Hold on to your purses boys and girls

Alan Greenspan has said that the environment today is much tougher than the one he faced.

The Wall-Street Journal is reporting that we are seeing a large jump in consumer prices.

Greenspan believes that it is much harder for the Fed to continue to cut rates because there are other inflationary factors.

This from the Wall Street Journal:

"…the Labor Department reported that overall consumer prices last month rose by a seasonally adjusted 0.8% from October; the largest monthly gain in two years. Prices rose 4.3% from a year earlier, the highest such jump since mid-2006.

Energy prices which climbed 5.7% from October, accounted for more than two-thirds of the gain. Core consumer, which exclude food and energy, rose 0.3% marking the biggest increase since January…"

What does this mean for you and me?

Well it is possible that this is just a short-run trend and that in the long-run things will equal out. Even with the high oil prices in the 70s we have seen prices of energy and food not grow as much as any other items.

Greenspan believes that this is going to change. He believes that since we aren’t innovating as much as we used to and are not receiving as much cheap labor as we used to from China, India, and the former Soviet Union that we could see higher than normal inflation.

This article also reports that speculators are rethinking the possible recession because output in factories has grown.

Published in: on December 21, 2007 at 3:44 am  Leave a Comment  

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