The Bureau of Labor Statistics told us the other day that gas prices are down. The Fed has been
blathering on for months about how inflation is “contained.” Unfortunately, here in
RealityLand, that doesn’t fly. In fact, there’s a great story in
the Washington Post today about how gas prices are rising so quickly that some older gas stations with analog pricing
mechanisms can’t keep up anymore. The little pricing wheels stop at “$3.99.” Here’s an excerpt …
“Like a lot of small-scale entrepreneurs, Cathy Osborne worries that she’ll go out of business if fuel prices rise
above $4 a gallon. Not because she won’t be able to buy gas at that price, but because she won’t be able to sell
it.
“The old mechanical gas pumps with scrolling dials at her country store in Fauquier County lack the gears to go beyond
$3.99 a gallon. State inspectors shut down her diesel pump several months ago when the fuel topped the $4 mark, so now
all that’s left are two pumps dispensing 87-octane gasoline, set at $3.75 — and climbing.
“I don’t know what I’m going to do. I don’t have $30,000 to invest in new pumps, and I’m barely skipping by,” said
Osborne, who owns the Orlean Market and Restaurant, a store dating from 1892 with horse-country views of the Blue Ridge
Mountains and miles of rolling Virginia Piedmont.
“Osborne said she doesn’t make money on fuel sales, but the pumps are a big draw for the hay farmers and cattlemen who
gas up their tractors and take their morning coffee in her store. The next-closest service station is a 40-minute
round-trip drive to Warrenton, and in Orlean, Osborne’s barbecue sandwiches and Amish-baked cherry pie face no
competition.”
Meanwhile, regarding my last post about inflation expectations, the Fed has said
repeatedly that it closely monitors them. Official after official has come out and said that rising inflation expectations would be a real problem. One example: Chicago Fed President Charles Evans
said earlier this week that “any increase in inflation expectations would pose an
important risk to the achievement of price stability.”
Well, 1-year forward inflation expectations are now at the highest level since February
1982. Five-year forward expectations are the worst since August 1996. The federal funds rate was 15% and 5.25%,
respectively, at those times. So I’m sure any minute now, we’ll hear an announcement about an emergency Fed conference
call and subsequent rate hike. Yeah, right. More than likely, the Fed will continue to maintain its “all hat, no
cattle” approach to fighting inflation.
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