Inflation is everywhere. Countries such as China, Mexico, Venezuela, and Thailand are employing various methods of price controls in an effort to stem out of control food and fuel prices amid growing public discontent. From the protests of Burmese monks to three Chinese shoppers being trampled to death in a supermarket over cooking oil, inflation is spiraling out of control.
The monetary policy of the Federal Reserve favors keeping growth going, including inflation. President Bush’s solution to our “addiction to oil” is to use food (corn) for fuel. Not only has ethanol contributed to rising food prices, but producing it consumes more energy.
Today President Bush will propose the first federal budget topping $3 trillion for the fiscal year beginning October 1, 2008. It will contain the largest military budget since World War II. That’s $515 billion for the Defense Department and an additional $70 billion for Iraq and Afghanistan that only covers the first quarter of FY2009. The Pentagon is blaming part of the higher costs of the wars in Iraq and Afghanistan on higher food and fuel costs.
Here we have a government entity acknowledging inflation while the Federal Reserve continues to lower interest rates, adding further fuel to the inflation fire.