OMG. When you lose an argument to Paul Krugman it's time to take a break
She then linked to a Dylan Byers post that said in part:
In other words, Erickson got totally mauled by Krugman, but the Rubin observation is what is important here. If you lose a debate to Krugman, it's time to take a break.
First, Erickson was in error focusing in on bread and milk. It allowed Krugman to use, in a post, this chart of milk prices over the last 10 years.
Erickson should have talked about consumer prices over all, which for the same period as Krugman's milk chart look like this:
Big difference. Never give Krugman the opportunity to use shady data that will distort the overall picture, he will use it.
That said, let's take a second look at milk prices, which Krugman is using to promote the idea that there is no price inflation. He writes in the post with the milk chart:
But of course the notion that we’re having runaway inflation isn’t based on evidence, and can’t be refuted with evidence.
But, are slowly climbing milk prices evidence that price inflation is not a threat? Far from it, it is another example of Krugman thinking only one or two steps deep, without getting the even deeper full picture.
The fact of the matter is that milk consumption is crashing in America. The US Department of Agriculture reports:
This change in milk consumption patterns is having the effect that one would expect, falling milk sales.Between the 1970s and 2000s, people have become less apt to drink fluid milk at mealtimes, especially with midday and nighttime meals, reducing the total number of consumption occasions:• Between surveys in 1977-78 and 2007-08, the share of preadolescent children who did notdrink fluid milk on a given day rose from 12 percent to 24 percent, while the share that drankmilk three or more times per day dropped from 31 to 18 percent.• Between 1977-78 and 2007-08, the share of adolescents and adults who did not drink fluid milk on a given day rose from 41 percent to 54 percent, while the share that drank milk three or more times per day dropped from 13 to 4 percent.Underlying these decreases in consumption frequency are differences in the habit to drink milk between newer and older generations. All else constant (e.g., race and income), succeeding generations of Americans born after the 1930s have consumed fluid milk less often than their preceding generations:• Americans born in the early 1960s consume fluid milk on 1.1 fewer occasions per day than those bornbefore 1930.• Americans born in the early 1980s consume fluid milk on 0.3 fewer occasions per day than those born inthe early 1960s.
In 2011, total U.S. beverage milk sales were 53 billion pounds - about 6 billion gallons - the lowest level since 1984, according to U.S. Department of Agriculture.
Whole milk beverage sales in 2011 were less than half their level from the early 1980s.
Got that? Milk sales are crashing, and it is across all age groups. Here is a chart from the USDA:
Is it any wonder milk prices are not keeping up with the overall price inflation? It's not that Fed chairman Ben Bernanke has steered us through and away from a great milk price inflation, it is that other factors in the milk supply demand equation must be considered. .
A recent WSJ article slams home the point about the change in consumer demand:
In an age of vitamin waters and energy drinks, the decades long decline in U.S. milk consumption has accelerated, worrying dairy farmers, milk processors and grocery chains.[...]So far this year, sales volume at U.S. food retailers for all types of liquid milk, including nondairy varieties, has fallen 2.9% from a year earlier, and total dollar sales have slipped 2.2%, according to Chicago-based market-research firm SymphonyIRI Group Inc. Sales volume for the biggest milk category—skim and low-fat milk—has dropped 4%.But there is more that Krugman has not considered. From the Dairy Reporter:
US milk prices continue to decline as cheese inventories remain high.High cheese inventories mean less demand for milk from cheese makers, thus, putting additional supply on the liquid milk market. Thus, we have less demand for liquid milk and at the same time increasing supply.
It's all about these supply and demand factors when it comes to milk prices. They have nothing to do with Bernanke.
In fact, the real surprise is how milk prices have not completely collapsed in the face of such supply and demand downward price pressures. That's what really needs to be explained by Krugman. Got Ben Bernanke newly printed money, Paul?