Former Fed Chief: Inflation Isn't Dead

Former Federal Reserve Chairman Paul Volcker, famous for helping whip sky-high inflation in the early 1980s, said Tuesday that rising prices should again be a subject of concern for the U.S. economy.

Speaking before the Economic Club of New York, Volcker said today's economic conditions are not as severe as they were during his tenure, but still suggested caution about the threat of inflation. He also warned that the weak dollar is a major problem.

"We are at a point where we have to worry about [inflation]," said Volcker, who was appointed Fed head in 1979 by President Jimmy Carter before stepping down in 1987.

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This article addresses the former Federal Reserve Chief, Paul Volcker's statement that the United States should be aware and mindful of the continued rise in prices, and steps should be taken to combat this problem. His concerns included the threat of inflation and the weakness of the dollar. Volcker's statements simply reaffirm what many have begun to believe: the United States is facing an economic crisis, and something must be done to reverse or at least begin to change this. The leaders must lay aside any criticism they have received, and must focus on bettering the economy to get the United States back on its feet.

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Wholesale Prices Surge in January

Inflation at the wholesale level soared in January by the fastest pace in 16 years, pushed higher by costs for food, energy and medicine.

The Labor Department said Tuesday that wholesale prices rose 1% last month, more than double the 0.4% increase that economists had been expecting.

The worse-than-expected performance was certain to capture attention at the Federal Reserve, which has chosen to combat a threatened recession by aggressively
cutting interest rates in the belief that weaker economic growth will keep a lid on prices.

But the combination of rising inflation and weaker growth raises the threat of "stagflation," the economic malady that plagued the country through the 1970s, when a series of oil shocks left households battered by the twin problems of stagnant growth and rising prices.

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This article concerns the rising inflation rates that the United States's economy has been experiencing. This increase is attributed to rising costs for food, energy, and medicine. This article also addresses the Federal Reserve's attempt to avoid a recession by drastically cutting interest rates hoping that the "weaker economic growth will keep a lid on prices." Because of these two decisions, there are concerns that the United States's economy will become stagnant, a fear they called "stagflation." There has also been an increase in wholesale prices which the government is going to attempt to fight with one of the previous mentioned methods. The Federal Reserve's role in fighting the stagnation, inflation, and interest rates shall be evident in the next few months to see the measures they take to change these three problems the United States's economy is experiencing.

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Oil Muscles Past Faltering U.S. Economy

There was a time when oil prices needed the backing of a strong U.S. economy to reach record levels, but oil prices hit all-time highs again Wednesday even as a recession looms.

Clearly, a strong economy is still necessary to keep oil prices high, but it seems the United States is no longer oil's main driver.

"The really strong economy is on the other side of the world," said Peter Tertzakian, chief energy economist at ARC Financial, a Calgary-based private equity firm.

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This article addresses the recent rise in the cost of a barrel of oil for the United States. According to the article, the US is losing its status as the "main driver" of the price of oil because of its weakening economy. This article also compares the anticipated growth of the United States's economy (1.8 percent) with that of the developing countries (an average of eight percent). This shows the staggering stagnancy that has developed in the US's economy. This article also compares the prices that United States's consumers are paying for gas with the prices others are paying. (The US price: $3. European price: $7. Chinese price: $2.65. Indonesian price: $1.82. Iranian cost: $0.42. Saudi Arabian cost:$0.45.) This comparison shows the amount of taxes the United States is paying for oil, and it also represents the severity of the inflation occurring in the United States.

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