It is Thanksgiving week and Americans are thinking about what they have to be thankful for. As the country moves deeper into campaign season the candidates' rhetoric leaves many with the impression that 'tis the season not to be jolly.The CPI measures changes in prices paid by urban consumers for a representative basket of goods and services. The PPI measures the average change over time in the selling prices received by domestic producers for their output. While increases in these indexes may result in bill shock for consumers, increases also mean that consumers want what America is producing.
As a consumer driven economy, we want to see increases in demand. How to incite the demand is another story. The Obama Administration and Congress don't want to admit it, but there may not be much more that they can do to help consumers spend more. President Obama's stimulus funds ran out in 2010. His new stimulus plan, under the guise of a jobs bill, is getting no love from the Republican controlled House of Representatives. Fiscal policy, that combination of changes in taxing and spending by government, appears dead in the water.
We don't appear to be getting much help from the Federal Reserve either. As part of its dual mandate, the Federal Reserve is responsible for helping to stabilize prices while promoting full employment. The Fed does not appear to be doing well on either front.