A Report on Price Inflation from the Front Lines

We asked, you responded. In Monday’s edition of your Daily Reckoning, we addressed the steady, inexorable creep of inflation. And this despite our guardian angel central bankers doing their best to maintain price stability…through, we are told, the flagrant manipulation of our currency.

Here’s Jean-Claude Trichet, head of the European Central Bank, reporting from the frontlines:

“All central banks, in periods like this where you have inflationary threats that are coming from commodities, have to…be very careful that there are no second-round effects” on domestic prices, Mr. Trichet told The Wall Street Journal from his office overlooking Frankfurt’s financial district.

“Can you believe it, Dear Comrade?” we wrote on Monday. “If we are reading Mr. Trichet’s comments correctly, it would seem that the world’s food and energy communities are consciously rallying against us. Long thought to be soulless, mindless vegetables and minerals, commodities have apparently taken it upon themselves to ‘become’ more expensive, to raise their own prices. We can almost hear the battle cries coming from the fields: Ears of corn unite!”

Given the fact that we are now at war with self-inflating vegetables and energy sources, we decided to conduct a little front-line reconnaissance operation…with the help of the Daily Reckoning brain trust. Specifically, we asked readers to send us some boots-on-ground anecdotes from their own gas pumps and grocery stores.

“Are you noticing a price creep in your monthly bills?” we wondered. “Could it be that inflation is already here, that it has infiltrated our defenses and lurks in our very midst?”

Reckoners filed the following field reports:

Don, writing from Goffstown, NH, notes that, “Locally, gasoline is up 8-10 cents/gallon. Food is up about 10% over last year. And McDonald’s announced this morning it will be raising its prices.”

Fellow Reckoner, Anna, observed:

“Those rebels, the vegetables, fruits, corn, and other food items, have attacked our neighborhood stores in ways unimaginable. When growing a lowly bell pepper in my garden this past summer, I had no way of knowing that the scoundrel would turn traitor and cost $4.39 each at my local supermarket. Had I known that, I would have established a green house to grow these crooks in and, thereby, would have used their rebellion for my benefit.

“Ah, the value of hindsight,” Anna continued, “it counts for naught. And the asparagus! It was raging at a full price of $3.98 per pound! I couldn’t believe my eyes. I could go on but I am sure by now you get the picture. This is not JUST 10%. The bell pepper was at least four times higher than the same item last winter. The asparagus, by comparison, was ONLY around 40% higher. And it was not just these two vegetables but to continue would take more pages than you would want to read.”

Chimes another reader, “VTY”:

“The recent Scottsdale antique car auction had bidders paying anything just to secure something that wasn’t greenbacks. Cars that seemed pricey a year ago at $50K were going for twice that. To me, that means the big money is scared; they have lost faith in government, the Fed and our ability to manage our future.

“Besides,” VTY concludes, “it’s much harder to steal a 5500 pound Packard than a clutch of Krugerrands (And the Packard seems so innocent by comparison.)”

And from Florida, Larry reckons:

“The Tampa Bay Area has creeping inflation. Food prices, clothing, gasoline have all gone up. Makes stretching the dollar harder. Candy bars and basics like butter, milk and bread are up 20 cents or are the same price, but the sizes are smaller. McDonald’s prices are going up and Arby’s are closing because beef is too expensive. Go figure!

“1963 Franklin Half Dollar Silver coins have gone up from $7.50 to $12.50. Other silver coins are being bought at 12 times face verses 5 times face value from the prices last year. Silver dimes are being sold for $2.10. Peace Dollars have gone up from $12.00 to $16.00 for junk silver.

“But according to the Feds and the government I must be mistaken, because we only have a 2 to 3 percent inflation rate. So my figures must be wrong! But my better half wants more money to shop for food with! I’m not going to tell her she is wrong!”

And “A. Grocer” has this:

“I have been keeping an eye on things since I stocked shelves at the grocery store here in Elyria, Oh. We used to sell pasta 3 lbs. for $1 as an advertised special about 2 years ago. Now it goes for $1 per lb. Apple juice was advertised for 99 cents for a 64 oz. bottle. You’ll be lucky to get it for $1.59 now. I could go on… Things used to go up here and there by 5 to 9 cents at a time. Now they jump 59 cents at a time…and this is just the beginning! It is truly shocking…I reckon’ ya better say yer prayers my friends.”

There were so many emails inflating our inbox, it was hard to keep up.

From Rick:

“Car Insurance is up 11.3 % yoy…despite all vehicles being one year older. Health insurance up 13.5 % yoy. Homeowners Insurance up 32 % yoy…”

From Rex:

“Domestic beer is up $1.33 on a 12 pk in less then 8 months. That dummy Bernanke. What’s next, smaller cans?”

And this, from a Fellow Reckoner in the Lone Star State:

“I work with those ‘foot-soldiers’ in the corn army. When I went into that field back in ’02, you could ‘enlist’ 6 to 8 of these ‘soldiers’ for one paper dollar. Now they won’t recruit for less than 68 cents. Now, the current generation of corn ears is asking 85 cents to sign on to your dinner table. This is in TEXAS; we grow corn here for crying out loud.”

Indeed!

We also received reports from Reckoners in Europe, Asia, South America and far beyond. Who knew we had readers, for example, in Australia? (Which reminds us: Hi mum!)

Thanks to everyone who wrote in. We’ll feature more frontline reports, including some international insights, in future issues. For now, let’s dive into today’s column…also about inflation…

Joel Bowman…and The Daily Reckoning Readership
for The Daily Reckoning