Perhaps Mr. Pethokoukis does not go to the grocery store. The inflation calculation does not include food or fuel, both of which are up significantly in price the last few years and are, oddly, something most of us have to buy every day. I don't commute much anymore, but buying fuel for my lawn equipment and topping off my truck's tank can easily run up a hundred dollar bill at the GAS station. Pressure from food and fuel costs is a drag on the rest of the economy.
The reality of the global economy does not square with Pethokoukis' thesis. We have exported inflation to China via the dollar's position as the world's reserve currency, as we were talking about a few days ago. This is one of the reasons for the BRICS developing a new reserve. Pethokoukis is delusional if he thinks that will be painless.
Another thing, the official inflation rate is at least double what the average investor can get on a safer investment such as a certificate of deposit. That means that money setting in a bank account is shrinking in purchasing power every year by 1% or more. In five years, savers have lost 5%, 10% in ten years. Not exactly the way to build a retirement nest egg, is it? So what do we do? The same as the Japanese. Those of who are still working and can do so save more and spend less. We stretch our grocery dollars as far as possible, buying less meat and dairy, picking up things on sale, buying fewer packaged convenience foods, and depending more on gardening. We fix our vehicles instead of buying new ones, put fewer miles on them by not going out, avoid restaurants and movie theaters, pick up clothes at Goodwill, because we are paying a stealth tax through inflation for the government's continued deficit spending.
The arithmetic ignorance of alleged financial experts leaves me stunned at times. It is hard to believe anyone can be this stupid. Humans have a built-in bias against thinking that others will deliberately and blatantly lie to us. As cynical and skeptical as I am, both by nature and nurture, even I have a hard time believing that the news reporters intentionally broadcast false information or that Obama knows he is lying about Obamacare, Benghazi, the IRS, and whatever else is going on. OK, not so much in Obama's case. He's one of those guys, like Clinton, who will lie when the truth would serve better, just to keep in practice. His whole life is a lie.
Enough of that. I offer this brilliant quote from Pethokoukis:
.And consider this: If inflation were really 10 percent, that would mean the real economy, adjusted for inflation, has been sharply shrinking — yet somehow still adding 2 million net new jobs a year.
If GOP inflationistas had their way, the weak U.S. recovery would almost surely be even weaker. Just look at Europe. Unlike the Fed, the inflation-phobic European Central Bank sat on its hands despite weak growth. The result has been an unemployment rate nearly twice America's and a nasty double-dip recession. Of course, inflation is lower than in America — so low, in fact, that the region risks a dangerous deflationary spiral of falling prices and falling wages.
He almost stumbles upon reality. You want to grab him and shake him while screaming, "The real economy has been shrinking, you dolt!"
The recession is not over. The U.S. economy, apart from government deficit spending, has been contracting for years. There is no real economic growth, we just had more rope with which to hang ourselves. Government is growing. The number of people on food stamps has grown. The number of people going on disability has grown. The number of people who have given up looking for full-time employment has increased. The labor participation rate is at historic lows, but, Glory Be!, we are not as bad as Europe!
Yes, we may get a massive deflationary or dis-inflationary correction when the markets collapse. If we had let this happen in 2007 -- Bush deserves some blame -- our economy would be growing instead of stagnating like Japan's has been since the '90s.