My apologies

Last week I seem to have been channeling Alan Greenspan. I'm not sure what I said, but it looks like it spooked the financial markets a bit. I regret the inconvenience.

Actually, I don't know why the CPI data came as such a surprise. Oil, gold, and copper prices have been soaring lately, and the dollar has been weakening (making imported goods more expensive).

A funny story about the CPI numbers... As reported by the Wall Street Journal, Treasury Secretary John Snow walked into a House committee hearing Wednesday, and the bartender said... Dammit -- wrong joke. No, seriously, Mr. Snow was all woo-hoo over wage increases:

Average hourly earnings are picking up. We learned from this month’s jobs report that average hourly earnings have risen 3.8% over the past 12 months — their largest increase in nearly five years.

Then Rep. Barney Frank (D-MA), playing the straight (?!) man, asks:

Mr. Secretary, I agree with much of your statement, but I confess to some trouble with your citation of the rise in hourly wages. What’s the CPI increase over the past 12 months? Do you know?

With impeccable timing, Snow delivers the punch line:

Well, about 5, I think 5.1.

For the benefit of those who don't get the joke, let me explain in a way that is not at all funny. Let's say that in 2004 you made $1,000. And let's say you had a generic basket of goods that cost $1,000. In 2005, you earned $1,038, but your basket of goods cost $1,051. So that larger amount you earned in 2005 only buys 98.8% of that same basket. The 1.2% shortfall -- that's how much your income declined in real terms.