US: Inflation Rears Its Ugly Head – Investors.com

Policy Errors: Led by the biggest jump in food prices since 1974, inflation at the wholesale level soared 1.6% in February — a sign, economists say, of even more to come. It’s starting to feel like a rerun of “That ’70s Show.”
As we all worry over Japan’s nuclear disaster and the political meltdown in the Middle East, America faces an equally serious but silent threat from within.


Put simply, wholesale prices, often a trigger for consumer price rises, have taken off. In February, they rose at a 8% year-over-year rate.
Some 75% of that gain was due to surging prices for food and energy. Food prices today are the highest on record, rising at double-digit rates (see chart). Meanwhile, gasoline tests the $4-a-gallon level, the dollar is weakening and gold is near its all-time high.
At this pace, prices for the basics used by businesses will double in less than a decade, pushing millions of Americans down the economic ladder as they struggle to keep up.
Why is this happening?
It starts with a government spending way beyond its means, producing a $1.6 trillion deficit this year and $1 trillion-plus deficits through 2020. Since 2008, federal spending has surged 28% to a forecast $3.8 trillion this year. Thanks to the slow economy, tax revenues have lagged.
By buying hundreds of billions in U.S. Treasury debt, the Fed has helped the Democrat-led Congress hike spending to record levels over the past three years. It did so with a “Quantitative Easing” program under which the Fed has snapped up $1.7 trillion of government-issued debts, creating money out of thin air.
No doubt about it: The Fed has sown the seeds of inflation not just here, but around the world.
Meanwhile, the White House and Democrats in Congress not only refuse to stop spending, but continue their regulatory and tax assault on the economy — creating uncertainty and confusion for businesses.
There’s too much money chasing too few goods. That’s why global prices for key consumer and industrial goods, from oil to wheat, are now at or nearing record highs.
But at some point the charade must stop. When it does, it won’t be pretty. The reason interest rates are so low today — the 10-year Treasury remains below 3.5% — is the Fed’s debt-buying binge. When it stops, as it likely will in June, interest rates will surge.
There’s no easy way out. It starts with spending cuts and ends with the Fed turning off its money presses. If it doesn’t, and inflation takes hold, welcome back the ’70s.