Inflation By Stealth
By now, everyone with a pulse is up to date regarding the news about the FED dumping another $600 billion to sop up treasuries. Ultimately, the FED is hoping that by buying treasuries, the banks will start lending out more money which will in turn stimulate consumer spending. The risk is, of course, that “stimulating” the economy in this way will fuel inflation and asset bubbles.
The FED is actively encouraging inflation because they are terrified of deflation. To the average Joe, deflation is a good thing because the buying power of the dollar increases. As the price of goods and services decrease, buying power increases. The FED is worried about this because when prices drop, consumers delay their purchases. Why bother buying something today at $100 when the chances are it will be $80 next week? When deflation kicks in, businesses start offering their goods and services at steeper discounts, lowering their revenues and profits. With lower revenues and profits, businesses then start firing employees to make up for the shortfall. Wages also drop, so it’s a catch 22.
We’re told though, that inflation hasn’t reared its ugly head as of yet. We’re told inflation is low and that the biggest worry is deflation.
Now I ask you – who are you going to believe, the FED or your lying eyes?
Sure, the CPI tells us that inflation is relatively stagnant right now. We might be seeing a little bit of inflation, but nothing to worry about. That’s not how the Mayor sees it. The Mayor sees creeping stealth inflation and it’s ugly and it’s affecting us all.
The core CPI doesn’t measure food or energy costs. When the FED decides whether or not to raise FED Funds Rate, it looks at the core CPI. If gasoline and food have gone through the roof, the FED doesn’t react until those price changes have seeped into other goods and services. So let me ask you, are you paying more for food and gas then you were, let’s say, a year ago?
The Mayor has been seeing stealth inflation creep up on us now for years and years. I say stealth inflation because if you’re not looking hard enough you might not catch on to it. For instance, Scott’s, the paper towel and toilet paper manufacturer, as of this summer started trimming the size of their toilet paper rolls. Scott’s toilet paper use to be 4.5″ wide, and now it’s 4.1″ wide. Not a big difference, but a difference none-the-less. The price of a roll is the same, but you get less.
Another example is apple juice (and other juices). Allan’s use to sell a 1.5 L tin of apple juice for 99 cents. Now, the tin is 1.25 L for the same price. The 1.25L is now 1L, for the same price. It doesn’t sound like a big decrease, but if you drink a cup a day, you’ll have to buy two more litres a month. Or about $25 more a year.
Go down the list of groceries you buy and look at how the portions are getting smaller for the same price. Usually businesses change the sizing of their products under the guise of “options”. “We now have more options for you!” Instead of jumbo rolls of paper towel having 125 sheets, they have jumbo rolls with 100 sheets for the same price. Or, you can get the 125 sheet rolls for just a bit more.
Same goes for bags of chips, cookies, garbage bags, bags of pasta, sauces, you name it. Smaller portions for the same price.
This isn’t reflected in any inflation index, but you are paying more for less.
TLDG and I went through some of our grocery bills from 2 years ago and compared them to what we spend on groceries today. Two years ago we averaged $430 a month on groceries. This year we’re averaging $520 a month (not including baby food – which, the tins of baby food has also gotten smaller). We eat the same crap as we did two years ago, but we’re paying nearly a hundred more a month. Over a G-note a year?
I know, it’s not an exact science and there are probably some mitigating factors, but the thing is we have purposely cut down on junk foods over the last few years and have started buying in bulk. So it would seem at first blush that we are going out of our way to cut back and save money, yet grocery prices are still beating us to the punch.
Gas is another killer. Today it’s $1.o8 a L. Last year at this time a L of gas was 82 cents. The Mayor fills up twice a week and spends about $16 more every week when compared to last year. That’s roughly $800 more a year just for gas.
So, between food and gas (not all energy costs, either, as hydro has been bumped up another 8% since July 1 thanks to the HST), our household spends about $2000 more than it did a year or two ago. Yet, this isn’t reflected when the pointy heads get together to figure out if inflation is on the rise.
So when it comes to inflation, who are you going to believe, the government stats, or your lying eyes?
November 24th, 2010 at 11:38 am
[...] Mayor has a good rant on inflation by stealth: Go down the list of groceries you buy and look at how the portions are getting smaller for the [...]
November 24th, 2010 at 12:42 pm
Dude, my expenses are up at least twelve percent, this year alone. It is certainly not because of “recovery.”
Jimmy Carter, Round Two, FIGHT!!!
November 24th, 2010 at 2:03 pm
Another facet of creeping inflation is the standard priced packaging of meat and fowl at Walmart.
They put two frying chickens into a bag,put on a sticker that says “Only $12″. When you calculate the weight,you’re paying about a dollar more than you would if you bought it by the pound or kilo at another store.
I’ve noticed many items where the larger package is actually more expensive than the smaller one,this is ofetn the case with “Family pack” meats,fish,fowl, but you have to be pretty good at math or carry a calculator.
If you have the time, you can save a lot of money on NOT buying canned baby food. Process the food yourself,dole it out into an ice cube tray,freeze it,and thaw as you need it. It’s also a lot safer as you know exactly what your child is eating.
Works well with just about all the vegetables,for about a tenth the price. We did this with all our kids baby foods,and they’re a healthy lot now.
November 24th, 2010 at 8:01 pm
I think we’re really missing the point here. Oh sure … gasoline, baby food and chicken parts are important. But nothing is more important than toilet paper. I used to be a proud, card carrying member of Facelle Royale Bathroom Tissue Fanclub, until they started putting those little raised dimples on the sheets, making the outrageous claim that these little raised dimples will somehow make my perceptive butthole happier. Up your butthole, Facelle, you’re charging me more money and giving my perceptive butthole less wipability per roll. Bring back the old, dimpleless style and call it Facelle Ryale Classic. If it worked for Coke, it’ll work for toilet paper.