Breakfast Inflation

We’ve been repeatedly told by experts that inflation has been non-existent and is less of a threat compared to deflation which is seen as the major scourge.

This from the Economist,

SEVERE drought and wildfires in Russia, the world’s fourth largest wheat producer, have destroyed a fifth of the country’s crop and sent prices soaring. Since the end of June wheat prices have more than doubled. On Wednesday August 4th, the UN’s Food and Agriculture Organization cut its forecast for 2010 global wheat production by 5m tonnes, to 651m tonnes. Kazakhstan and Ukraine, both big wheat producers, have also been hit with dry weather. In Canada the problem is the reverse: unusually wet weather has prevented seeding and destroyed crops. But wheat is not alone. The price of orange juice has also risen recently, probably thanks to bets placed on the likelihood of tropical storms. Coffee prices, which hit a 13-year high, are a result of poor harvests. Taken together, the raw ingredients for breakfast in much of the rich world have increased in price by 25% since the beginning of June.

Some observations:

Inflation on your breakfast table poses only as short term quirk.

Inflation is beginning to pick up and your breakfast is first among the many diffusing signs.

Let me guess, mainstream analysis which see money has having a neutral effect is wrong.