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To: NVDave

“The Fed reports on inflation “ex food and fuel” - and guess what? Those are the two areas in the economy where we’re seeing very tidy rates of inflation.”

If it included gasoline, when the price dropped from $3 to $2.50 everyone would have to start talking about 17% deflation, and now at $3.20 panic about 28% inflation. That makes the measurement useless.

Therefore, we measure inflation by the prices of things that don’t vary wildly from week to week.


42 posted on 11/29/2007 9:35:16 AM PST by No.6 (www.fourthfightergroup.com)
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To: No.6

What most consumers obsess about is gasoline. Price goes up, price goes down, and it hits consumers directly in disposable income. That’s pretty easy to measure.

What most economists and policy makers should be obsessing about is the price of diesel fuel (or, more accurately, distillate), which hits consumers in the price of everything that has to be shipped — coal to power plants, food to stores, food being harvested, finished goods to/from ports, jet travel, bus travel, you name it.

The fact is that we get only about half as much diesel in cracking a barrel of oil as we do gasoline also blazes by most consumers (the “3-2-1 crack” of crude).

And as a farmer, lemme tell you that five years ago, I used to buy non-taxed (ie “off-road”) diesel for about $0.70/gal.

Today, if I wanted to get a load of diesel, it would cost me about $3.10/gal - without taxes. That makes the price of my goods (hay) go up, which is making the price of milk go up and in between here and there, the cost of trucking hay to dairies and milk from the dairies to the fluid plant and from the fluid plant to your store has gone up, up, up — all due to diesel fuel.

That’s inflation, and it is stupidity on the part of policy makers to not measure it, because consumers *are* seeing it in the end.


43 posted on 11/29/2007 9:41:44 AM PST by NVDave
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