Friday, February 29, 2008

Purchasing Power


The French worry about pouvoir d'achat. The rest of the world worries about wages and prices. Check out the above graph of recent movements in commodity prices (courtesy James Hamilton, click to enlarge). The index is fixed at January 1 = 100. That's right: in under two months, prices on these basic commodities have jumped from 6.5 percent for zinc (annualized 39 pct.) to 46 percent for wheat (annualized you don't want to think about).

Meanwhile, Christine Lagarde has gone shopping at Carrefour, and inspectors are compiling lists of shelf prices. The French government wants people to believe that it's doing something about purchasing power, but in light of what's happening in the commodities markets, these steps are risible. Shouldn't someone be explaining this to the public? Someone besides bloggers, that is.

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