Perspectives: Quantitative easing vs. our perceptions

OPINION – There sure are a lot of sober faces today. Some people are acting like the end times have arrived. What is the source of this doom and gloom?

For some it might be the fact that the television series Breaking Bad ended its five-season run last night. Fans will no longer have Sunday nights to look forward to or a show to discuss on Monday mornings. For others, it may be the impeding “government shutdown” we are being incessantly told to fear.

But one of the most truly sobering things going on around us hasn’t yet registered on most peoples’ radar. It’s the steadily rising effect of inflation driving up the cost of everything we purchase. But the reality of these rising costs is sometimes carefully disguised.

For starters, the Consumer Price Index deliberately excludes things like food and fuel when measuring rising costs of goods and services. The official explanation is that these items are considered more volatile. But this doesn’t change the fact that they are among the most essential items we purchase regularly and they are clearly being affected by inflation.

Food prices can fluctuate from season to season, but careful shoppers are catching on to the fact that even where prices have remained steady, quantities have decreased. Cereal boxes have shrunk; as have ice cream containers, candy bars, etc. Cans of tuna that used to be 7 ounces are instead being sold in 5 ounce cans. Next time you purchase a bag potato chips pay attention of how much of the bag is actually filled with air.

Marketing experts know that consumers are more sensitive to price changes than they are to quantity changes. So they quietly reduce the amount of food or the size of the packaging in the hope that we aren’t reading the labels too closely.

But the reality remains; we’re ending up with less food for more money.

Eric Peters states it perfectly:

“But it’s happening across the board – as anyone who shops for basic staples, food and so on, already knows. The bag of groceries that cost $50 five years ago now costs $70 – and there’s less in the bag, too. Gas costs twice what it did just five years ago. We’ve just gotten used to $3.40 as the New Normal.”

How does the public become so susceptible to having their perceptions manipulated? Part of the reason is that we no longer call things by their actual names.

Quantitative easing is a term used by the Federal Reserve as verbal camouflage for the purpose hiding inflation from the public. The money masters refer to it as injecting “liquidity” into the economy to make more money available. In reality, it amounts to the printing and pouring of tens of billions of manufactured dollars into the economy each month. All that unbacked funny money, in turn, waters down the purchasing power of every dollar.

Historically, such actions cannot be sustained indefinitely without destroying the money supply through hyperinflation.

Once the money supply begins to grow at an exponential rate, we will experience the kind of economic upheaval the Weimar Republic did in the 1920s.

Simon Black offers a powerful illustration of how an inflationary crisis can take so many people by surprise. He starts by asking us to suppose we were at a party where a pipe bursts at 11pm sending a small leak of water into the room. Few people would feel threatened by a steady trickle and would likely continue partying.

But when that leak becomes exponential, the situation changes drastically.

As Black explains:

“At first, there’s just one drop of water. But each minute, the rate doubles. So by 11:01pm, there’s 2 drops. By 11:02, 4 drops. And so forth.

By 11:27pm, there’s only six inches of standing water. Yet by 11:31pm, just four minutes later, the entire room is under nearly 8 feet of water. And the party’s over.

For nearly half an hour, it all seemed safe and manageable. People had all the time in the world to leave, right up until the bitter end. 11:27, 11:28, 11:29. Then it all went from benign to deadly in a matter of minutes.”

Those rising prices and shrinking quantities of the food in our grocery carts are serving as our canary in the coalmine.

Now would be a good time to become better informed and to formulate a personal game plan for protecting your assets and keeping food on your table.

 

Bryan Hyde is a news commentator and co-host of the Perspectives talk show on Fox News 1450 AM 93.1 FM. The opinions stated in this article are his and not representative of St. George News.

Email: bryanh@stgnews.com

Twitter: @youcancallmebry

Copyright St. George News, SaintGeorgeUtah.com LLC, 2013, all rights reserved.

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6 Comments

  • Karen September 30, 2013 at 2:04 pm

    Interesting that Mr. Hyde can be so blase about today’s news as he writes the words, “government shutdown” in quotes. He also adds that the shutdown is something ”we are being incessantly told to fear.” Nevermind that the economy of Southern Utah is dependent on tourism dollars and with national parks closed, those dollars will be lost. With more than 15 percent of Washington County’s private sector jobs built around tourism, everyone in Utah, especially Southern Utah should be worried. I’m just hoping the adults in the House will stop this nonsense.

    • Karen October 1, 2013 at 10:16 am

      Whoops, there are no adults in the House of Representatives!

      • philiplo October 1, 2013 at 3:14 pm

        None with any say in the proceedings, at least.

  • philiplo September 30, 2013 at 6:47 pm

    Mr. Hyde has linked to a page describing the CPI and, upon reading it, I find that either he or I is misunderstanding part of it. This article claims that the CPI excludes the cost of food. Yet at the link provided is the following explanation, with food as the first item and fuel covered under the fourth:
    .
    .
    What goods and services does the CPI cover?
    .
    The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:
    .
    FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
    HOUSING (rent of primary residence, owners’ equivalent rent, fuel oil, bedroom furniture)
    APPAREL (men’s shirts and sweaters, women’s dresses, jewelry)
    TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
    MEDICAL CARE (prescription drugs and medical supplies, physicians’ services, eyeglasses and eye care, hospital services)
    RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
    EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
    OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

    • Bryan Hyde Bryan Hyde October 1, 2013 at 8:08 am

      Good catch. I didn’t make it clear that the CPI excludes food and fuel price increases when reporting the overall rate of inflation. It’s a clever way of cooking the books to make inflation appear lower than it is.
      .
      For instance, when housing was roughly 25% of the CPI and housing prices started going up, they didn’t count it because they claimed rent wasn’t going up. But when home prices began to fall, the CPI began including them again.
      .
      The CPI methodology has changed over the years from measuring the cost of things to measuring the cost of living/surviving. Either way, by not focusing on the price of certain items, the real rate of inflation is being under-reported.

  • philiplo September 30, 2013 at 6:48 pm

    Oh my goodness, my grammar shames me. “He or I is?” ((shudder))

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