Look What You Did, Bernankehttp://www.fool.com/investing/general/2008/04/16/look-what-you-did-bernanke.aspx Kristin Graham
April 16, 2008
A few weeks back, I preached about how the Federal Reserve's actions were destroying our economy by rescuing our fellow Americans who engaged in greedy and detrimental activities. In the face of the gigantic financial mess we've created, however, our leaders have relaxed, sat back, and lowered rates, thinking they had an easy solution to a challenging problem.
Well, their efforts finally shone through yesterday, in the inflation numbers that were released. I've warned that inflation has been a problem for some time, and now the numbers reflect it. For example, we're experiencing the worst food-price inflation in 17 years, and panic over escalating prices seems to have finally set in.
Numbers don't lie
Retailers across the board are struggling for a multitude of reasons. Homeowners who can't afford their mortgage don't have discretionary income to throw around. Rising unemployment hasn't helped, either, since those without jobs have no inflow of money. Even the well off are decelerating their spending habits, as the beaten-down stock market has left them feeling less wealthy. But our major problem is that consumers are cash-strapped as a result of inflation.
Rocketing commodity costs have laid the foundation for the series of increasing prices that get passed through the supply chain. According to the USDA, egg prices were up 25% year over year in February. Milk and dairy products rose 13%. And chicken and poultry increased 7%. Accordingly, consumer-goods companies such as Kraft (NYSE: KFT ) and Tyson Foods (NYSE: TSN ) are forced to raise prices to curtail slimming margins, and those higher prices are passed on to food retailers. Meanwhile, restaurant chains have been forced to offset rising input costs: Cheesecake Factory (Nasdaq: CAKE ) raised its menu prices 1.5% in February, and a Chipotle (NYSE: CMG-B ) in New York City increased its prices by almost 10% in March.
But Mr. Bush, I thought you wanted to stimulate the economy!
Little does our president know that I, like many of my fellow responsible citizens, will be saving the money to help keep those expensive eggs and cartons of milk in my fridge and the gas in my fuel tank. The fact that our government is encouraging our debt-laden nation to spend money on materialistic items we don't need instead of use it to pay off what we already owe is another article all to itself.
My point is that with unemployment rising, basic economics tells us that getting a raise is out of the question -- especially in a slumped economy. Static income coupled with escalating costs doesn't make for a good situation, and it means I'm going to need that government cash to sustain my everyday basic lifestyle. We