U.S. Food Inflation Running at 22%
by Chriss W. Street 26 May 2014
After five years of the federal government telling the
public that despite a $3.5 trillion increase in monetary
expansion, the inflation rate is below+2%, the
Department of Agriculture (DOA) just warned the American
public that the consumer price index for food is up by
10% this year.
The DOA tried to blame food inflation on the drought
conditions in California, but last year’s drought was
worse and food prices fell by -6%. The real problem is
Federal Reserve monetary stimulus is stimulating
inflation. I reported in "Food Price Inflation Scares
the Fed” two months ago that commodity food costs were
exploding on the upside. Given the lag in commodity
costs impacting prices on grocery store shelves, annual
U.S. food inflation is now running at +22% and rising.
The DOA tried to blame food inflation on this year’s
drought conditions in California that they stated may
have “large and lasting effects on U.S. fruit,
vegetable, dairy and egg prices.” It is true that
California droughts are always agricultural issues,
since 80% of the state’s freshwater supply is used by
farms and ranches. This has resulted in surface water
deliveries to farms and ranches from reservoirs and the
California Aqueduct being cut by 32.5%, or 6 million
US now spending 26% of available tax revenue just to pay
Excellent article from sovereignman, This is
with interest rates at record lows. Imagine what happens
if the interest rates move up a few points, it will be a
matter of time, Americas money bomb has been lit.
By the 19th century, the Ottoman
Empire had become a has-been power whose glory days as
the world’s superpower were well behind them.
They had been supplanted the French, the
British, and the Russian empires in all matters of
economic, military, and diplomatic strength. Much of
this was due to the Ottoman Empire’s massive debt
In 1868, the Ottoman government spent 17% of
its entire tax revenue just to pay interest on the debt.
And they were well past the point of no return where
they had to borrow money just to pay interest on the
money they had already borrowed.
The increased debt meant the interest payments
also increased. And three years later in 1871, the
government was spending 32% of its tax revenue just to
pay interest. By 1877, the Ottoman government was
spending 52% of its tax revenue just to pay interest.
And at that point they were finished. They
defaulted that year. This is a common story throughout
The French government saw a meteoric rise in
their debt throughout the late 1700s. By 1788, on the
eve of the French Revolution, they spent 62% of their
tax revenue to pay interest on the debt.
Charles I of Spain had so much debt that by
1559, interest payments exceeded ordinary revenue of the
Habsburg monarchy. Spain defaulted four times on its
debt before the end of the century.
It doesn’t take a rocket scientist to figure
out that an unsustainable debt burden soundly tolls the
death knell of a nation’s economy, and its government.
Unfortunately, it can sometimes take a rocket scientist
to figure out what the real numbers are; governments
have a vested interest in not being transparent about
their debts and interest payments.
In the Land of the Free, for example, the
government routinely doesn’t count interest payments
that they make to the Social Security Trust Fund.
They’ve managed to convince people that those
debts don’t matter ‘because we owe it to ourselves.’
It’s a stealth bailout,” Barrington said.
“Low-interest-rate policies have helped bail out
banks, the stock market and real estate, but the Fed
has not publicly acknowledged the cost of those
Of course, not. Because the costs are
Money-market rates have been stuck between
0.08% and 0.10% but the annual inflation rate has
been, at least nominally, 1.5%. That’s pretty low
for inflation, yet this spread eroded the purchasing
power of American deposits by $122.5 billion over
the last year alone, Barrington said.
Barrington’s analysis, by the way, is
conservative. It only counts what inflation has done
to savers. It does not include what savers might
have made if interest
rates were closer to historic averages. And
after five years, these costs are only mounting.
“Unlike the other bailouts we’ve seen, this
one has become open-ended,” Barrington said.
He does not attribute this ongoing folly to
corruption, as I do. He sees it, more charitably, as
the result of “thinking that’s trapped in the past.”
Our economic problems are unprecedented, and yet the
Fed is still making comparisons to what they think
should have been done in the 1930s.
The Fed has been purchasing tens of
billions of dollars per month in U.S. Treasurys and
mortgage-backed securities from banks. It has been
cutting back this program, and many Fed watchers
expect it to end by October, but so far these
purchases have totaled more than $3.3 trillion.
And what does the Fed have to show for
this? Economic growth averaging only about 2% a
year. A sluggish labor market. And artificially
raised stock and real estate prices that may not
hold if the Fed ever stops manipulating interest
rates to such historic lows.
Most Americans, by the way, haven’t
participated in these lofty stock market gains that
continue to widen the gap between rich and poor.
Bankrate.com on Monday released a survey of
more than 1,000 households that showed 73% are “not
more inclined to invest in stocks.” It was the third
year in a row that this survey uncovered negative
sentiments regarding the stock market, even as the
Standard & Poor’s 500 Index SPX +0.41% has
doubled since hitting bottom in 2009.
After getting burned twice in one decade —
the 2001 Internet bust and the 2008 financial crisis
— it is easy to see these gains as part of yet
another financially engineered scheme. Average
Americans either don’t have money to risk or they
simply refuse to be herded into a casino, even at a
time when money-market rates and bank deposits are
delivering negative returns relative to inflation.