Inflation, Delivered

Posted by LK on 6/12/08 • Categorized as Financial Markets, Politics, The Economy, The Economy and Markets

An old, stale riddle goes something like this: “what does a New Yorker make for dinner?” and the answer is “a phone call.” The food, from any number of cuisines and nationalities, usually arrives within 30 minutes or less.

A Chinese meal that cost $26.85 last week costs $33.40 this week. Same joint, same items, same quality. That’s the base upon which the tip (which is discretionary), and the tax (which is not) is calculated. So the tax is higher, and the tip can be as well, unless, and nothing new here, it’s the folks on the bottom rung whose wages remain stagnant while prices rise.

Pull the calculator out and that comes to a ferocious bump of over 24%. From one week to the next. And the tax increase puts the out of pocket bump up more than that. The price of rice, which used to be thrown in as an accompanying afterthought, has skyrocketed for the restaurants (see chart below), and the gas that’s used to power the delivery vehicles, which around here are old and most likely inefficient cars, has taken a moon shot as well.

Weekly Price Chart For Rice

Which is going to lead me to order far less frequently, as the sticker shock was, well, shocking. I’m probably not the only one who’s going to react that way, so revenues for the restaurant won’t go up, and may well decrease.

This is a lose-lose situation for the consumer and the retailer. And Bush and McCain, in true Orwellian style, must believe that if they speak well of the economy frequently and vociferously, their blind conviction alone will make it so.

If this piece sounds a bit more sober and less flippant than the usual LK fare, it’s because there’s absolutely nothing funny about it. People are hurting and are going to continue to hurt.

I’ve said it before but it bears repeating: Paul Volcker, the man who, as Federal Reserve chairman, put out the last inflationary fire, has endorsed and hopefully is advising Senator Obama, and together with the rest of Obama’s team had best come out with a painful but tolerable plan (as Volcker did in the early ’80’s) to right this extremely shaky ship.

It’s also been brought to my attention that the example used (delivered Chinese food) could be perceived as elitist and plays into the criticism that’s already been leveled at Senator Obama. He should use the price of gas, milk, and war as examples of the problem, which is what I’m sure he and his brain trust are planning to do.

And he still needs to come out with specific plans of action in order to garner the support of swing state voters , without whom his transformational visions have little chance of being realized.