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The index for gasoline posted its ninth consecutive increase in March and has risen 14.4 percent over the last three months. Try telling Americans who have to empty their wallets to fill their gas tanks that inflation isn’t already here. The index for food eaten at home continued to climb in March, rising 1.1 percent “as all six major grocery store food groups increased,” the CPI report said. The cost of food eaten at home is up 3.6 percent, with some items soaring way past that.
The Associated Press April 16 reported food prices at the wholesale level rose in March by the most in 36 years, forcing stores and restaurants to pay more for vegetables, lettuce, meat, and dairy products.
The household energy index crept up as well, with advances in fuel oil and electricity indexes more than offsetting a decline in the price of natural gas. The index for shelter—despite the continuing housing crisis—even rose slightly. Medical care was more costly. Several transportation indexes increased significantly, including new cars, used cars and trucks, and airline fares.
When core prices rose in February, the dollar weakened. Investors feared that inflation would continue to creep upward. This, in turn sent commodity prices higher. Silver and gold benefited. And cotton prices jumped on expectations of stronger global demand. Other agriculture products, from corn to soybeans, rose in price.
The poor economic record of the Carter years, especially the combination of high inflation—going over 13 percent one year—and high unemployment, led to his defeat in 1980. Stagflation could wipe out Obama’s hopes for reelection.
If increases in food, energy, and commodities persist, this could lead to an increase in inflation expectations, which occurred in Carter’s presidency. The expectations could become self-fulfilling. When businesses’ costs rise, they hike up prices. When workers feel they are falling behind, they seek more rewards. “Ultimately, that leads to an upward spiral, which central bankers might have to battle with higher interest rates,” The Wall Street Journal said in an April 16 story.
The Obama unemployment rate, although down from its high, still includes a labor participation rate at an all-time low. His policies have helped cause the loss of three million jobs in the nearly two and a half years of his reign. The recent job gains haven’t led many people, who stopped looking for work during the height of the recession, to start looking again. The real unemployment rate is undoubtedly much higher than 8.8 percent. The jobless rate for blacks and Hispanics continues to rise as well.
Barack Obama may well win the unwelcome award of being the worst president since Jimmy Carter. In fact, he may even top Carter’s abysmal record, particularly if stagflation sweeps over us.
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