High energy, food prices continues to weaken the economy

Posted by Ron H.

on Thursday, June 12. 2008

The Federal Reserve is cautiously admitting that rising fuel costs are steadily pushing up the costs of food staples all across the board and is also causing affected businesses to raise their costs to consumers as well all leading to increasing inflation and a slowing of the economy. All of this is really hammering the consumer and their pocketbooks and thus is both adding to inflation and putting another drag on overall economic growth. The Fed went on to say

Chafing under price hikes, "consumer spending slowed ... as incomes were pinched by rising energy and food prices," the Fed said. Manufacturing activity, meanwhile, was "generally soft" and the housing market remained stuck in a rut.

Of course the Fed attempts to lay further inflationary woes off on the consumer saying that if they start to believe that the economy is in trouble and start to act in ways that would worsen the inflation climate. Well, if the consumer is starting to see the obvious and they then try to protect their families don't blame them. Put the blame where it really belongs. Typical blame shifting rhetoric by those in the Bush administration in order to try to get out from under their incompetence and mishandling of the economy for the past few years.

James Bullard, president of the Federal Reserve Bank of St. Louis states

Raising rates too soon, though, could deal a set back to the already fragile economy.

And by keeping interest rates too low causes the US dollar to remain weak in the world economy which in turns makes the goods Americans purchase more expensive and causes the cost of imported oil to be much more expensive. In order to strengthen the dollar, interest rates must be allowed to slowly start rising but no so fast as to trigger out of control inflation. Congress also is going to have stop printing money to cover their inflationary and budget destroying pork programs and ear marks that continues to increase the deficit which in turns makes the dollar weaker as well.

There are many things at play that are working to drive up the costs of oil which in turn affects everything else in our lives. There is no one thing that is solely responsible. But one answer that is definitely in our own interests is to start drilling in ANWR and the OCS and along with other worthy ideas that could help wean us off of foreign oil. If we don't start now then I agree with a growing list of world economists that the US will start to cease to exist within about seven to fifteen years. There is just barely enough time to start domestic drilling to bring down the staggering costs related to imported oil consumption and other needs tied directly and indirectly to oil necessary to our economic well being.

And finally. John McCain has consistently opposed and has even voted to ban drilling in these areas. He is also on record as opposing drilling as he campaigns for the highest office in the land. I must wonder just whose interest he is trying to protect here.

Fed: High energy, food prices keep economy weak
By Jeannine Aversa, AP Economics Writer
WASHINGTON — The Federal Reserve says the economy remained "generally weak" heading into summer as rising costs for energy and food pounded consumers and forced some companies to push their own prices higher.
The Fed's latest snapshot of business conditions, released Wednesday in Washington, underscored two big sore spots for the country: listless economic activity coupled with high energy and food prices. Those rising prices raise the risks of both spreading inflation and putting another drag on overall economic growth. ....

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