Inflation, Food Prices &
the “Can’t Afford Rent Theory”

At yesterday’s semiannual forecast to Congress, Federal Reserve chairman Ben Bernanke said the US economy will continue to face "numerous difficulties," including rising oil and food prices.

At the same time, Labor Department released some interesting numbers:

• Energy prices Jumped almost 11%: 6.0% in June, 4.9% in May
• Residential natural gas rose 10.4%: 6.6% in June, 3.8% in May.
• Unleaded regular gasoline soared 18.6%: 9.0% in June, 9.6% in May.
• All food prices increased 2.3%: 1.5% in June, 0.8% rise in May.

The lumping food prices into astronomical energy costs has led some to call it the “I Can’t Afford Rent Theory.” For example, if your rent in increases by $10’s and your electric bill increases by $100’s, you can’t fairly say, “I can’t afford rent anymore.”