Back in March, the president of the New York Federal Reserve, William Dudley, was trying to explain to the citizens of Queens, N.Y., why they had no cause to worry about inflation. Dudley, a former chief economist at Goldman Sachs, put it this way: “Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful. You have to look at the prices of all things.” Quick as a flash came a voice from the audience: “I can’t eat an iPad.”
Dudley’s boss, Ben Bernanke, was more tactful in his first-ever press conference on Wednesday of last week. But he didn’t succeed in narrowing the gap between the Fed’s view of inflation and the public’s.
To ordinary Americans, however, it’s not the online price of an iPad that matters; it’s prices of food on the shelf and gasoline at the pump. These, after all, are the costs they encounter most frequently. And with average gas prices hitting $3.88 a gallon last week, filling up is now twice as painful as when President Obama took office.
Sensing a threat to his hopes of reelection, the president last week called on Congress to eliminate “unwarranted” tax breaks for oil companies and set up a Justice Department task force to investigate price gouging and fraud in the oil markets. Give me a break. The spike in gas prices is the result of Fed policy, which has increased the monetary base threefold in as many years, and a geopolitical crisis in the Middle East that the president and his advisers still haven’t gotten a handle on.