Thursday, January 21, 2010

Hidden Inflation: Health Bars and Toilet Paper

According to the Bureau of Labor Statistics which just reported a couple days ago, the inflation rate has been modest. They announced that the December Consumer Price Index for All Urban Consumers rose 0.1 percent on a seasonally adjusted basis,the U.S. Over the last 12 months, the index increased 2.7 percent before seasonal adjustment.

However, other than technology where prices continue to drop and buy greater and greater power [just look at the Apple (AAPL) iPhone. I paid $599 for the original; look at the memory and features you can now buy for one third the price], consumers are getting less bang for the buck. The rate of inflation may appear low but just take a look at how companies are hiding their own 'hidden' inflation, and not doing a very good job.

Check out the following breakfast bar. This was a brand new bar, as it appeared as soon as I opened the package. It barely takes up three quarters of the package. It looks like someone had already taken a couple bites out of it. And it wasn't an aberration. All the bars in the box were about the same size, and all the boxes I opened during the last couple months were similar. A year ago, one of these bars would satisfy me for a snack; now I have to eat two.

Do you remember the days when the toilet paper roll was wide enough to cover the entire roller? Some roll holders, where two large silver arms with circular latches fit into the sides of the roll, can't even hold the modern day rolls (sorry I don't have a picture of one of those).

Fortunately, we don't have the outrageous inflation that Zimbabwe had a couple years ago. Their inflation rate by the end of 2008, was 516,000,000,000,000,000,000% (516 quintillion percent), according to unofficial sources. In the following photo, you can see at the top the one Zimbabwe dollar issued in 2007, then after the runaway inflation the Zimbabwe 100 trillion dollar bill issued in 2008, and finally issued in 2009, a 'new' 1 dollar bill equal to the 'old' 100 trillion dollar bill. Now the Zimbabwe dollar is longer in active use. It has been replaced by the United States dollar, South African rand, Botswanan pula, Pound sterling, and Euro, with the US dollar used as the official currency for all government transactions.

Although the United Stated doesn't have a multi-zeros inflation rate, higher inflation is still on the horizon. I expect much higher inflation within four years. They can reduce the size of my health bars only so far.

Author owns AAPL.

By Fred Fuld at


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