What? Inflation?

I love this guy...

Barry Ritholtz submits: Okay, so here's the "Official" explanation: the selloff over the past few days is courtesy of this new-fangled discovery called INFLATION. That's why rates have ticked higher.

You see, we have been living in a benign non-inflationary environment, and just yesterday, it seems that some traders have discovered that -- WTF?! -- prices of goods and services are rising.

Of course, many pundits, traders and investors -- and a goodly part of the Federal Reserve -- have convinced themselves that there really wasn't any inflation, so long as we wear blinders and ignore those pesky goods and services like Food and Energy. You know, those annoying items utterly necessary for survival.

That's been the f@#ktard explanation, anyway. If you believe it, though, you must be living in a cave -- which given the market for bat guano and stalagmites, probably has achieved the elusive Fed goal of price stability.

Bill King notes that:

For April 2007, the monthly food cost is $1044.80 for average family of four, per the USDA.

For April 2006, the monthly food cost is $995.40 for average family of four. Ergo y/y food inflation is 4.963% according to the USDA.

The BLS has ‘food’ inflation (urban) at only 3.7% y/y (unadjusted) for April 2007. Ergo, there is a 34% discrepancy in food inflation reporting between U.S. Government Agencies – the USDA and BLS.

This story from May 24, 2007 went largely unnoticed: Reuters reports, “The Federal Reserve's adherence to core inflation, which strips out food and energy prices, is taxing the public's patience and risks credibility, a senior U.S. central banker said on Thursday.

‘In the United States over the last 20 years, core measures excluding food and energy did take out a lot of noise. But in the last three years it has been extracting quite a bit of signal,’ said Harvey Rosenblum, head of research at the Federal Reserve Bank of Dallas.”

Meanwhile, the rest of the world continues to raise their interest rates to fight inflation.

~~~

The Chicago Sun-Times was kind enough to include this table of food price increases:

NATIONAL FOOD PRICE INCREASES

Here's a sampling of where food prices are heading across the nation:

National average prices	April 2007	April 2002	April 1997
White bread (pound)	$1.20	$1.00	$.86
Ground beef (pound)	$2.25	$1.78	$1.38
Bacon (pound)	$3.50	$3.26	$2.66
Whole chicken (pound)	$1.12	$1.11	$1.00
Eggs (dozen)	$1.62	$1.05	$1.08
Milk (gallon)	$3.14	$2.78	$2.61
Butter (pound)	$2.86	$3.20	$2.18
Ice cream (half gallon)	$3.79	$3.72	$2.90
Red delicious apples (pound)	$1.10	$.91	$.90
Bananas (pound)	$.52	$.50	$.52
Navel oranges (pound)	$1.24	$.75	$.60
Iceberg lettuce (pound)	$.99	$1.15	$.67
Tomatoes (pound)	$1.63	$1.32	$1.35
Frozen orange juice (12 oz.)	$2.52	$1.89	$1.73
Sugar (pound)	$.51	$.44	$.44
Peanut butter (pound)	$1.75	$1.98	$1.81
Coffee, ground roast (pound)	$3.44	$2.98	$3.89
Potato chips (16 oz.)	$3.48	$3.29	$3.18

Source: U.S. Department of Labor, Bureau of Labor Statistics