The Obama administration immediately dismissed the CEO's statements as "it's only one guy". But the "only one guy" happens to run the world's largest public corporation in 2010 with over US$258 billion in sales.
Consumer prices rose 0.5% in February, the most since mid-2009, largely because of surging food and gasoline prices. Commodities are not included in the CPI, though this is where inflation is most rampant.
Gasoline prices have doubled to $4.60+ (see realtime gas prices at bottom of blog page) since Obama took office. Food-manufacturers are putting 13.5 ounces of food in cans that once held 16 ounces in order to mask the rising prices for food. Obama is calling for yet more subsidies for ethanol production though 40% of all corn production is already going toward this inefficient gasoline additive. Japanese and US auto makers have announced rising prices for the coming new model year. The only element of the economy that is going the other way, is housing, as prices continue to drop, and construction is at a standstill. But lowered housing values mean lowered property tax revenue for state and local government, leading to layoffs of public employees.
Fed head Ben Bernanke has publicly downplayed rising fears of inflation, however, others in the Fed have indicated that interest rates will be hiked later this year, and the EU is already beginning to raise interest rates. A huge risk to the US economy still lays in the massive infusion of cash created by the Fed printing presses, and the Quantitative Easing programs. Bernanke still has the daunting task of pulling all this liquidity out of the markets BEFORE inflation gets too high, a balancing act never seen before.
The US Labor jobless rate of 8.8% this week did not take into account those that have left the labor market due to frustration, and lack of real job growth. Couple that with those that did find work, are taking lower wages, the US consumer is still on his/her back.
During the Carter administration, inflation, high interest rates, and high jobless rates led to the term 'stagflation', meaning inflation normally comes with high employment, high consumer spending. Obama is facing the near identical situation, with a high jobless rate, low consumer spending, and looming inflation, stagflation appears to be reemerging.
Why are we seeing inflation despite US consumers absent spending? Demand from the new markets in Asia are pumping trillions into US corporate pockets, and raising demand for everything from food to oil.
The past no longer matters, who spent what and when, the future is all that matters now, and that future is in doubt. Cut spending, or continue to drive the Debt higher?
