Monthly Archives: December 2013

The Inflation Paradox at the End of 2013

The latest inflation numbers are out from the Bureau of Labor Statistics and they show that consumer prices barely increased over the past twelve months.  The most commonly-cited measure of consumer prices is the CPI-U, the Consumer Price Index for Urban consumers.  The CPI-U is up 1.2% over the twelve months through November, and this is almost identical to the 1% 12-month rise in the data through October.  The other major inflation measure, the Personal Consumption Expenditure index (PCE), is even lower because housing is a smaller component of PCE than CPIContinue reading

Living Wages and the Service Economy

One of the stories that seems to be dominating the news in recent months is the plight of low-paid workers in the service industry.  Most recently, a story about Wal-Mart workers organizing a food drive for other employees so that they could have a Thanksgiving dinner has gotten a great deal of attention.  This comes on the heels of a McDonald’s helpline advising employees on how to apply for food stamps and locate food pantries and other assistance for the poor.  McDonald’s is not alone in this regard.  It is estimated that public assistance for fast food workers costs U.S. taxpayers $7 Billion a year.  This means that the U.S. government is essentially supporting this industry.  Noted financial commentator Barry Ritholtz asks the obvious question: “Why are profitable, dividend-paying firms receiving taxpayer subsidies?” Continue reading

Low Interest Rates Through 2014 and Beyond

Ben Bernanke, in a speech on November 19th, made it very clear that the Fed is likely to hold interest rates low for an extended period of time.  This comes on the heels of similar comments by his likely successor at the Fed, Janet Yellen, during her confirmation hearings.  On top of this, inflation numbers released on the morning of the 20th show almost no increases in consumer prices over the past year and existing home sales have just registered a drop.  In related events, Larry Summers just gave a widely-noted presentation to the IMF in which he warned that the U.S. may be settling into a long-term economic malaise.  Larry Summers, who was previously a contender to be the next Fed chairman, surely considered his comments to the IMF very carefully. Continue reading