Objective Press? Says Who?

Ouch! When it comes to inflation, I figure all those experts who say it's low (supposedly hovering around 2%) and view it as a nonevent must be living in Lalaland…Speaking for myself, I'm inundated by inflation. Granted, the Producer Price Index in March came in at 0.5%, the slowest pace in four months. But then again, the Consumer Price Index in March topped consensus estimates with a 0.4% reading. In any event, over the past six months higher prices have been beating me up all over the place…large container of popcorn at the local theater has climbed to $3.75 from $3 , Inflation is Contained? Says Who? Dan Dorfman NY Sun, 4/21/2006 (requires subscription for full text – you can get a free trial subscription)

Trust, the old saw goes, is a key component of the economy; if there’s no trust, the best financials aren’t worth a thing. What impact would it have on the US economy if we were to find that government statistics are confabulated, especially those regarding inflation upon which so much policy and policy action depends? That's the gist of Dorfman's story in today's NY Sun. Is he right?

For instance, regarding inflation, according to , Commodities, The Financials, (select the 3-year chart) commodities prices have risen 90+% in the last three years. Dorfman cites many anecdotal price increases, from gasoline to wine to pizza. What about rentals? According to The San Francisco Chronicle, as of July of last year, rent levels had declined by 15% from 2000. According to The NY Times, citing Richard J. Rosen of the Chicago Federal Reserve, nationwide rental prices are averaging about 2.3% increase a year, a completely separate trend from the runup in the cost of buying houses. According to the California Department of Agriculture, (select the graphs) the cost of the average “basket” of food has been more or less flat as of its latest reports, with a slight decline in beef prices. Automobile prices are notoriously difficult to judge regarding their contribution to inflation because we like so much stuff on them -- Grandma never had an entertainment center for the kids in the back seat (or the government requires more than last year). And prices haven’t moved much despite that. With American manufacturers, they’ve gone down. Dorfman’s anecdotal prices may reflect the neighborhood he’s living in. If it’s fashionable, as condo prices go up, the local cleaners, food stores, restaurants and bars may decide to raise prices to meet the expectations of richer clientele. In fact, Dorfman may just be another goldbug, seeing doom in every value in the economy except for the ownership of the yellow metal. He may also have risked a lot of capital in commodities – to his credit, it would seem,at least from the record of the last couple of years. He may also be a Democrat. And the commodities market may be about to turn in another direction. Nobody knows. Is it wise to buy at the top of a market? Consult your freshmen economics textbook, if it's not a Marxist screed.

Point? The value of news has as much to do with the beliefs of the reporter as with the quality of the facts gathered. The notion of an objective reporter is a fantasy and always has been. There's nothing wrong with this. What matters is knowing which side your favorite reporter is on. Dorfman has his side. When you read his column, do you know what it is? And which side are you on?

And that’s Luther’s side of this story.

Luther