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Economic Confusion: Recession, depression and inflation

Posted April 30, 2008

“You’re seeing a price revolution unfold before your very eyes.” — Ed Bugos

by Ed Bugos

Baltimore – (TFN): The economy doesn’t know what to do with itself. The Fed has made it all but certain that inflation will be a problem. Prices are rising and everything has become more expensive. So what ever happened to this recession we’ve been hearing about? Shouldn’t a slowing economy be depressing prices? You’d think, but the Fed has mandated some violent economic mood swings that may spell trouble down the road.

The Bureau of Labor Statistics (BLS) reported another sharp increase in producer prices during March. Finished goods were up 1.1 percent and intermediate-level goods rose 2.3 percent, pushing the year-over-year rates to 6.9 percent and 10.6 percent, respectively, in the month of March — the biggest yearly increases in this price indicator since 1981.

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U.S. consumer prices rose 4% year over year (according to the Consumer Price Index, or CPI), pushing the high end of a 15-year range. And you can bet the reality is worse than what the government data will confess.

The U.K. also reported a 6.2 percent year-over-year gain in its headline PPI (Producer Price Index). I mention it because the pound has been stronger than the greenback in recent years — but the inflation story is not just about the dollar. The buildup of inflation pressures overseas will soon be evident — when the foreign currency bubble pops.

You’re seeing a price revolution unfold before your very eyes. Read on to learn more.

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