Inflation throws a sucker punch

Wall Street shudders as new figures show prices rising at the fastest rate in 27 years

Published August 19, 2008 2:27PM (EDT)

It's beginning to look like the United States might actually need a recession, just to keep inflation at bay. The latest eye-popping numbers from the Department of Labor show the "producer price index" (PPI) jumping 1.2 percent in July. That's a year-over-year jump of 9.8 percent -- the fastest acceleration in 27 years. In early trading on the New York Stock Exchange, investors panicked -- the Dow dropped over a hundred points in the first hour.

The PPI measures prices paid to producers of goods. The only good news to take away from these numbers is that they are clearly a reflection of the run-up in energy costs earlier this year, and now that energy costs are on their way down, pressure might start to ease.

But that's just hopeful thinking. Living in the now, the new inflation numbers are tailor-made for a presidential candidate who might want to indulge in some timely economic populism. Life in the United States is basically 10 percent more expensive than it was last year at this time -- a point that was underlined to me on a JetBlue flight yesterday, where headphones are no longer free and a pillow and blanket costs $7. And don't bother bringing cash. JetBlue only accepts major credit cards for payment now.

Think about it -- the first presidential candidate to promise a future in which bottled water and pillows are free on all domestic flights wins the election, hands down.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Globalization Great Recession How The World Works Inflation U.s. Economy