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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (75146)	2/23/2008 8:18:30 PM
From: RealMuLan	Read Replies (2) \| Respond to of 116555

Why Your Wallet Feels Thinner Melanie Lindner, 02.15.08, 7:30 PM ET forbes.com Don't tell that to omelet lovers, who have watched the price of eggs rise at a whopping 15% annualized rate in the last three years. There are two drivers behind that hike. First, in 2002 the egg industry set new animal welfare guidelines, forcing farmers to give their hens more room to cluck, in turn cutting the number of birds able to be housed. Fewer birds led to fewer eggs, and as the supply went down, prices went up. Then came the ethanol craze, spurred on by runaway oil prices. Ethanol is made from corn--otherwise known as chicken feed. Result: "[Egg producers] have had to reduce their number of birds because they can't afford to feed them," says Gene Gregory of United Egg, an alliance of five separate organizations providing services to the egg industry. Other food products have shot up in price too. Price indexes for coffee, milk and white bread have all advanced 6% year-over-year since 2004. "It's all well and good for [Bernanke] to say there's no inflation, but that's just not the case for the supermarket shopper or the average person filling their gas tank," says Arthur Hogan, an analyst with Jefferies and Co., an investment bank. Hogan believes the Fed is more concerned with the dangers of an economic slowdown than inflation. But lofty prices don't just loom in the grocery aisle and at the gas pump. Look closely and there are pockets of inflation across many sectors of the economy. Take higher education: College tuitions are climbing at a 6% clip. Rising high school graduation rates translate into a crush on college admissions offices, notes Brian Bethune, an economist at Global Insight, a consultancy in Waltham, Mass. And while universities are letting in more students, overall demand is still outstripping capacity. Same goes for airline fares, up 5% year-over-year. A big reason: Airlines are able to pass at least some of their soaring jet fuel costs along to their customers, observes Gus Faucher, director of macroeconomics at Moody's Economy.com. Meanwhile, demand for international travel continues to rise. Then there's the real killer: health insurance. Since 2001, insurance premiums have jumped 78% for family coverage, far outpacing inflation, according to research by the Kaiser Family Foundation, a Washington, D.C.-based health care policy research foundation. Chalk up the increase, in part, to fancy new drugs that keep sick patients alive longer, forcing the insurance companies to boost prices to cover the cost of providing all that additional care. Where to go from here? Allan Meltzer, a Fed historian and professor at the Tepper School of Business at Carnegie Mellon University, warns that Bernanke and company should focus on maintaining steady economic growth while also keeping inflation in check. Says Meltzer, "Focusing on one or the other will eventually lead the economy into deeper recession.