Ummm, bacon. (A view of the economy through bacon?)

 

Ummm, bacon. I can hear Homer Simpson now. Heck, I can smell breakfast and the wonderful smell of cooking bacon filling the house.  Full disclosure, my youngest son – now not so young – is a phenomenal cook and he has a simple recipe for bacon that will have you eating bacon at least four times a day.  Ummm…

But I digress.  Here I am, before the sun comes up, writing a story about finance and lusting over bacon.  What’s up, you say.  Well, as it happens, this particular story and my lust love for bacon are hopelessly intertwined.  And yes, I said hopelessly, because when all is said and done, as we’ve learned over the past three years, hope is not a plan.

Our friends at CNS News featured this story last week and the heart and soul of it is this…

(CNSNews.com) – So far, during the presidency of Barack Obama, the price of a gallon of gasoline has jumped 83 percent, according to data from the Bureau of Labor Statistics.

During the same period, the price of ground beef has gone up 24 percent and price of bacon has gone up 22 percent.

We’re paying 22% more for bacon today than just three years ago.  And bacon is not unique as you well know if you shop for groceries.  The price of survival – we do have to eat to survive – is up dramatically, yet the cost of living as published by our government is up only a fraction of that and the policy makers in DC aren’t concerned at all about inflation.  The reason they’re not concerned is, primarily, because they’re paid to NOT be concerned about little things that have the potential to significantly reduce the standard of living for all Americans and especially middle class Americans.  The standard operating procedure is to produce baseline reporting – in all departments, not just the Federal Reserve – that paint the picture The Masters want us to see.  Here are two examples:

  • Inflation.  The government measure of “inflation” is what’s known as core inflation.  It measures a variety of commodity prices over time but does not include either food prices or energy prices.  They’re “too volatile” and are subject to a whole variety of uncontrollables like weather and acts of God.
  • Unemployment.  Everyone was celebrating because unemployment dropped below 9% this month.  And yet, if you read anything other than the New York Times or Washington Post, you’ll know that the private sector isn’t producing new jobs at even a “sustainment” rate – enough new jobs to account for population increases.  How can that be?  Well,  again its’ the way they measure unemployment.  Put simply, the U3 unemployment index – the one that is reported – divides the number of unemployed by the number of people looking for work.  The primary reason unemployment is down is because under Obama’s policies, we have the smallest percentage of the total workforce actually looking for a job since we began measuring unemployment.  If we had the same number of people looking for work as we had the day he took office, the unemployment rate would be 11.5%.

So, they’re playing with the numbers.  But why are food prices skyrocketing?  There are a number of reasons, and some of them are, in fact, uncontrollable.  The weather has played a part with droughts in Russia affecting the wheat crop as an example.  But there are controllable features as well, primarily government policy.  Let’s look at two.

  • Ethanol.  From a report in 2008 from the Earth Policy Institute, they note that from 1990 to 2005 world grain consumption rose by 21MM tons per year due primarily to population increase.  Starting in 2006, because of US ethanol production, consumption rose to 54MM tons.  In 2007 to 81MM tons and they projected 114MM tons in 2008.  This has driven the price of grains up as much as 60%.
  • The Endangered Species Act.  the “delta smelt” is a two inch long fish common to the California delta and several years ago it made the Endangered Species list.  As a result, the federal government required the water that had made central California the breadbasket of the world turned off because the smelt “might” die out.  The result?  Once thriving farming communities are now desolate.  Central California has the highest unemployment in the state and foreclosures are the rule of the day.  And the food they used to grow?  Gone.

The policies of the federal government have a huge impact on food prices through over-regulation and the two examples above could be a hundred except for space.

And then there’s gas prices.  As noted above, gas prices have gone up 83% since Obama was inaugurated.  And in his defense, he did promise that he would raise prices and he’s kept that one.

Again, let’s look at government policies.  When the deep water well blew out in the Gulf, this Administration took the opportunity – never let a crisis go to waste – to virtually shut down drilling and exploration in the Gulf.  Obviously Alaskan drilling is off limits and most recently the Keystone pipeline was denied a permit.  Each of these are subjects for lengthy dissertations, but I’m going to assume that our gentle readers are up to date on recent events.  In addition to the denial of permits to drill, explore and transport oil, the Administration – through the EPA (again) – has shut down one of the major refineries that produces gasoline for the US.  That just happened this month, so the 83% increase may be looking like small potatoes by November.

So the bottom line, gentle reader, is that you’re paying more at the pump and at the grocery store in large measure because of the policies of over-regulation by the United States government.  I don’t know about you, but for me November will be payback time.

-Michael Becker