Bernanke’s Blind Eye for Inflation
Weak Dollar Policy Good for Agriculture
If Bernanke does not see inflation in his rear view mirror economic data, it’s time he learned to read Braille. Unfortunately his myopic view has infected all of the Federal Reserve Bank presidents except Thomas Hoenig, Kansas City Federal Reserve Bank President, who cast the only vote against Bernanke’s QE2 (Quantitative Easing Stage 2) plan. It should be of interest to Darke and Mercer Countians that Hoenig is from the rural county seat Ft. Madison, Iowa (BA in Mathematics and Economics from Benedictine College and a PhD from Iowa State). Although his opinion has been dismissed by the urban elite of the east and west coast, he is not alone in his inflationary concerns.
MacDonald’s has been forced to raise the price of their menu while grocery store prices have increased by approximately 10% recently. According to a Midwestern restaurant association, “the price of a three course meal will have to be raised by $5 per dinner, to $25.11” – that is a full 25%. Are these observations spurious and deserving of no further consideration or do they represent the conspicuous signs of an inflationary trend that is already in place?
To gain further insight we looked at the price change of a broad array of essential commodities over the last three months. Food stuffs increased by 47 %. Precious and industrial metals increased by 24%. Energy increased by 15%. Lastly wood/fibers increased by 52%. Inflation can also be seen in a whole host of other areas that are more difficult to quantify with such precision. This eclectic group includes Coke, beer, electricity, real estate taxes, healthcare and college tuition.
Another inflationary blow will strike those of modest means who spend a significant portion of their income at Wal-Mart, Target and Costco. Secretary of Treasury Geithner has been pressuring the Chinese for several months to allow an increase in the value of the Yuan. Even if the undervalued Yuan is partially corrected, consumers can anticipate an increase of 10-20% on a broad array of foreign products- most of which come from China. The middle class with fixed or declining incomes will be forced to leave the stores with their bags less full.
Even though Bernanke’s quantitative easing policy may have undesirable inflationary features, it is beneficial for the local agricultural economy of Darke/Mercer Counties. The devalued dollar resulting from QE2 will increase the world demand for corn, soybeans, dairy, and poultry products.
Charles E. Reier MD
Rebecca A. Reier
Greenville OH
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