Wednesday, January 14, 2015

Memo to Jersey City Mayor Fulop: The Federal Reserve, Not Supermarkets, is to Blame for 'Hidden Food Inflation'

Jersey City, New Jersey mayor Steve Fulop is a statist. For example, he recently imposed mandatory paid sick leave on Jersey City businesses. So it’s no surprise that he pins the blame for rising food prices on business.

In Food cost inflation now on special at some supermarkets, Fulop tackles the practice of food merchants’ raising prices by reducing packaging quantities while keeping posted prices steady:

Food inflation is real and expensive, especially for those who can least afford it. Just visit your local supermarket. What was a five-pound bag of sugar is now four pounds, but at the five-pound bag price. In effect, this is inflating the price by 20 percent. Soup cans have gone from 16 ounces to 14.5 ounces or an effective inflation rate of more than 9 percent; orange juice containers have decreased from 64 ounces to 59 ounces (also a cost inflation of more than 9 percent); the volume inside a cereal box has shrunk by about 20 percent; and the list goes on. Inflation like this is rarely discussed yet impacts working families every day. Unfortunately, these changes – paying the same amount for less -- are visible only to the most attentive supermarket shoppers.

He calls it “hidden inflation.” To “combat” this, Mayor Fulop’s administration “partnered” with “Share Our Strength” to feature “supermarket tours for seniors and low-income residents . . . highlighting smart purchasing that is both healthy and will stretch their dollars to the maximum. They also get a $10 credit toward their next purchase at the supermarket.” (How much of this, I wonder, is coercively funded by taxpayers. More on that below.)

In classic statist fashion, Fulop implicitly blames the merchants, and strongly hints that the law—the government’s guns—should be aggressively brought to bear on food producers and marketers:

Keep in mind, the U.S. inflation rate is running under 2 percent. Think about someone whose wages haven’t budged in several years facing hidden double-digit inflation costs for basic foods. It’s not illegal, but it’s devastating to those who can least afford it.
In Jersey City we are making a difference. Hidden food inflation is insidious. If it can’t be stopped it must at least be known. That’s what we’re trying to do and hope that until Trenton acts more responsibly, other cities will join our effort.

What’s really “hidden” is the real cause of inflation. I left these comments:

Consumer education. Great. But there’s some knowledge consumers need much more—like a little economic education.

First, as any semi-observant consumer is aware, food and other bills have been rising much faster than the official inflation rate of 0-2%. For whatever reason, the official rate is grossly understated. But keep in mind that the government has a vested interest in keeping official inflation artificially low, because so much is tied to that rate. For example, yearly Social Security inflation adjustments are tied to the official inflation statistics. A realistic official rate would cost the government a fortune in cost-of-living benefit increases.

Second and more importantly, the food price increases, whether manifested in higher sticker prices or smaller packaging, do not represent inflation. Inflation is the artificial expansion of the money supply—money creation not backed by production of goods and services. Inflation is engineered by the Federal Reserve to finance the government’s deficit spending. The result is a falling value of the dollar—essentially a tax on purchasing power. Rising prices, in this case at the supermarket, is a consequence of inflation. It is not actual inflation.

This isn’t complicated. The meaning of the monetary term “inflation” has been flipped so as to protect the guilty and switch the blame for rising prices onto the victims. Don’t blame the merchants and food manufacturers. They’re just trying to cope with inflation as best they can, like everybody else. Blame your central bank, which has been manufacturing counterfeit money faster than in the 1970s, when consumer prices were rising at double digit rates. These days, the Fed calls it “quantitative easing.” The rest of us should recognize it as a confiscation of our money purchasing power by our government, and demand that it stop.

I didn’t want my opening words, “Consumer education. Great.,” to be construed as sanctioning Fulop’s program if it is tax-funded. My reason for avoiding that aspect was to keep focussed on my main topic. To avoid any misunderstanding, I left this reply as a supplement to my comments:

Aside from the misinformation peddled by Mayor Fulop in this article, let me state that “Share Our Strength” appears to be a worthy organization with a worthy goal. And there’s nothing wrong with public officials getting involved with them—as long as they do it on their own time and no part of the initiative is coercively funded by taxpayers. I suspect that both are the case, though, at least partially. To the extent that it is, it is immoral. It’s easy to be a do-gooder when you can simply force other people to pay for your “good deeds.” If so, I wonder if the touring folks are informed on the fact that their “consumer education” as well as those $10.00 credits are funded by picking the pockets of their neighbors.

Related Reading:

Economics in One Lesson—Henry Hazlitt

Senator Menendez Dishonestly Equates Private Food Bank with SNAP

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