Even though the Labor Department is known to massage its statistics, the numbers are so bad that its latest report registers an increase in the Producer Price Index of 1.2% in July and 9.8% in the last year. CNN carries the story. Even with a dip in oil prices over the last month, CNN says that this is the highest rate of increase in the past 27 years.

The Dow is sinking and should dip below 11,000 once again. It well may test new lows in the next couple of days.

This morning's WSJ has a sobering page 1 headline: States Slammed by Tax Shortfalls. The article by Conor Dougherty, Amy Merrick and Anton Troianovski paints the bleaking picture:

The stumbling U.S. economy is forcing states to slash spending and cut jobs in order to close a projected $40 billion shortfall in the current fiscal year.

The article goes on to inform us that they, the powers that be, are worried [editorial comment duh] about inflation and cuts to services.

In my little town that has been happening for over a year, and from Defuning's comment in an earlier thread, it's happening all over.

Oh, but that's because we are not part of the top 1%. Those guys in the upper atmosphere are sucking up all the oxygen. According to another WSJ article, this time in yesterday's edition, entitled charmingly Richest See Income Share Rise by Jesse Drucker:

The richest 1% of Americans in 2006 garnered the highest share of the U.S. adjusted gross income in two decades as their average tax rate fell,the IRS said.

This thread is really linked to Cho's commentary below.

A friend who reads the economic blogs pointed out the following commentary to me. It is on a topic that is close to home, Why a lot of people think the CPI is not representative of their experience ... and are right. At least partly.

promoted by roxy

In The Crash is past. Comes now Inflation, on March 2 (it seems so long ago), I warned that the official response to the financial crises so far was to save Wall Street and the financial system at all costs; that inflation was being unleashed; and this would mean a severe decline in our standard of living over the next few years. I alluded to a rise in food prices being one immediate cause of pain, and intimated that social unrest would be the result.

It’s happening much faster than I thought possible.

Bernanke is going to start buying mortgage-backed securities, perhaps including some in default, from banks holding them. The Fed announced the creation of a $200 billion facility to do this today, along with a $100 billion swap facility with the European Central Bank, British central bank and Swiss National Bank. Last week the Fed announced it was doubling the size of its existing facility to $200 billion. Net $500 billion is going into the banks. The stock market was up more than 400 points as a result.