Producer Price Index Paints Grim Outlook Despite Bernanke Assurances

by: James Quinn

Even the government can’t conceal the raging inflation occuring in the U.S. and across the world today. But, Ben says not to worry. He can rectify the situation in 15 minutes by raising interest rates. When do you think he’ll be doing that?

Below is a link to the chart from the Bureau of Labor Statistics (BLS) showing the change in producer prices over the last year. The PPI went up 0.8% in January. For the mathematically challenged, that is an annualized rate of 9.6%. And, as you can see, this is not a one time thing. The annualized rate over the last three months is also 9.6%.

The amusing data point is food, which according to the BLS, only went up 0.3% in January. Those guys at the BLS are sooo funny. Their index shows virtually no food price inflation in the last year. As regular readers of my blog know, food prices are up 20% to 50% in the last year across the board.

So here is the skinny. Companies have two choices when their input prices rise 10%. They either pass them on to you or they absorb them and reduce their profits. Wall Street shills keep projecting ever increasing profits for corporate America. Ben and his minions keep projecting inflation of 2% for consumers. Who’s lying?

The truth is that your wages will continue to stagnate, the price of food and energy will continue to increase, and corporate profits will start to level off and decline. Sounds like the best time to buy stocks and a new home.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.