Leave it to George W. Bush's administration to bring back inflation. With an expected rise in interest rates on the horizon and consumer debt at record levels -- more bad Bush economic news is on the way.

mdphl you are exactly right my friend, and here are a few big trouble signs occuring right now, gas prices through the roof,(plane fares, and other modes of transportation going up) milk prices which could go to $3.50 a gallon, and cereal and food prices on the rise. The so called recovery is close to being dead in the water.

I have been paying $3.89 a gallon for Borden's milk! What will it be in a couple of weeks? Probably $4.50! I'm sure this is a positive sign of economic recovery! People spending more money is always a positive sign. Right?

Must be time for another tax cut, the BushCoInc cure all.

Hey that is funny, i just paid 1.87 for a gallon of milk yesterday. They had some other milk there for 2.55 also....

Gas prices go down, then they go up, then they come down.. blah blah blah...

Int rates are at, what, 50 year lows? Inflation is NOT a worry kids. Infact, if the rates go up right now, it is the sign of a healthy economy.. an economy that has rebounded....

But good try libs.

Ok, whatever you say Mr. Phillyfan Greenspan, the Fed. expert.

Consumer prices are way up and inflation is back -- that's a fact. You can't keep spending when you don't have the money. That is what our government has been doing under George W. Bush (just like his Daddy) -- record spending and deficits. Unfortunately, many Americans are following the government's lead and spending their way into record debt. Once inflation raises its ugly head(as it is beginning to do) it puts the squeeze on consumers who are already leverged to the hilt.

Regardless of what you pay out there in Arizona for milk - the consumer price index increased .06% last month. Food, gas, college tuition, housing and durable goods are all going through the roof. The price of raw material is rising in almost every sector at a rate not seen in -- you guessed it -- 10 years.

The entire issue of glutonous spending and obscene consumption is for another thread.

Consumer prices are way up and inflation is back -- that's a fact. You can't keep spending when you don't have the money. That is what our government has been doing under George W. Bush (just like his Daddy) -- record spending and deficits. Unfortunately, many Americans are following the government's lead and spending their way into record debt. Once inflation raises its ugly head(as it is beginning to do) it puts the squeeze on consumers who are already leverged to the hilt.

Regardless of what you pay out there in Arizona for milk - the consumer price index increased .06% last month. Food, gas, college tuition, housing and durable goods are all going through the roof. The price of raw material is rising in almost every sector at a rate not seen in -- you guessed it -- 10 years.

The entire issue of glutonous spending and obscene consumption is for another thread.

MD just a few shorts months ago, ya'all were worried about DE-FLATION. Now everyone is on the inflation bandwagon?

If any of you thought that the interest rates were going to stay at this long time low, you were kidding yourself(which is what the fed will do). Everyone knew (maybe some of you didnt with your heads in the sand) that once the economy becomes stronger, you must raise the interest rates. Just like they were lowered when the economy sucked.

Now, if rates were up at 10% right now and prices were going up... you'd have something to bitch about. Get back to me in 2-3 years if that occurs.

Gas prices are at all all time record high, as is the deficit, spending, blah blah blah

Nice try right winger.

The problem is that interest rates and inflation are 2 different animals. Where they are connected is what is going to make the stuff hit the fan. Here is the scenerio -- Jane Doe has been living high off the hog for the past 5 years spending her way into oblivion. Her consumer debt about equals her income. She is borrowing to make ends meet. Prices rise so her everyday expenses (putting gasoline in the SUV, purchasing milk -- or Kettle One and tonics--,vet expenses for her Black Lab, airline tickets to go the Islands,etc.) increase significantly. At the same time, interest rates rise so her adjustable mortgage, credit card rates, home equity loan costs and the interest for the debt consolidation loan put on a further squeeze. What happens -- Jane tightens her belt (unlikely); her job is lost to outsourcing (possible); she declares bankruptcy (also quite possible).

C'mon PhillyFan -- even you have to admit that the Bush administration is spending like there is no tomorrow. Unless and until the Federal government has a workable economic program -- we're all in for some tough times.

Now MD you are confusing the Personal Debt with the Federal Debt.

In the case you are just saying the woman racked up high debt to live high on the hog (it sounds like). Are you suggesting that her taxes be raised to offset the budget? Really, that is the only way that you are going close that gap. How about they do an across the board 5% cut in gov't spending? At that point you would just say the admin cut spending for the kids.

Which is it then?

Wouldnt that fall into her problem that she never cut down her spending after the dotcom boom? Rather than her not using her brain that borrowing on adjustable rates would at some point bite her in the backside?

As far as gas prices being the highest ever, well duh raze... this is 2004 not 1974. Did you add inflation into the calculation? Or are you using the same type of "logic" when you say that the current deficit is the highest ever... strictly dollars.

If gas prices are going to have this much of an effect on the economy, then when the prices go back down after summer,,,,, would that not be a boom to the economy? Thus lowering any type of inflation. whoops except for that pesky milk.

I think it's going to be more like October...isn't that the plan the Bushies have with the Saudies for the Novemeber election? Yeah, I thought so.

Number 1, Phillyfan is right that inflation is typical - it is only a problem if prices are going up way too fast, and only with gasoline and natural gas are there problems with the speed of price increases (and given the complete lack of attempts by ANY recent administration to reduce our dependence on foreign oil, we are stuck with those problems).

HOWEVER, interest rates are important, as others have noted, because the low rates are what helped fuel the consumer spending of the 90s, and consumer spending has to rebound for an economy to be fully in recovery. The recent rise in both interest rates and prices, if they were to continue, could eventually make a real dent in consumers' ability to buy new products, and make the recession worse than it already is.

Which is why Bush&co's spending habits are such a problem. The higher the deficit is each year, the more debt the government is carrying, and the higher interest rates have to go to finance that gov't debt. This crowds out corporate investments, which reduces the growth of the economy, and could make the recession much worse.

So the reality is that inflation, plus rising interest rates (in real terms), plus increasing gov't deficits (the highest in $$ ever, and among the highest in real terms) all add up to bad economic policies.

And no, tax cuts will not help - they will only increase the amount of $$ the gov't must borrow, and further drive up interest rates. So people will get "their" money back, but be able to buy less with it.

Actually summer usually officially ends on Labor Day in September. I would expect gas prices to start falling mid to end of September. As for the price of milk, I think it's still been pretty cheap here in L.A. Around $1.89 for a gallon I think.

CPT - excellent post. I especially appreciate your keen comment about the foreign oil dependency issue. This issue is finally starting to get some serious attention -- it's about time.

Yes foreign oil is a problem, but instead of looking for more, why not support inventing renewable recources instead...I know why ...Bush and his friends won't be able to make any money if we are less dependant on oil.

We will never get rid of foreign oil folks.. and do you know why? Cause we wont drill off the CA coast... we wont drill in Alaska.. we wont drill anywhere because some tree hugger doesnt want to see that when they are sitting at the beach.

Then we have the Kerry Crowd who says we need to cut down, but their wife and kids run around in the HUGE SUV's. Which is OK for them, but bad for you.

How about hybrid vehicles, then? Or public transportation -- like I do. The buses here in Austin run on natural gas. Some of them are hybrids, too.

I'm not taking the bus. Feel free to on yourside, but i live in a town that takes over an hour to drive from one side to the other....

Then again, if you have a family... how do you suppose riding the bus is going to go over?

Let's be realistic here folks. I'm not going to tell you what to drive, or not to drive. So, dont tell anyone else what to drive.

At some point and time the marketplace will produce a fuel cell, but let that handle itself. Gov't spending on fuel cells isnt going to help, it's just going to waste our money.

If gas prices aren't high enough to figure into your decision of whether or not to drive, or what to drive, then shut up about gas prices.

The other problem is that the pedal's to the metal. Gov't spending is through the roof and interest rates are as low as they can get; if a housing or oil shock happens, there's nothing we can do about it.

Golfer, you raise the interest rates during inflation.... not to split hairs... but...

The housing market is booming because of the very low int rates.

The raising/lowering of the rates is meant to buffer the economy from sharp turns. To have the int rates this low and some inflation to occur, that's good because you can raise the rates to slow any effect... Correct CPT?

[ April 26, 2004, 04:24 PM: Message edited by: PhillyFan ]

IF the inflation is caused by an "overheating" economy, one in which we are at or close to full employment and labor is scarce and expensive, that is correct Phillyfan. However, given that we have inflation at the same time as high unemployment, that is not correct.

At times of overheating, you want to slow production and reduce demand, so you raise interest rates to make borrowing more expensive. Both consumers (who have debt tied to the prime rate) and businesses (who rely on borrowing to finance most investment) slow down their spending, and the economy moves to a more even keel.

If the Fed raises interest rates now, though, it will still have the effect of slowing down both consumption and business investment. That is the last thing you want in a time of recession. You want to stimulate investment and consumption, and reduce interest rates. But with interest rates already so low it's hard to make any impact by lowering them.

This inflation is actually closer to the "stagflation" of the 1970's. I haven't seen all the #'s, but I would guess the leading causes of inflation are supply costs - the costs of energy and health insurance for employees. When those costs rise, prices rise but businesses also cut back, because they can't raise prices to the same level as costs. During the 90's with the huge productivity gains the economy made, such supply "shocks" were largely counter-balanced. As fewer people could do the same amount of work, the higher cost of employees did not matter.

Now, this level of inflation is not horrible, if it is a one-time thing. But if it continues, we could be in for a bad time - it is VERY hard to counter stagflation.

Yes...maybe when we have an eco-friendly person and not an oil-slicked-chimp/Texan-wanna-be in The White House.

[ April 27, 2004, 07:26 AM: Message edited by: bobby78751 ]

Oops...double post.

[ April 27, 2004, 07:25 AM: Message edited by: bobby78751 ]

Booby,

We just had 8 years of an "supposed" enviornmental friendly prez. Where are the feul cells? they are no closer than 8 years ago.

Where are the cars getting 55 miles a gallon?

Flooding the market with free money to produce these doesnt help.. you just give a free meal ticket to a company. If they have to use their own money to produce it, they will do it cost effective.

Not to mention whoever does it first will be a billionaire.

LittleFilly...hence the use of the word "maybe" in my post.

PhillyFan -

Where does your candidate stand on the inflation issue?

Actually, Phillyfan, a lot of the technological advances we enjoy in consumer products were developed first for governmental/military needs. Then you have the entire field of pharmaceutical development, which is heavily subsidized by government (e.g., federal researchers uncover a promising new compound, a pharma company licenses it, hires away the gov't scientist and makes a bundle). Things like GPS, and 4-wheel-drive (perfected in WWII with the original Jeep) are the direct result of governmental investment.

In fact, when government does invest in technological advances, that is $$ well-spent, because it can reap economic benefits far outstripping its cost. The same cannot be said, for instance, for government outlays to support a war that did not need to be fought.

When Clinton was in power, more certainly should have been done to develop alternative technologies for personal transportation, but a) the government was trying to cut spending to deal with the Reagan/Bush debt and the oil companies are very persuasive (with their a$$i$$tance to members of Congress) and are dead-set against research into non-oil burning cars. When you then add in the cost and difficulty of building a completely new infrastructure to fuel these new types of technology, you see how difficult the process can be. It takes leadership, and that is lacking in DC right now.

The word inflation, is not in his vocabulary.

Yesterday, bought a gallon of milk, and paid, $3.89!!!! This is getting as ridiculous as the gas prices, which I have read, could, and some are predicting it could go up to $5.00 a gallon. frown

[ May 25, 2004, 10:16 AM: Message edited by: puckman1 ]