Food inflation is very real.  Which makes me think that people don't understand the danger when they ask for a weaker dollar policy to stoke our manufactured exports.  While that may well work, they have to realize that most people are in an unwitting global competition to be able tp purchase essential commodities, particularly food and energy.  So it sounds great for China to revalue the Yuan upwards by 40%.  Until you see Chinese consumers using their newly more powerful currency to drive up the prices of things that you need.

A while back when the Kochs* were drawing so much wrathful attention just about every msm article described Koch Industries as the second largest privately held company in the US.   It caused me to wonder who was first.  That would be Cargill, Incorporated.  Guess what their specialties are:

Cargill, Incorporated is a privately held, multinational corporation, based in Minnetonka, Minnesota, specifically the Wayzata Post Office area. Founded in 1865, it is now the largest privately held corporation in the U.S. in terms of revenue.  If it were a public company, it would rank in the top 10 companies in the Fortune 500. Cargill's business operations include purchasing, processing, and distributing grain and other agricultural commodities, and the manufacture and sale of livestock feed and ingredients for processed foods and pharmaceuticals. It also operates a large financial services arm, which manages financial risks in the commodity markets for the company. In 2003, it split off a portion of its financial operations into a hedge fund called Black River Asset Management, with about $10 billion of assets and liabilities.  It owns 2/3 of the shares of The Mosaic Company, one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients.

Yes, their specialties are food, especially grains, and futures on food.  Somehow they seem as worthy of a bright, shining light as the Kochs.  David?

My guess is that there is a lot of money out there looking for a place to speculate and it is probably driving food prices up as much as or more than anything else.  Look what its done with gold and other commodities.  Add in increased transportation costs and a bout of crop failures and, well, you just told that story very well and a lot better than I could.

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*What is the plural of Koch?  My recollection of grammar caused me to want to spell it Koches but that seemed like it might be too confusing so I just went with s.

What you will throw in front of "-flation" next?  So far, we've had "hyperstagflation", "camoflation", and, IIRC, "hyperstagrentdebtflation" (or something to that effect).  If the gum you buy this week is more expensive than last week, do you dub it "gumflation"?  What if the price goes down?

Kidding aside, I don't recall whether anyone criticized your previous posts as right-wing.  My criticisms are fundamentally based on two things: mistaking changes in price for inflation and inconsistency in interrogating methodology (and motives).

First, changes in price are not inflation.  Inflation is supposed to be a measure of changes in the overall price level, which we hope tells us something about whether our monetary policy is on target.  In other words: Are we expanding the money supply too fast or too slow relative to the growth of the economy.

Prices for specific goods or services might go up or down, but this doesn't necessarily say anything about the overall purchasing power of a single unit of currency, which is why we really care about inflation.  Price changes in the market for a given good or service are most often determined by our old friends, Supply and Demand.  When trying to make a broad measure of how the purchasing power of our currency is changing over time, incorporating volatile short-term changes creates a lot of noise without really telling us what we want to know.  This is something Simons doesn't (or doesn't want to) grok:

Now let’s rearrange the data to get at the real, um, core of the issue, and that is the inane classification of price indices into core and non-core components. While it may be true food and energy prices are volatile, that would be like excluding small tech stocks from market indices because, hey, they are too volatile.

What's inane is comparing the stock market to the market for, well, everything.  Another way to think about Simons' comment here is to consider why we don't use the stock market, in whole or in part, to estimate changes in the overall price level.  The anwer is the same as for short-term volatile commodity prices.  More Simons:

Let’s look at it another way: If the price of cattle going to the slaughterhouse rises (commodities are not pretty) the price of leather shoes gets measured in the core CPI while the price of beef products are considered non-core and the stocks of any publicly traded companies along the way that might be linked to the price of cattle are not included in any measure of inflation at all as they are assets and not prices. See the difference?

I do, but Simons apparently doesn't.  Can you think of any differences between the way leather gets to market and the way that beef does?  How long can some shoes or a belt sit on a rack or in a warehouse?  How long for a side of beef?  Do you think this might affect whether one of these markets has more short-term price volatility than the other?  I do.

All of this is to say that inflation is not just a measure of price changes.  We can track price changes all day long.  A proper measure of inflation is supposed to tell us something about the money supply relative to production, not just whether the price of beef is different than last year (which could be for any number of reasons that affect supply and/or demand - mad cow anyone?).

Having that said, the BLS still attempts to measure all of this stuff, which brings me my second critique.  You wrote a post about John Williams and Shadowstats, highlighting his claim (it's unclear to what degree you actually think he's right) that the BLS is intentionally hiding inflation by way of methodology and that the motivation for doing this are purely political.

First, as has been pointed out to critics over and over again since the change involving geometric weighting, the BLS still measures using the old methods.  Their initial estimate was that it would change the CPI by about 0.2%.  Actual measures of the difference by the BLAS have come in at around 0.28%.  So, they were pretty close in their original estimate.

Second, what of Williams' methodology?  The interesting thing here is that while the BLS has made their methodology entirely transparent, allowing any economist anywhere in the world the opportunity to examine, Williams has not.  I did some digging and was able to find this buried in one his August 2006 newsletter:

SGS Alternate Consumer Inflation Measure. As discussed in the October 2005 SGS, the BLS publishes a "current methods" CPI that restates historical CPI reporting for methodological changes made to the series since the early 1980s. By reverse engineering the series, it is possible to calculate what the BLS estimates the different changes to CPI reporting have added or subtracted to reported annual inflation. With nearly all of the changes resulting in reduced CPI inflation, one would have to add 3.6% to current annual CPI reporting to approximate what inflation would have been, based on the older methodology. This BLS series, however, allocates only 0.2% to the annual effect of the changeover to geometric weighting in the 1990s.

SGS estimates show that net effect of the geometric weighting change is roughly 3.1% CPI reduction in terms of present impact. According 2.9% (3.1% - 0.2%) is added on top of the other adjustments. The SGS Alternate Consumer Inflation measure has been calculated over time, adjusting for the effects of all the methodological changes on annual not-seasonally-adjusted CPI-U inflation, as well as using a three-month moving average centered on the month in question. The latest month is published as is and then is revised with the publication of the next month's reporting.

Given the timing issues of when the BLS recognizes such factors as rising energy prices, the process eliminates some the unnecessary short-term volatility in the reporting. The results are shown in a graph in the Opening Comments.

Since the adjustment process is largely additive to existing reporting, the alternate series tends to show the same general up and down patterns of the underlying official CPI-U. The July 2006 annual rate of the SGS Alternate Consumer Inflation is 11.0%, which is reasonably close to rough estimates of the fully independent SGS inflation series that still is under development.

[Emphasis mine.]

Got that?  Williams, after "reverse engineering" BLS methodology (not clear what this means or why it would be necessary), has decided that it should be ~3% higher, so he just adds that shit on top of the BLS data, which, as he explains, is why it tracks so nicely.  We have no idea how he arrived at this figure, but just trust him.. it's ~3% all the time.  Does this sound right to you?

Finally, there is the question of motives.  While you freely speculated about the political motives behind current BLS methodologies, you did not bother to interrogate the motives of Mr. Williams, who sells a newsletter of "alternative" data sets (not sure how "alternative" they are when he's actually using the government's data after all, but whatever) at $175 per anum and claims his subsribers number "in the thousands."  Assuming he has at least 6,000 subscribers, he's grossing over $1M per anum.

Making a six or seven figure income by adding a cool 3% to government data sounds pretty good to me.  It's also probably a damned sight more than the BLS employees who actually did the hard work got paid.

So, that, in a very large nutshell, is my critique of this series of posts.  Well, that and your penchant for neologisms that end in "-flation."  :)

Famine in the land of plenty? Whats next..... pestilence?

Meat. Meat. Meat Meat Meat. (And some commodity speculation.) And in an environment being whacked by climate change.

But the key is meat. (And I say this as an unrepentant omnivore.)

In the US/Canada, raw food prices are 10%-20% of the finished food product. Not the rise in most raw food prices is heavily insulated. Plus, as a % of consumer spending, food is a fraction of housing - about 1/3 or 1/4. Plus, there is a lot of room to substitute across foods when a particular price rises, or to move down from highly-processed foods. Plus, there's an incredible amount of food being eaten outside the home, which costs.

The real impact is that China and other rapidly-developing nations are adding rapidly meat to their diets. And that takes 2-10 pounds of grains or veggies per pound of meat produced, plus has varying impacts on energy use, GHG emissions, fertilizer and water inputs, etc.

 A couple of years ago, some people enjoyed going on and on (and on) about ethanol as the driver of world food price inflation, blaming it. But it was pure kneejerkery. Because rising MEAT demand was dwarfing it.

http://2.bp.blogspot.com/_4ify7vDXrDs/SB8rqnF-m5I/AAAAAAAACj4/_7hfPBxzqQ...

Or as the NYT put it in their piece on meat....

"The world's total meat supply was 71 million tons in 1961. In 2007, it was estimated to be 284 million tons. Per capita consumption has more than doubled over that period. (In the developing world, it rose twice as fast, doubling in the past 20 years.)"

http://www.nytimes.com/2008/01/27/weekinreview/27bittman.html?pagewanted...

China's pork consumption went from 22 to 50 million tons from 1990 to 2009.

Now, I've got no problems with the Chinese eating more meat. But I suspect we're going to have to get used to eating quite a bit less. Which I also have no problems with. 

And yes, China and other nations consumers with rising currencies are going to bid up the prices of food. But - for us as a people - I find it hard to shed a tear for we North Americans on this front. I mean, we ate food produced by the peoples of the world for nothing, a song, for decades. Fresh fruit and vegetables and spices and whatever we wanted, when we wanted, for nothing. OPity those who lived on our banana and coffee plantations, right?

But now the world can buy too, and we're crying. (Or - in the case of the rich - whining.)

Because, as a people, we North Americans are assholes. 

For our poorer households however, I do shed a tear. And we're going to need to get real busy, real quick, to fix this problem - with better wages for the poor, a better safety net, better training and education in cooking (because the poor are perhaps the most deskilled in this regard), better access to good food, etc.

Meat.