Gasoline has skyrocketed, along with heating oil, and that's led to many other increases.

Housing has also skyrocketed, and though it's dropped off a lot, it's still way above where it was five years ago.

Milk, juice, bread has all skyrocketed.

The local pizza shop just raised prices from $2 to $2.50/slice.

The local laundromat just increased the price for a washer from $1.50 to $2.

And there's no problem with inflation?

Well data can be skewed. I think you may have misunderstood though. Someone may have said that inflation did not increase over a set period, but anyone who knows anything about economics knows that inflation is a fact of life in any given year. It's just a question of how much, if the amount has increased and how it is affecting the overall economy.

Another thing to keep in mind is that things like energy are kept out of the inflation number. Statistics can be finessed. What really matters is what people's perception of how we're doing is. And consumer confidence is not particularly good. It cost an arm and a leg to fill up your gas tank last year. Now it costs both arms and legs. You don't need a master's in economics to be able to look at the signs over gas tanks reminding us that the $4/gallon mark isn't far away.

Drill in Alaska for God's sake. Or actually take Iraq's oil outright (that would be intellectually honest if not politically correct) - isn't that the real reason we went into Iraq anyway? The fact is that most people don't look at obscure economic indicators. They just want to know how their incomes are doing and what the price of the things they need are. And by those standards, we are not doing well. My greatest fear is that the American people will react by voting democratic come November and then we really will be screwed.

Spoken like a true good ol' boy.

You're conflating too many different things that have many different causes. Besides, inflation in New York is higher than inflation across the country, so when the Fed (or whoever) talks about inflation, they're not just talking about what's going on in your backyard.

http://ap.google.com/article/ALeqM5jsanM66...vWS7zAD8VD8FN82

Compared to Zimbabwe obm you have no inflation

They can't admit inflation because that would be sharply contrary to their deeds. In fact, government is encouraging inflation because they see the benefits outweigh the costs and they use it as a means of "bleeding" savings and other inaccessible layers of money in favor of momentary stability and status quo. It's hard not to agree with them on the fact that $5 gasoline is better then riots and wholesale unemployment in double digits.

Compared to Zimbabwe Germany didn't have inflation in the time leading up to WWII.


Well based on the (deeply flawed) Keynesian model the Fed makes decisions based on, you can either lower interest rates which would ostensibly stimulate the economy at the expense of higher inflation or you can raise interest rates which would lower inflation and increase unemployment levels. What they don't get is that what we need are cuts in government spending and massive tax cuts. This would stimulate the economy and encourage the hiring of workers without actively creating higher inflation levels. So what that the stupid senators and congress-shmucks don't get their pork barrel legislation. Too bad.

We are in the midst of both a stagnant economy and inflation rates that are quickly approaching a level intolerable to the American public. It's called stagflation and the Keynesian model has no answer to that. So perhaps someone will finally see reason and start using Microeconomics (supply side) rather than relying on Macroeconomic policies again and again. The definition of insanity is doing something over and over and expecting a different result.

Ah, stupid Bernahnke can't figure out such simple things. If only you were running the Fed ...

Let's see. Cuts in government spending (already in deep deficit), where would you start cutting ? Military spending ? Let's pull out of Iraq. Ah, oil will get to $150 on the ensuing chaos and will remain there ? Who cares ...

Maybe Medicaid or Medicare ? Let the poor rot to death, that sounds like a plan.

Which taxes are you talking about ? Let's assume these are corporate. I'm sure you know that large corporations pay exactly as much taxes as they would like to, and don't really mind doing so. They won't hire more because you'll reduce their tax bill. But the "pork barrel" projects end up as jobs, so if you'll kill that spending you will eliminate these job positions from the market, that is a certainty.

This slash and burn would be so disastrous that even Bush with his myopia and extemist Republicanism doesn't dare venture there.



The "intolerable" level is far from reach. US still pays way less per gallon of gasoline then Europe was a year ago, and same goes for most consumer prices. People will whine some more and maybe will listen to some populist demagogue preaching some kind of fix-all idiocy (like people listened to Zhirinovsky in 1994 Russia when he promised vodka prices frozen at 3.24 per bottle, IIRC). But reality is that in the position we're in, the best strategy overall is for the government to slowly bleed those with huge dollar reserves by inflation and low rates, while artifically supporting domestic infrastructure (Bear Stern case in point) . Welcome to free markets.

When did bri become an economist? (not that I disagree, i'm very impressed)

I've always been a junior economist of sorts but now I'm majoring in the subject. Thanks, Torn. I wasn't intending for this to be a huge discussion, but maybe I will post a rebuttal now.

(And she's single.)

Hey don't put words in my mouth. I'm not calling Bernanke stupid. I just disagree with him.


I didn't say we should pull out of Iraq or eliminate Medicaid and Medicare. There is so much crud in the budget it would take a full year of research to wade through and sort through all of it. I could go on about this for a long time, but three prime examples:

1. Stop giving money to thugs. Musharraf is a great example. He is no less a terrorist than the guys he pretends to fight. And if you don't think he's the one who had the late Prime Minister Bhutto assassinated, you don't know the dynamics of that region. Oh and by the way I consider the UN part of this. They are anti-American and we still give them prime real estate in NY. We give them immunity from the parking rules the rest of us have to abide by. It's unnecessary. It's high time we kicked their butts out. Let them have their UN somewhere 'sophisticated' like Zurich if they hate us so much.

2. Government bureaucracies must be streamlined. We only need one intelligence agency for example. There's no reason why different divisions of the same organization couldn't be the FBI, the NSA, the CIA and all the other organizations in one. When there are too many bureaucracies we get massive failures when something like Hurricane Katrina happens and everyone is waiting for someone else to do the job.

3. Corn subsidies. This one really makes me mad. Corn ethanol subsidies totaled $7.0 billion in 2006. This is more than just a benign waste of money. If the free market would support ethanol, subsidies wouldn't be necessary. We only have this because green programs are sexy whether they are effective or not. Read more on the subject if you like. I have and I became more outraged the deeper I dug. In a nutshell, the program is extremely inefficient. It costs a ton of taxpayer dollars for a very small amount of green effect.

But even worse, when farmers are economically encouraged (that's what a subsidy does) to grow corn for ethanol instead of wheat, the opportunity cost of growing wheat goes up and so does the price. Since the US provides exports wheat to locations around the world, this has a huge effect on developing countries for whom a few cents is a significant percentage of their income. So beyond being just plain stupid, ethanol subsidies actually contribute to starvation.

There is more but I figure that's a start.

My suggestion is to cut income tax. Significantly. Even if this would lead to larger deficits in the short term, and I believe for various reasons that it wouldn't, who cares? We spent $243.7 billion on interest alone last year. A couple extra billion wouldn't be that big of a deal.


Just because the US isn't as sublime as the socialist havens you seem to love so much doesn't mean we can't do better. We can and we should. Our futures depend on it. As a side note just in case you don't know already, the prices of gasoline in Europe are the way they are on purpose. Gasoline is taxed as a disincentive to use it. I strongly believe that we the people should not be coerced into living our lives based on the intelligentsia's vision of the world but that's another ball of wax.


I'm not promising a fix-all. Utopia will never exist (although don't tell Obama that). But creating an environment where the people have an incentive to work because the government isn't running off with a huge percentage of their pay and those who actually succeed aren't penalized seems like a good idea nonetheless. We live in a society where private property is dissolving into an illusion. Monkeying around with interest rates to "bleed the rich" is dangerous and unethical. I just want a level playing field rather than a chessboard in which a big hand can reach in and tweak things when it feels like it.


ETA: I was being facetious when I said that we should just take Iraq's oil. Obviously that's ludicrous - I'm just bitter about the fact that we were all duped into this disaster of a war.

viewed that way, the free market doesn't support much american farming at all -- the USDA subsidizes all sorts of farm commodities, from staple crops like corn (and not just for ethanol) and wheat to "specialty" produce like wool, peanuts, and honey. oh, and tobacco.

That's correct. Supply and demand, baby.

1. As long as it helps America (usually with security) they could care less who the money goes to. If it goes to Musharaf so be it. On a moral/ethical level I should be outraged, in reality I could care less.

Of course it's up for debate if every dollar spent on foreign policy helps, the Taliban used some of our own weapons we gave them to fight the Russians.

The U.N. sucks, I'm not sure if it's possible to have a better world body of opinion though. We also complain that they have no "teeth" but forget that if the UN did have any real power America wouldn't be able to brush it aside and ignore it whenever they feel like it (like when they went to Iraq despite the UN inspectors going in and finding zero WMD's)



Amen to that, Gov waste is the reason we should have as small a Gov as possible.


Amen again, ethanol has very little to do with "green" it has to do with foreign oil dependency. It takes a ridiculous amount of water and land to create a barrel of ethanol. It makes no sense at all. Down the road I hope this program takes off in Israel and can spread to the USA. Of course a drastically reduced price of oil could bankrupt some Arab nations and decrease stability in the region......I have no problem with that.



Income tax is already pretty low, I think freezing them where they are or maybe repealing the capital gains tax would be enough. In theory I believe in the flat tax, that's not going to happen so what we have now is workable as long as Gov. spending is slashed.



America can learn from Europe in that respect, it's so much more effective then CAFE



I don't think playing around with interest rates bleeds the rich, I think double and sometimes triple taxation does. The whole Robin Hood mindset that we can tax rich people at a higher rate than everyone else simply because they have more money is just wrong. Overall the Gov. doesn't do a terrible job at managing the economy, they screw up plenty but do a lot of stuff that helps the economy as well. For example a stock market crash of 1929 proportions can't happen again because of Gov. policy put into place. While Corp. transparency still needs a lot work it's better then it was 50 years ago. Do they hurt more then they help....I don't know, it's a coin toss. America does have one of the strongest economies in the world, we have to be doing something right.

I never understood the fascination with Greenspan, his famous "irrational exuberance" speech came way too late and he ignored the housing bubble build up and it ended getting dumped on Bernanke who was also slow to respond to both the house bubble and the credit crunch that is going on now. To be fair to Ben, everyone.......EVERYONE was unprepared for what happened with the credit market unlike the tech bubble of 2000 and the housing bubble we're still in now.

so why rail against corn ethanol subsidies in particular? especially in light of your subsequent point about world wheat prices, wheat subsidies should probably be your first target.

Maybe because ethanol is all the rage right now and is being promoted as helping the world.

Same reason why people were outraged with Spitzer and the Mayor of Vegas can get away with whatever he wants.

This is a prime example of an ill advised, knee-jerk populist move that could wreck not just foreign policy but much more then that for years to come, and still could be popular with the dwellers of trailer parks in Alabama, whose votes weigh as much as Hawking's. Musharraf's regime gets pennies a year (something like $3b over five years) and much of that money comes right back at the US contractors. And for these pennies US gets a faithful lapdog ally in the region without whom you would have a Taleb state that would dwarf Afghanistan in Taliban times. He can be a dictator or a democratically elected president - whatever the local recipe calls for; that has very little to do with US political and economic interests.

What about aid to Israel ? That one I'm sure you'd triple ...



This too is nice soundbite that will get you votes of every unemployed degenerate who never saw inside of a serious organization. NSA as it is, if it were a privately run business, would have a market capitalization bigger then Microsoft. The three organizations you mentioned have absolutely different mindsets and employ vastly different skills and models. If you will ever get a job in a normal business, you will learn that the bigger an organization or department gets, the harder it is to get the job done and the more people it takes to get the job done, while there are meetings, and meetings about meetings, and approvals and all such. And all of these meetings have a very good reason to be. If you were to lump all these under one roof, you would end up with an impotent monstrosity (DHS was intended to be something like this, luckily things got stalled early enough).

Mind you, there are many ways to trim and streamline the government, and maybe some of them can even be beneficial. But you should know that US Bureaucracy is some of the best functioning in the world, where you usually encounter people familiar with their jobs and getting them done, and not a anthill of nephews and nieces who take 5 hour lunches and go home at 3.

But what would you do if you started taking apart FBI, CIA and NSA and the new Frankenstein Uber-Gestapo of yours didn't work the way you intended ? Would you say "oops... let's put it back together ..." ?


Have you factored in how the demand for gasoline would hit this taxpayer once the 10% ethanol in his tank vanished ? What about it being the only replenishable domestic source of energy, would you be ok with dismantling them and signing off the remainders of US energy demand to Bin Talal and Chavez ? And what's $7 billion dollars - that sum is a joke compared to how much the government spends on things that I better not mention here so that you don't come up with even stupider ideas ...


Any subsidies of any agricultural product will have effect on other products. Developing countries aren't suffering because of high prices of raw food commodities. Those are plentiful. They suffer from corruption and inability to manage. And it's very hard to screw a head on someone else's shoulders. To blame US corn subsidies on world starvation is so facetious, it's not even worth arguing ...


Federal Personal and Corporate Income tax serve two main purposes. One - they cover vast majority of the budget, effectively taking money out of the working "ants" in favor of everyone else, and another one is "selective enforcement" - given the complexity of the code and people's aversion to paying taxes, it usually is a matter of will to prosecute or at least investigate almost anyone who is anyone for "tax reasons". This is the most versatile, cynical and multipurposes tool ever invented for keeping everyone in line in a supposedly democratic and legally sound system. So throwing away a couple trillion dollars in revenue, plus an entire government agency, plus the only way to keep tabs on everyone may sound as a great idea to you, but you'll forgive uncle sam for not going along with you here.

But on the interest part - guess what, we'll save a few bucks on that one by cutting the interest rate.


You have a problem with definition of "better".


Well, if European people weren't "coerced" into their way of living, you would be paying $6 per gallon of gasoline for past five years. And if you'd like to live in a world where the least common denominator populist gets the votes of every uneducated degenerate under the sun by making the most outrageous undeliverable promises that [s]he promptly forgets, I think you're right about to have that experience.


Under normal circumstances, I would not have a problem with a thirteen year old spouting economical nonsense that may be picked up on all the pseudo-libertarian moot resources that flourish on the psychiatrically challenged segments of the net. After all, hopefully you're not majoring in economics or public service so the damage is contained. But the amount of "Amens" that the populist and unworkable, yet sounding so great, suggestions got from the supposedly more mature and verse population is indicative of just how much damage can be done when a properly trained unscrupulous politician gets ahold of the simple, dumbest ever but popular slogans and ideas that make so much sense to those completely unfamiliar with subject matter. Don't take it as a personal offense (although I'd expect that all these years amongst professionals would have some effect) ...

Well if giving money to Musharaf really was helping America with security that would be one thing. The thing is that giving him money leads to no more "protection" than giving the local mob a share of ones profits does. Our leaders seem to completely misunderstand that he is about his own power and nothing more. His people are only with him when it is less dangerous and more profitable to so. They see the Taliban as their brothers. We are the evil west to both groups. It is extremely unwise to financially back Musharaf up to say the least.


The world would get its opinion out there whether or not there was an overpaid bunch of idiots to sit around in a little circle and do it formally. Individual countries were perfectly capable of making deals and performing joint operations long before the UN arrived on the scene. In fact the UN is a step backward in that respect. The world relies on the UN to solve its most pressing problems. The reality is that it's little more than a snotty little club with a clearly socialist (or at least anti-free market) bent.


Finally a voice of reason.


Well the logistics would have to be worked out, I give you that. I'm wary of the flat tax though. As much as I want to love it, that system would create a huge black market. I mean think about it. If you could get a flat screen tv that was $5K after taxes for $2K on the black market, wouldn't you do it?


Sometimes the ends don't justify the means.


Well I was answering Shaya when I mentioned 'bleeding the rich'. I'm aware of the progressive income tax and its screwed up logic. What amazes me is that the most liberal prof in the econonomics department goes on about inequality of income etc when the "rich" are paying a disproportionate share of the nation's taxes. What I want to know is how much taxation is enough?! 45%? 50%? More than half? How much is okay to take from other people's pockets?

Yes, I'm aware that everyone likes to point fingers and yell like Jim Kramer about the Fed. It's easy to be an armchair economist. But I think that discussion and critique of economic policy is vital. The powers that be need to know that they are constantly scrutinized.


No, not really. Maybe I'll go into it more another time.