I stumbled across this article, continuing the conversation on inflation.
http://finance.yahoo.com/news/Why-the-Federal-Reserve-Isnt-usnews-2186172338.html?x=0&sec=topStories&pos=3&asset=&ccode=
The final quote of the article poses an intriguing argument:
"When consumers pay more for food and energy products, they cut back on discretionary spending, like spending on furniture, clothing, and recreational activities, which pushes the prices of those goods down," - Stacey Schreft , former economist and vice president at the Kansas City Federal Reserve
However, this fails to address two other pieces of the puzzle. The more money consumers spend on Energy and Food, the less they have to spend on discretionary spending, regardless of price. While core inflation stays low, the overall state of our consumer based economy can be negatively impacted. Secondly, as commodity and raw materials prices continue to rise that puts additional upward pressure on discretionary goods. This pressure has the potential to offset any decreases in pricing from slowing demand.
There is obviously no simple answer to any of this, however it is certainly interesting to follow the debate, we will have to wait and see how it all plays out.
