The Sky is falling! The Sky is falling!

We've all heard that expression from "Chicken Little". The right-wing bloggers I come into contact have all said or implied that I'm like Chicken Little, always assuming the sky is falling, especially when it comes to economic matters, whereby they tend to tell me the economy has never been better, jobs are plentiful, and inflation is going down. [Side note: And I'm the one with "BDS" - Bush Derangement Syndrome? Not hardly!]

So let's take a look at where the economy is today, for those of us who live in the reality-based world. Anyone who does the grocery shopping in their home can tell you that prices are rising, but here's some proof:

"After nearly two decades of low food inflation, prices for staples such as bread, milk, eggs, and flour are rising sharply, surging in the past year at double-digit rates, according to the Labor Department. Milk prices, for example, increased 26 percent over the year. Egg prices jumped 40 percent.

Many analysts expect consumers to keep paying more for food. Wholesale food prices, an indicator of where supermarket prices are headed, rose last month at the fastest rate since 2003, with egg prices jumping 60 percent from a year ago, pasta products 30 percent, and fruits and vegetables 20 percent, according to the Labor Department.

Several factors contribute to higher food prices, analysts say, but none more than record prices for oil, which last week closed above $105 a barrel. [Ed. note: Oil is selling now at $112/barrel.] Oil is not only driving up production and transportation costs, but also adding to demand for corn and soybeans, used to make alternative fuels such as ethanol and biodiesel.

The weak US dollar, at or near historic lows against the euro and other currencies, adds more pressure. Oil and other commodities trade in dollars, so when the dollar is worth less, producers demand higher prices to make up for the loss in value. This pressure raises inflation fears, which in turn make commodities attractive to investors, who view them as holding value during inflationary periods. As investors buy, demand grows and commodity prices go even higher.

This combination of a weak dollar, soaring energy prices, and global demand recalls the 1970s, when retail food prices rose an average of nearly 9 percent a year, said Bill Lapp, president of Advanced Economic Solutions, an Omaha research firm. Over the past year, Lapp said, food prices rose nearly 5 percent, more than double the average rate of the previous 10 years. Prices will rise even faster the next five years, he forecasts, increasing at an annual rate of 7.5 percent."

There are many factors at play in the rising cost of food, many of which are absolute staples in our house (milk, eggs, bread, fruits and veggies): the weakness of the dollar, the already high and rising price of oil, increased demand vs. decreasing supply, stagnant wages, and poor job growth, and the housing crisis (apparently hitting people other than middle-class homeowners) to name just a few.

So, is the sky falling? Let your checkbook answer that for you...but in the interest of fair and balanced reporting from "Thanks for Stopping By", let me leave you with the view from the other side of the aisle:



Update: After I posted this entry, I heard about this on NPR. This isn't good news, either.