Why the Cost of Your Breakfast Is Going Up

Official Inflation Numbers LieCoffee prices are soaring.

As you will see from the chart below, since November of last year, coffee prices have gone up 110%.

And your cereal is going to cost you more, too. Since February, wheat prices have increased more than 22%.

If you like eggs for breakfast, I’ve got more bad news for you; they are rising in price as well. In its April Livestock, Dairy and Poultry Outlook report, the U.S. Department of Agriculture said egg prices were higher by 13% in the New York region in the first quarter of 2014 compared to the first quarter of 2013. (Source: U.S. Department of Agriculture, April 15, 2014.)

 Coffee - Spot Price ChartChart courtesy of www.StockCharts.com

Aside from food, gasoline prices are also moving higher. As the chart below shows, since November, gasoline prices have gone up 20%. Higher gas prices means it costs more to deliver goods to the end user…a signal that goods in general could be rising in price.

Gasoline Unleaded - Spot Price ChartChart courtesy of www.StockCharts.com

But have no fear, dear reader. The government tells us there is no inflation. That’s because the government’s “official” numbers exclude food and energy prices! How ridiculous is that?

Our most recent reader survey concluded our readers believe inflation in the U.S. economy is running at five percent per annum.

And it’s not just prices rising. In many cases, while prices seem to be the same, the actual size of the container is getting smaller. This is a prime example of non-price inflation.

As inflation continues to rise, it will kill the buying power of the average American Joe because incomes in the U.S. economy are not keeping up with inflation. Rising inflation puts severe pressure on disposable income as more buys less. That means the saving rate will go down. It’s the spiral effect: the more inflation rises, the more severe the problems.

If anyone ever thought the Federal Reserve could print $4.0 trillion out of thin air and inflation would not be a problem, they obviously never studied the history of economics. Every economy in the world that has printed mass amounts of its money (and none have printed more than the U.S.) has encountered inflation as a consequence of money printing. The U.S. will be no different.

Don’t listen to what the official numbers say. Inflation is a big problem already for the U.S. economy. And in an inflationary environment, gold bullion goes up and stock prices go down, because materials cost more and consumers spend less. I’d adjust my portfolio accordingly for the rapid inflation that awaits us.