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Inflation, Unemployment, and Gold

Posted by Gonzalo Schwarz
November 28, 2012

I'm going to give it to you straight… I don't have any idea what I'm doing.

Written by Kathleen Packard
Washington Post’s Neil Irwin wrote after the election, “To economists, inflation is the dog that didn’t bite. Despite fears among commentators that the Federal Reserve’s easy money policies would cause rising prices, the consumer price index rose only 2 percent over the last year, exactly what the Fed aims for. And investors are pricing in only 2.07 percent annual inflation on bond markets over the coming five years.Don’t tell that to voters. Some 37 percent named rising prices as the biggest economic problem, basically tied with the 38 percent who named unemployment. (The other options were taxes, with 14 percent, and housing, with 8 percent.)Prices for gasoline and some other key commodities are up since Obama took office. But he began his term when those prices were artificially depressed by the global economic crisis. Since early 2011, gasoline prices have moved up and down within a range of about $3.20 to $4 a gallon, showing no discernible trend upward. The average national price of a gallon of gasoline was $3.46 on Wednesday, well below its peak of $4.13 on July 15, 2008.

Voters may be frustrated that the prices of goods have been rising (at a relatively low rate by historical standards), but wages haven’t. In that case, their real complaint is that weak economic growth and high unemployment are keeping wages down. …

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image:flickr.com/nostri-imago