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Starr expects inflation this year, although he thinks it will drop in the subsequent year or two. James Hamilton of the University of California, San Diego, also expects inflation. “The ethanol program is one factor driving up food prices in the U.S. and the rest of the world, and low interest rates have encouraged commodities speculation,” says Hamilton. “There is a contribution of U.S. policy in these global problems — an unwise policy on our part. It doesn’t make sense to drive cars powered by corn, and it doesn’t make sense for the Federal Reserve to drive interest rates as low as possible as quickly as they have.” Excessively easy money and credit can boost inflation.

For one thing, lower interest rates make it less expensive for commodity speculators to hold larger inventories of oil and grain. For another, the rise in the price of oil — caused greatly by lower interest rates and a weak dollar — makes it more profitable for farmers to grow corn for ethanol. And that causes all kinds of shortages and market distortions.

Phillips says that the falsifying of the consumer price index evolved gradually under both Democrats and Republicans. One economist calls the phenomenon “Pollyanna Creep.” The phony numbers have “had a hand in the abetting of political dishonesty, reckless debt, and a casino-like financial sector,” says Phillips. Those are the woes that are burying us. And contributing to food riots abroad.

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Comments

Don Bauder May 1, 2008 @ 9:31 p.m.

Response to post #5: I was thinking of putting the phony unemployment statistics in that article, but I ran out of room. It's just as egregious. Best, Don Bauder

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Anon92107 May 1, 2008 @ 1:21 a.m.

Right on Professor Bauder, one of your best reality checks ever.

Keep educating your readers up close and personal because our elected officials are worst-case scenario examples of our failed education system that has been destroyed by politicians who sell out everything they may have learned in school as soon they become politicians.

We are drowning in tsunami of B.S. and the democrats running for election are proving daily that they are totally unprepared to deal with republican betrayals of Democracy and the Land of Opportunity.

Considering the world that Bush-Cheney created so far in this new century, it’s a wonder that anyone wants to be the next president.

And I don’t hear anyone yet in this war of personal attacks-counterattacks who appears to be capable of even beginning to deal with actual problems.

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Anon92107 May 1, 2008 @ 10:56 a.m.

Response to post #2:

Great political cartoon by Breen this morning on that particular subject.

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Don Bauder May 1, 2008 @ 6:50 a.m.

Response to post #1: I had to chuckle yesterday. The government reported that gross domestic product (GDP), or total economic output, rose 0.6 percent in the first quarter. Some exulted, saying this refutes the idea that we are in a recession. The economy is still growing, albeit slowly, they rejoiced. Ha Ha Ha. The devil was in the details. GDP is inflation-adjusted. The government uses a broad measure of inflation called the deflator to adjust GDP. Do you know what the reported deflator was in the first quarter? 2.6 percent. Yes, 2.6 percent. Raise your hand if you think inflation is only running at 2.6 percent. And according to the deflator, consumer inflation was only 3.5 percent despite food and fuel prices soaring. So by this bit of prestidigitation, the GDP rose slightly. I didn't see anybody commenting on that in the printed or electronic media. Best, Don Bauder

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Don Bauder May 1, 2008 @ 12:07 p.m.

Response to post #3: Yes, I saw it. It was good. Best, Don Bauder

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Don Bauder May 1, 2008 @ 9:32 p.m.

Response to post #6: Yes, good cartoon. Best, Don Bauder

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JohnnyVegas May 1, 2008 @ 4:20 p.m.

Don, for you next article why don't you lay out how the government fudges unemployment statistics!

The government includes the military and excludes anyone out of work over 6 month......... It never gets old with the government and their bogus numbers.

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Don Bauder May 3, 2008 @ 6:33 p.m.

Response to post #10:Welcome back, Fumber! I don't know whether wheat grass prices are rising, because I have never had the stuff and had never heard of it until you mentioned it. I doubt if wheat grass is a major item in the compilation of the consumer price index. Best, Don Bauder

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Don Bauder May 3, 2008 @ 6:34 p.m.

Response to post #11: Fumber, somehow I am not surprised at your view on the presidential race. Best, Don Bauder

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Russ Lewis May 3, 2008 @ 11:50 p.m.

For what it's worth, wheatgrass is up -- way up. I had a shot the other day, and it had just about doubled. Of course, Fumbler, I drank it in your honor. I've wondered what happened to you.

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Don Bauder May 4, 2008 @ 6:12 a.m.

Response to post #15: Riposte! Johnny and Fumber can renew their duel! This will be more exciting than the Super Bowl. Best, Don Bauder

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Ponzi May 3, 2008 @ 2:23 p.m.

My water bill just arrived with a notice it was increasing 8% this year. I've noticed that a hamburger now costs $10 in most restaurants and a cocktail is $12. I don't go out very often, but I was shocked to take some out of town guests out to dinner for some sandwiches and drinks and spend $70 on four people. That was 4 cheesburgers with fries, and 4 drinks.

The "food servers" also are pushing that a 20% tip is "normal" now. What happened to 15%? If prices go up so does the tip, why this new rule?

Everything at the grocery store seems to cost $5.00 now. $5 for a jar of pickles, $5 for A-1 sauce, $5 for a box of cereal, $5 for some smoked cheese...

Maybe other people have seen 5% inflation, but I have kept a budget on Quicken for 10 years and this year my costs have increased about 25% over-all. I have cancelled a vacation because I have no room in my budget. The money has been moved to gasoline and food. By investment income has also dropped becuase the yeilds on my long term investments have dropped. So I'm being squeezed at both ends. It also it cutting into my ability to save money. Due to some recent medical bills (also very high) I had to reduce my 401K contribution 3% to help pay the bills.

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Don Bauder May 3, 2008 @ 5:59 p.m.

Response to post #9: Yours is a most astute post. Food and fuel prices have escalated, but because the inflation numbers are rigged, the government keeps telling people that prices really aren't rising that much. It's a con game. As I noted in response to one reader, economists rejoiced this week that the economy grew by 0.6 percent in the first quarter, according to official figures. The economy isn't contracting, they exulted. But that was only because the government claimed that inflation was a mere 2.6 percent. Does anybody believe that? And consumer inflation was only 3.5 percent, said our government, despite the soaring food and fuel prices. Does anyone wonder why more and more people simply don't believe what the government says? Best, Don Bauder

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JohnnyVegas May 3, 2008 @ 9:34 p.m.

Fumbler is back!!!!!

Missed ya buddy.

Obama 08!

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Don Bauder May 4, 2008 @ 6:15 a.m.

Response to post #16: With the price of agricultural commodities soaring, the price of wheat grass at retail should be up (although I confess I don't know the exact ingredients of wheat grass.) Will the higher price of wheat grass cramp your lifestyle, russl? Best, Don Bauder

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