Wow! Food is Expensive!

I just made my first trip to the supermarket after coming back to the states today.  It was amazing to see how much more expensive food is than when I left.  I had read that food prices had gone up, but I hadn’t realized how bad it was.  I bought three bags of groceries and it cost $68.  The same three bags would have cost about $55 when I left.  The most jarring examples were meat, boxed cereal and dairy products.

Chicken breasts are now up to $7 per pound, up from $4.50.  Beef stew meat is $3.99, up from $2.50.  A box of frosted mini wheats $4.75, up from $4.  Premium deli roast beef $10.50, on sale, up from $8.50 when I left.  It’s crazy.  My favorite sandwich shop raised prices from $5 to $5.50 and my favorite bagel store raised prices by $1.

So why are prices so much higher?  It’s a confluence of government policy, a falling dollar, rising commodity prices, mandates for corn based ethanol and crop failures around the world.  In the last six months, corn has nearly tripled in price.  Farmers feed corn to chickens, pigs and sometimes cows.  Add in higher fuel prices for transportation and you get much higher prices.  Pork has gone up 33%. Beef at least 12%. Chicken at least 10%. Wheat 25%.

The government claims that inflation is 1.8%, but since it does not include food and fuel, it’s a completely meaningless number.  When I left in November, the average price of a gallon of gas was $2.85.  Now it’s $3.96, a 39% increase.

Rising food and fuel prices disproportionately hurt the middle class, the poor and seniors on fixed income.  Food and fuel make up a larger portion of the monthly budget for those who are not wealthy.  Government policy is to blame.  Instead of letting banks and bondholders take losses, the Federal Reserve cut interest rates in an attempt to let the banks earn their way back to solvency.  Low rates hurt savers and retirees who put their money into CDs, money markets and savings accounts.

On the other hand, banks can borrow from the Fed for virtually nothing and led it back to the government at 3%, generating 100% risk free profits.  With “quantitative easing,” which is just another name for printing money, the value of the dollar is falling quickly.  Since commodities are priced in dollars, it takes more dollars to buy goods.

Government policy is to bail out the banks at the expense of the poor, those on a fixed income and the middle class.  It started under Bush and has accelerated under Obama.  I don’t understand why more people aren’t outraged.