Sadly Slighted

The consumer in economic analyses I read are sadly slighted. There are at best detailed reports on their expectations, what they buy and where they buy it. But it is all framed in terms of what is good for business.

For instance, inflation, until quite recently, was not viewed as a threat simply because consumers didn't have additional money from jobs. Therefore they would not be spending more money on goods and the slushy employment market would prevent escalating labor costs. Whew! Don't you feel better? You have to get less goods for more money and no raise in sight. That's good for the economy?

Here's a big secret: the economy is made of people.

The people who are paying more for a simple half gallon of milk are getting screwed. There are two inflation indices that are infallible. The first is the candy machine/soda price. The second is the price of a half gallon of milk. When you see these prices move across the board, there is consumer level inflation at work.

Right now, there is pent-up inflation. That's what happens when the cost of getting goods to market, i.e. gas and electric, is rising but the sellers of goods aren't yet raising the prices because of perceived competition. We will be in full inflationary swing when prices are raised in ANTICIPATION of the costs of goods sold being higher when the bills come due.

We all should have listened to Jimmy Carter and his alternative fuels initiative. If we had, we wouldn't be in this mess. But the guy had other problems. Still, he was right on that one.

No comments: