Commentary

Inflation is everybody's problem

Housing headaches get all the headlines, but many CNNMoney.com readers say they are more concerned about rising food and gas prices than the credit crunch.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Paul R. La Monica, CNNMoney.com editor at large

paul_lamonica_morning_buzz2.jpg
Where do you prefer spending your money?
  • A small business
  • The mall
  • A big-box store
  • Wherever is cheapest

NEW YORK (CNNMoney.com) -- Make no mistake, inflation is a big headache for Americans. Just ask our readers.

According to today's consumer price index (CPI) report for March, retail prices are up 4% over last year.

Those gains were fueled (pun intended) by a 17% increase in energy prices and 8.2% jump in transportation prices. Food and beverage costs are also rising, up 4.4%.

And this comes at a time when paychecks aren't going as far as they used to: the government also reported that weekly wages in March, adjusted for inflation, dropped 1%.

So even though many news outlets (including ours) are paying a lot of attention to the problems in the housing market, many readers suggested in response to yesterday's column about inflation that they are much more concerned about rising energy and food prices.

"Inflation on energy and food has to be the major problem," wrote Jim from Washington County, Va. "Many, many Americans have paid off their mortgages ... but everyone has to deal with energy price increases and food price increases. My family has to turn down the temperature and wear sweatshirts inside. We do drive as little as possible. We keep the speed at 55, check tire pressure correctly inflated., etc. Little things do add up."

Bill C. of Boise, Idaho, agreed. He said inflation was a bigger concern and chastised those who used the housing bubble as an excuse to live beyond their means. He was referring to those who recklessly tapped into the value of their home as if it were merely another ATM machine.

"Shame on people for 'living' off of home equity. The housing issue really only applies if one buys or sells. But what about day-to-day living? This is the issue. And this will kill the engine. Every dollar extra spent on fuel, food, etc., is one less dollar to save or spend in the economy," he wrote.

Criticism of those who bought houses with exotic adjustable-rate mortgages was a common thread on the discussion page. And several readers begged the Federal Reserve to stop lowering interest rates for fear that a weaker dollar will only drive food and gas prices even higher.

"As I bought a house well within my means, at a fair price with a fixed interest rate, the payments on my house are not rising," wrote Genia, of Columbus, Ohio. "The weekly food and gas prices that are rising at such a fast rate that I can barely keep up. Some please tell the Fed not to lower the interest rate anymore. It's obviously not solving the problem, it's making matters worse.

There were also several readers who were angry about the Fed "rescuing" banks like Bear Stearns.

"I've had enough of the Fed trying to bail out the banks and people that weren't smart enough not to buy houses they couldn't afford," wrote Michelle in Atlanta. "You need to stop cutting rates and let the dollar rebound to keep inflation from getting any worse. This country is never going to recover if inflation keeps the food and gas prices through the roof."

With all this in mind, the Joint Economic Committee of Congress will hold a hearing in the next few weeks to discuss the threat of inflation.

"There's a middle class squeeze. The average person is paying more for groceries and gas, getting paid less, and no one is doing anything about it," wrote the committee's chairman, Sen. Charles Schumer, D-N.Y. "As the paychecks of middle-class families get smaller and their homes lose value, their wallets are being further emptied by the skyrocketing everyday costs of gas and food."

Of course, this is not to suggest that the problems in housing should be ignored. Rising foreclosures and delinquencies are not good for the economy. And it is in the best interests of all Americans to get the real estate market back on track.

"Housing prices have me more worried than anything else. While we can afford our mortgage just fine, my husband and I had planned to move someplace nicer (with decent health care and schools) before having kids, but now are stuck with a house worth less than we owe and no way to sell," wrote Amie of Lancaster, Calif.

In addition, while rising food and gas costs are problems that truly do need to be addressed, several readers astutely pointed out that Americans can help their finances by changing some daily habits.

"As far as food and gas goes ... tons of people bought monstrous gas-guzzling cars and now they want the government to bail them out because they can't afford all the gas they use. Meanwhile they criticize all the people who bought houses they couldn't afford. Isn't irony grand?" Amie added.

But I think David of Albany, N.Y., summed it up the best. In tough times, everyone has to start examining whether they are really living within their means.

"Things are hard - I feel a difference and I already never eat out, I bike and run to work instead of drive," he wrote. "But seeing people bring big LCD TVs out of Wal-Mart, driving big trucks and SUVs aggressively, and eating out a lot (watch that diet!) has made me wonder if people don't feel entitled too much for the amount of value added their work contributes."

"Things just seem a bit out of line. I hope people will make the necessary adjustments and we will get back on track - on a better track," David concluded.

Issue #1 - America's Money: All this week at noon ET, CNN explains how the weakening economy affects you. Full coverage.

Have you lost your job, your business or your home? Are you raiding retirement accounts to pay the bills? We want to hear from you. Tell us how you're being affected by the weakening economy and you could be profiled in an upcoming story. Send emails to realstories@cnnmoney.com. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
Revolving door: Washington to Wall Street Former House Majority Leader Eric Cantor is headed to Wall Street. See who else has jumped the political ship for a lucrative career in finance. More
How to keep your naked photos out of hackers' hands Follow these steps to make sure that your nude photos and other sensitive information won't get hacked. More
9 reasons to be excited about Windows 9 Microsoft is expected to begin showing off Windows 9's features later this month. Here are the expected changes you should be thrilled about. More


Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.