Photo on line by Brother “Joe” Ministries

“For the first time in years, inflation is picking up.” – Justin Spittler, “Not Even Trump Can Clean Up This Mess”, Casey Daily Dispatch, 1-23-2017

Is it so that inflation is just now “picking up”, or has it been raging in the background all along? The statistics tell the story. According to the Consumer Price Index for all goods, so-called price inflation over the last 12-months is slightly more than 2%. From 2012 to 2016 the average U.S. cost of a Big Mac increased about 1.8% per year. This sounds not too out of line, at least by recent historical standards.  To the contrary, inflation has been raging all along.

One thing these statistics neglect is that a general increase in prices is not inflation. An increase in the money supply is. Focusing on prices, a symptom, enables the creators of currency to redirect blame elsewhere.

Often inflation effects tend not to be noticed, or counted – supposedly. The anecdotes in this article are based on personal observation. Take for example those little “tubs” of butter that one gets when eating out. They measure approximately 5/8-inch square.  Years ago, they were filled to a level where the peak was flattened by the peal-off cover. Not anymore. Now they are inclined to be less than half full. Or sometimes, they are not butter at all.

There is a certain company that makes granola bars. Not so long ago, there were six bars per box; now there are five. Neither the physical size of the box not the weight of each unit has changed. The price of a box immediately before and after the diminution remained unchanged. The hope is that the consumer will not notice, or won’t care, that the charge per given amount of product has increased.

An interesting observation is that, when such price increases do get noticed, the private vendor imposing the higher price gets the blame. Hence the effort to hide reality.

For another, at first, subtle indicator of inflation, regard the photograph. One of the effects of inflation, besides higher prices, is the disappearance of certain goods. Brother Joe’s picture may not be so subtle. But did those shelves go bare over night? In the last stages it may seem so. That is because during the earlier stages many people adapted to the loss of variety or just brushed-off the product disappearances as minor inconveniences.

It starts slow. Over the last few years, more and more products have become harder to find as indicated by these two examples. Several of my favorite types of cereal are no longer available. My favorite sauces which I use for salad dressing have become very difficult to find. So far substitution has become the order of the day. As inflation progresses, what was the strategy of forward seeing executives to reduce service in favor of increasing the price, becomes more and more widespread.

Why do objects become unavailable or rare? Recall that, as previously mentioned, the vendor gets the blame. People tend to reject the higher price, and customer’s refuse to buy from them. So, marginal products become unprofitable and manufacturers withhold their merchandise. Even now, most of the wheat produced on my farm in 2016 is stored in grain elevators. This reduces the supply on the market and tends to keep prices from falling even more; one assumes many farmers are doing the same thing. It also helps the economy in that when shortages do cause prices to rise, the grain put away in bins will find its way into the market and foil vertical price movement: if enough remains in storage.

Aside from consumers, the powers that be pass laws restricting price increases. Furthermore, labor unions resist lower wages. The effects of these actions make it difficult if not impossible for businesses to adjust to the new reality. So, they take their products off the shelves and terminate the workers. Once again, prices rise because of the reduced supply. But they can’t rise, at least not publicly. In the early stages, one can get the rarer products, if they are available at all, by shopping only at a premium purveyor where expensive items are the widely-expected norm. In the later stages, as illustrated in the above picture, one can get their desired product only if they know someone. The shopper can still get flour if he knows a farmer, is willing to pay the black-market price, can be trusted to keep his mouth shut, and can grind the wheat himself or hire someone to do so.

Granted, we in the United States today are in the early stages; but, based on these anecdotes, symptoms of inflation are already in progress and have been for many years, despite statistics to the contrary. Perhaps, the epigraph means that its author thinks that inflation will trend more vertical soon. Maybe he thinks we will soon face not just a few inconveniences but whole-sale empty shelves.

(BTW, things as illustrated in the photo are apparently not so bad: the lights are on and shoppers are present. This may be a misleading photo which only shows a temporary condition while the store manager rearranges the merchandise. Never the less, empty shelves can be found in inflation ravaged territories.)