 1930s. And in the past three decades, the labor market has ceased to be a market and has returned to being a feudal patronage system.
I would be curious as to what you see as the top five government-imposed hurdles against competition.
What I’ve found in my unsuccessful attempts at entrepreneurship is that some of the hurdles of corporate bureaucracies can be as debilitating as anything the government throws in the way.
The secret of US agricultural policy – a cheap food policy based on subsidies for farmers.
If those subsidies start getting the axe, agribusiness is going to hedge by increasing food prices now.
So watch how this plays out against your local CSAs and farmers markets. And consider planting your own Victory Garden.
Interesting point.
A part of the subsidy exists as price floors for the U.S. market. The other is to allow for the export of excess to other nations at a price below production cost.
The ethanol subsidy / requirement in the U.S. took a ton of corn off the global food / feed market, driving up prices quite substantially for both food and end-product livestock.
Was reading that this “boom” has possibly created a bubble in U.S. corn-belt $ per acre of farmland.
Something tells me none of this is going to end well.
The ethanol subsidy changes the varieties of corn planted, which might or might not be available for livestoock, and certainly are not suitable for direct human consumption.
I would not be surprised in any fad-driven bubble. There are a heap of institutional investors who are driven by stories instead of numbers.
Strangely enough after two bubbles in succession, individual investors tend to be more cautious. 😉