Wholesale prices surge
By MARTIN CRUTSINGER, AP Economics Writer
Tue Dec 19, 9:15 AM ETWASHINGTON – Inflation at the wholesale level surged by the largest amount in more than three decades in November, reflecting higher prices for gasoline and a host of other items.
The Producer Price Index, which measures inflation pressures before they reach the consumer, was up 2 percent last month, the biggest advance since a similar increase in November 1974, the Labor Department reported Tuesday.
Economists had been expecting a rebound in wholesale prices following two months of big declines. However, the 2 percent jump was four times bigger than the 0.5 percent increase they had forecast. Even excluding volatile energy and food prices, core inflation posted a 1.3 percent advance, the biggest jump in 26 years.
Wholesale prices have taken a huge jump, obviously due to oil and gas. I think it’s hilarious how the “core rate of inflation” doesn’t include energy and food. Thanks to cheap Chinese labor you can buy a DVD player for $30, but so what, if gas is over $3/gallon, with all of the money going to the biggest, most profitable corporations on Earth? I hate comparisons with gas prices in Europe, because the high gas taxes over there pay for projects that benefit society as a whole.
There’s no point in the Fed trying to adjust interest rates upwards, because all that will do is collapse whatever parts of the economy are still working. This is what happened in the 1970’s, and it resulted in the so-called stagflation, where high unemployment and high inflation defied the “law” of supply-and-demand.
One big difference between the 70’s and now is that the surge in demand for energy and cars, etc., isn’t from Baby Boomers coming of age, but from China. It would have helped if we hadn’t destabilized the Mideast by invading Iraq. Oops!