Thursday, November 20, 2014

Lower Energy Costs To Keep Inflation At Bay? Maybe Not

In challenging CNBC journeyman Ron Insana's inflation dovishness I said this:
I don't buy his argument because it's not a very good one.  Corn and soy futures are down?  So what.  This has no bearing on whether your chicken or corn flakes prices are going to be lower in the future.  Supply and demand dictate prices, not input costs.
Check this out from Brian Wesbury today on the latest producer price numbers:

Producer prices surprised to the upside in October versus consensus expectations for a slight decline due to falling energy prices. The gain in overall producer prices was all due to the services sector, where prices rose 0.5%. Oddly, about half of the gain in service prices was due to refiners generating fatter margins while the energy prices fell. In other words, the drop in energy prices did not get fully passed on to users
See that "odd" bit?  Supply and demand allowed producers to capture lower input costs for themselves, the lower commodity costs didn't make it to the consumer.  Thoughts on that Ron?

Inflation exists everywhere but in the minds of our elites who tasked with preventing it.

Oh, and speaking of inflation, check out this and this.  You won't find these government services in the official measures of inflation, because then you pesky stupid voters might start asking questions, like "Why does all this inflation seem to be driven by all this stuff run by the government?"


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