Back in November 2010 Governor Palin delivered a speech in which she warned that Bernanke’s "easy money" policy at the Fed were resulting in rising prices and, if left unchecked, had the potential to cause Jimmy Carter style inflation, complete with Carteresque terms like "stagflation" and the "misery index" that refugees from the 1970s remember all too well. Shortly after Governor Palin’s speech an intellectually lazy Wall Street Journal reporter, Sudeep Reddy, dismissed Governor Palin’s concerns and assured us that inflation was no problem, nor was it likely to be in the foreseeable future, he averred. This prompted a classic "boom, taste my nightstick" response from Governor Palin that no doubt left a mark on the hapless Reddy:
Ever since 2008, people seem inordinately interested in my reading habits. Among various newspapers, magazines, and local Alaskan papers, I read the Wall Street Journal.
So, imagine my dismay when I read an article by Sudeep Reddy in today’s Wall Street Journal criticizing the fact that I mentioned inflation in my comments about QE2 in a speech this morning before a trade-association. Here’s what I said: “everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher.”
Mr. Reddy takes aim at this. He writes: “Grocery prices haven’t risen all that significantly, in fact.” Really? That’s odd, because just last Thursday, November 4, I read an article in Mr. Reddy’s own Wall Street Journal titled “Food Sellers Grit Teeth, Raise Prices: Packagers and Supermarkets Pressured to Pass Along Rising Costs, Even as Consumers Pinch Pennies.”
The article noted that “an inflationary tide is beginning to ripple through America’s supermarkets and restaurants…Prices of staples including milk, beef, coffee, cocoa and sugar have risen sharply in recent months.”
Now I realize I’m just a former governor and current housewife from Alaska, but even humble folks like me can read the newspaper. I’m surprised a prestigious reporter for the Wall Street Journal doesn’t.
– Sarah Palin
In the midst of this rather one-sided exchange between Governor Palin and the overmatched Reddy, Paul Gigot, the editorial page editor of the Wall Street Journal, noted that Governor Palin was correct, and was in fact "leading the pack" on monetary policy.
A few months later, the New York Post suggested Governor Palin’s prescience on the issue made her at least as qualified as those currently at the Fed. Since then, there have been sporadic reports of rising inflation in the media but they have not kept up with the very real pain citizens have been experiencing at the grocery stores, the malls, and, of course, the gas pump. I’ve discussed the disconnect between the real inflation people are experiencing at the cash register and the relatively benign "official" data being reported by the government in several posts, including this one. Why is this relevant today? Take it away, Terry Keenan:
Remember the Misery Index? Veteran Democrats do, and so do the president’s re-election operatives in Chicago. The Misery Index is the sum of the unemployment and inflation rates, and it’s what did in Jimmy Carter in 1980 as runaway inflation compounded an already bleak economic picture.
On the face of it, the government measure of consumer prices, the CPI, is just mildly alarming — with the government estimating prices to be rising at a 3.1 percent annual rate.
But as anyone who pays the bills or does the household grocery shopping knows, a government-reported 3.1 percent inflation rate is laughably low. Bought cereal or mac and cheese for the kids lately? If so, you’re aware of the near double-digit increase in prices in the supermarket aisles.
So what is the true inflation rate?
Fortunately, the folks at the American Institute of Economic Research have resurrected the idea. Their Everyday Price Index (EPI) strips away the cost of big-ticket items, like homes and cars, and looks at the cost of things that consumers encounter on a daily or monthly basis, such as groceries, prescription medicine, and telephone and cable bills. By that measure, the Everyday Price Index shows inflation galloping ahead at an 8.1 percent annual rate, a reading that would put the current Misery Index at a Carter-like 16.4 percent — not a good recipe for re-election.
To be sure, as I’ve noted before, a completely accurate measure of inflation has always been elusive and remains so. However, as anyone who shops will tell you, the above EPI rate of 8.1% is far closer to reality than the "laughably low" 3.1% being reported by the Obama Administration. In short, Governor Palin’s warning of the perils of bad monetary and fiscal policy in 2010 was prophetic. If current trends continue, inflation and the misery index will once again become part of the national lexicon, and this won’t inure to Obama’s benefit. Unless Republicans give him a pass on this issue too, that is.