The Federal Reserve has been on a media campaign to sell its monetary policy to main street, but as the Wall Street Journal noted yesterday it hasn’t gone smoothly.
Frankly, I have to wonder how the Fed will spin this mornings news about the surge in wholesale prices, which were lead by the largest jump in food prices in 36 years:
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. Excluding those volatile categories, inflation was tame.
The Labor Department said Wednesday that the Producer Price Index rose a seasonally adjusted 1.6 percent in February — double the 0.8 percent rise in the previous month. Outside of food and energy costs, the core index ticked up 0.2 percent, less than January’s 0.5 percent rise.
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.
Energy prices rose 3.3 percent last month, led by a 3.7 percent increase in gasoline costs.
I suspect they’ll argue that food and gas prices aren’t part of “core” inflation, so they don’t enter in to their policy calculations. While that may be technically correct it ignores the practical reality; which is that food and energy prices are usually a leading indicator of rising inflation.
Sarah Palin was right when she urged Federal Reserve Chairman Ben Bernanke to “cease and desist” his “pump priming.” back in November:
All this pump priming will come at a serious price. And I mean that literally: everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher. And it’s not just groceries. Oil recently hit a six month high, at more than $87 a barrel. The weak dollar – a direct result of the Fed’s decision to dump more dollars onto the market – is pushing oil prices upwards. That’s like an extra tax on earnings. And the worst part of it: because the Obama White House refuses to open up our offshore and onshore oil reserves for exploration, most of that money will go directly to foreign regimes who don’t have America’s best interests at heart.
We shouldn’t be playing around with inflation. It’s not for nothing Reagan called it “as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man.” The Fed’s pump priming addiction has got our small businesses running scared, and our allies worried. The German finance minister called the Fed’s proposals “clueless.” When Germany, a country that knows a thing or two about the dangers of inflation, warns us to think again, maybe it’s time for Chairman Bernanke to cease and desist. We don’t want temporary, artificial economic growth bought at the expense of permanently higher inflation which will erode the value of our incomes and our savings. We want a stable dollar combined with real economic reform. It’s the only way we can get our economy back on the right track.
The simple truth is the effects of the Feds unconventional monetary policy have finally come home to roost, and we’re paying for it in the form of higher food and energy prices. It’s time for the Fed to turn off the printing presses and focus on restoring a strong and stable dollar. The rest of the economy will take care of itself.
- Housing starts see biggest drop since 1984 – Reuters
- World Food Prices Jump to Record on Sugar, Oilseeds – Bloomberg
- Import Prices Rise in February – Wall Street Journal
- Let them eat iPads – Scott Johnson, Powerline
- The $4-Per-Gallon President – Sarah Palin