Checklist for Claims that “There’s No Inflation”

From Zero Hedge/Shane Obata (bold original)

Presenting the “There’s No Inflation” Checklist

1) Don’t go to school – if you want to learn then turn on CNN. 

2) Don’t pay for medical care – if you get hurt then put on a band-aid and drink more water.

3) Don’t pay for transportation – if you have to get somewhere then teleport.

4) Don’t eat – if you HAVE to then cut your food into small pieces so it lasts longer (cough cough cough #McResources cough).

5) Don’t buy a house – if you have to live somewhere then pitch a tent in your local park.

6) Look at stupid charts such as:

* because CBOs projections are always right (warning: do NOT check the CBO's track record)

7) Ignore charts such as:

8) Stop paying for things, idiot.

I may add

9) Don’t ask why product sizes have been getting smaller. Also never wonder why some of the quality of products have diminished. (This is called shrinkflation or value deflation) see examples at CNBC or at Dr. Malmgren’s Pinterest

UN’s FAO on World Hunger: Let them eat insects

Many nasty side effects of inflationism has not only been to reduce the quality of products and services (value deflation) as well as to promote fraud, for instance in food (rat meat, horse scandal) but has also prompted policymakers to desperately scamper for solutions based on absurd premises. 

From the BBC.com (hat tip Zero Hedge)

Eating more insects could help fight world hunger, according to a new UN report.

The report by the UN Food and Agriculture Organization says that eating insects could help boost nutrition and reduce pollution.

It notes than over 2 billion people worldwide already supplement their diet with insects.

However it admits that "consumer disgust" remains a large barrier in many Western countries.

Wasps, beetles and other insects are currently "underutilised" as food for people and livestock, the report says. Insect farming is "one of the many ways to address food and feed security".

Remember these multilateral institutions are taxpayer funded. This means that such bureaucracies have been benefiting from wealth transfers (taxpayers to bureaucrats) which should have been redirected instead to “hunger”.

Yet in order to sustain their privileges, they recommend bizarre elixirs instead of promoting real market based reforms. Such is an example of ‘social justice’ based on central planning.

The UN and her subsidiary the FAO should set an example.  UN-FAO leaders should require all their employees to have insects as part of their daily fare.

The last time a political leader allegedly declared sarcastically “let them cake”…such led to a bloody revolution.

Side Effects of Inflationism: Rat Meat, Horsemeat and Fake Tuna Scandals

Due to price instability brought about by inflationist policies, one of the major nasty side effects has been to encourage a decline in quality of products (value deflation) or even promote fraud in the marketplace in order for many to survive.

As the great Murray N. Rothbard explained (bold mine)

By creating illusory profits and distorting economic calculation, inflation will suspend the free market's penalizing of inefficient, and rewarding of efficient, firms. Almost all firms will seemingly prosper. The general atmosphere of a "sellers' market" will lead to a decline in the quality of goods and of service to consumers, since consumers often resist price increases less when they occur in the form of downgrading of quality.  The quality of work will decline in an inflation for a more subtle reason: people become enamored of "get-rich-quick" schemes, seemingly within their grasp in an era of ever-rising prices, and often scorn sober effort. Inflation also penalizes thrift and encourages debt, for any sum of money loaned will be repaid in dollars of lower purchasing power than when originally received. The incentive, then, is to borrow and repay later rather than save and lend. Inflation, therefore, lowers the general standard of living in the very course of creating a tinsel atmosphere of "prosperity."

Take for instance the recent horsemeat scandal that hit Europe. UK’s The Guardian offers the origin: (bold mine)

Supermarket buyers and big brands have been driving down prices, seeking special offers on meat products as consumers cut back on their spending in the face of recession. The squeeze on prices has come at a time when manufacturers' costs have been soaring. Beef prices have been at record highs as has the price of grain needed to feed cattle. The cost of energy, heavily used in industrial processing and to fuel centralised distribution chains, has also soared. There has been a mistmatch between the cost of real beef and what companies are prepared to pay.

Such price mismatching gives credence to the economic logic that inflationism encourages value deflation or fraud. The next question is what causes such mismatches?

There has also been reportedly growing incidences of mislabeling of tuna and other growing seafood fraud in the US from 2010-2012.

In China, food scams has become a recent fixture. Some of what has been sold as lamb meat have been substituted with rat meat.

From Washington Post:

BEIJING — Chinese police have broken up a criminal ring accused of taking meat from rats and foxes and selling it as lamb in the country’s latest food safety scandal.

The Ministry of Public Security released results of a three-month crackdown on food safety violators, saying in a statement that authorities investigated more than 380 cases and arrested 904 suspects.

Among those arrested were 63 people who allegedly ran an operation in Shanghai and the coastal city of Wuxi that bought fox, mink, rat and other meat that had not been tested for quality and safety, processed it with additives like gelatin and passed it off as lamb.

The meat was sold to farmers’ markets in Jiangsu province and Shanghai, it said.

Despite years of food scandals — from milk contaminated with an industrial chemical to the use of industrial dyes in eggs — China has been unable to clean up its food supply chain.

There seems to be a coincidence: China’s food scandals emerged at the same period where accounts of seafood fraud in the US surfaced. 

From the same article

The supreme court said 2,088 people have been prosecuted in 2010-2012 in 1,533 food safety cases. It said the number of such cases has grown exponentially in the past several years. For example, Chinese courts prosecuted 861 cases of poisonous food in 2012, compared to 80 cases in 2010.

And all these likewise coincides with accounts of Ponzi and pyramiding scams in the Philippines and the world.

Media predominantly points the finger on individual aberrations or the lack of regulations as source of such misdemeanor, misdeeds or iniquities. Yet such would only signify as dealing with the superficial or the symptoms rather than the cause.

Media either have deliberately overlooked or have been ignorant of the incentives brought about by social policies that has led to such repulsive erosion of the public's moral fiber. Like price controls, culpability has been shifted to the private sector to justify more politicization when such logic gets it backwards. 

In reality, these offenses represent the unintended effects from the distortions of price signals brought about by monetary inflationism, which central banks have employed and which has been growing at accelerating scale, since 2008. (chart from Tradingeconomics.com)

In Greece, Sales of Select Expired Goods Now Legal

In Greece, food shortages signified by food price escalation has prompted authorities to allow the sale of select “expired” foods.

From Voz Populi (translated via Google, hat tip zero hedge)

Greece will allow the sale of expired food at a price lower than the original, in a move that the government has not been able to justify but consumer groups have interpreted as evidence of their inability to stop the escalating cost of commodities. A ministerial decree just reviving an old regulation that authorizes supermarkets and grocery stores to sell food once the expiration date, Efe reported. "This regulation has existed for many years. And it is something that is allowed in the rest Europe. All I did was point out that these products must be sold at low prices. do not understand what is causing so much noise, "said Yorgos Moraitakis Efe, advisor to the Ministry of Development, Competition and Merchant Marine. The regulations exclude meat and dairy from the list of perishables that can be sold and sets a ceiling dates you can continue marketing.Thus, foods in which the expiration date is indicated by the day and the month, may continue on the shelf for another week. In the event that the "best before" only month and year point, the sale may be extended for one month, and in the event that the date indicated year alone, the sale date may be extended by one quarter.Though Moraitakis Efe declined to specify the reasons for this decision and merely noted that the legislation already existed, consumer groups and even government agencies have criticized the measure. "Virtually admit their inability to control prices," Efe reported Tsiafutis Victor Consumers Association 'Quality of Life', one of the oldest in Greece. 

Food Inflation 

In the Greece of the crisis, the wage and pension cuts and rising unemployment, food prices and commodities has not stopped rising.Between August 2011 and August 2012, the price of sugar shot up 15%, the eggs, 6.8% for butter by 3.2% and that of coffee, 5.9%, according to data from the Statistics Authority. "It is an immoral act," criticized Tsiafutis. "Instead of taking initiatives to control prices, allow the sale of food past the expiration date." Moreover, from the National Food Agency gets even concerned that the measure serves to something. "It is doubtful that these foods are to be sold at low prices, because the price control mechanisms have failed," said Yannis Mijas, president of this organization linked to the government. Indeed, the measure of how much states must be the initial price reduction, which is at the discretion of the merchant.To Mijas, selling expired food is also a moral dilemma, to divide consumers into two groups: those who can afford basic food and those who, because of poverty, "are forced to resort to dubious quality food."

Two observations from the above,

One, current events in Greece shows not of deflation but of stagflation.

Two, the result of inflationism has been bring about lower quality and or a deflation in value of goods and services that puts the consumers to higher risks. The above is an example of one of the immoral outcomes of inflationism

How Inflationism Brings About Quality or Value Deflation

Retired professor Michael S. Rozeff at the Lew Rockwell blog explains how monetary inflationism results to the deterioration or deflation in the quality of food products.

Here is Professor Rozeff:

Ever since inflation took off in the 1960s, the food has gone downhill. That's not the only cause of it, but it's one cause. The food companies have tried to hold prices down by cheapening the food and cutting down the quantities. They've eliminated many good ingredients and substituted drek. There are foods today that I wouldn't feed to a dog.

Many bacon makers have watered the bacon. Water is a cheap ingredient! When you fry it, the water comes out and so does some white guck. I made bacon from the age of 10, and I can tell you for sure that this stuff isn't cutting it. The meat itself? Forget it! They've bred the fat out of pork, beef, and now lamb and with it went the flavor, the juiciness, and the tenderness. If you watch the food shows on TV, the cooks are constantly adding everything under the sun to the meats in an effort to create something that tastes halfway decent.

A can that says chunk tuna fish actually contains flakes that used to be what cat food was. Many common soups are salt baskets.

If a package says ORIGINAL INGREDIENTS, you simply cannot believe it! It will usually have partially hydrogenated oil and corn syrup and high fructose corn syrup, stuff that didn't exist when many of these brands first began or else wasn't used. They used to use sugar. A Sara Lee cake when first introduced was almost as good as homemade because it had the butter and makings that people used in their kitchens. It still has some butter down there after soybean oil, although maybe not since it says the butter is (cream, salt) . It has "Sugar, enriched bleached flour (wheat flour, niacin, iron, thiamin mononitrate, riboflavin, folic acid), water, eggs, soybean oil, butter (cream, salt), skim milk, corn syrup." That's before the 2% or less of the chemicals: "glycerin, leavening (sodium aluminum phosphate, baking soda, monocalcium phosphate), corn starch, natural and artificial flavors, salt, mono- and diglycerides, potassium sorbate (preservative), gums (xanthan, gellan), colored with (turmeric and annatto extract), wheat starch, soy lecithin, soy flour." Sara Lee is one of the better cases. Your typical product is usually even worse.

I find this anecdote highly relevant here in the Philippines. 

When I recently interviewed my neighborhood carinderias or eateries (small scale informal food retail businesses) on how they usually respond to rising commodity prices, their reply has mostly been to reduce the content or quantity or quality of their servings, first, because of the fear that raising prices would diminish the capacity of their consumers to spend or would lead to "poor sales".

Simon Black of the Sovereign Man labels such value deflation as shadow inflation,

Value deflation is not taught at university economics courses; you’ll never hear any of these Nobel economists or central bankers mention it. Stiglitz, Krugman, and Bernanke all happily tow the line that ‘there is no inflation’ because the price of iPads keeps going down.

These are the people who have the power to influence policy and conjure trillions of dollars out of thin air… and it’s amazing how easily they can hide the truth from people through this shadow inflation.

Curiously, this is what passes as a free society today. It is a truly, truly bizarre system.’

It’s unfortunate to see how these small scale entrepreneurs, fighting for survival, gets the kernel of the blame from supposed unethical practices, which has been used to justify more regulatory interventions (promoted by mainstream media), when they have merely been responding to the incentives brought about by immoral policies.

This shows how policies of inflationism-interventionism destroys the moral fabric of a society.