Financial News

Sometime this week, the Federal Reserve is planning to discuss the effects of slack and issues of our economy. Slack is defined as the unused portion of the economy's productive capacity (including underutilized industrial space, housing and labor), and in the case of the U.S. economy, is too high for comfort.

Where does the evidence lie? Here are a few facts:

• According to Credit Suisse, 2,535 Boeing and Airbus worldwide aircraft were in storage as of July.
• The Association of American Railroads reported that there are 501,472 freight cars with stuck in storage at the beginning of September.
• According to Smith Travel Research, that hotel occupancy rates in the service industry are at 56% - the lowest since it started keeping records in 1987.
• 18.7 million homes were vacant in the second quarter, according to the Census Bureau.
• The Labor Department reported that as of August, 14. 9 million Americans were unemployed and a total of 26.3 million were underutilized.

With all this being said, slack may not be a bad thing because in theory, it helps to suppress prices going up, essentially keeping inflation down. In this circumstance, keeping inflation under control is a big deal because it allows the Federal Reserve to better manage interest rates, and restore growth at a steady pace. Yet with too many unused airplanes, trains, hotel rooms, and labor - this represents a lack for demand; which also represents challenged industries.

Hence, the Federal Reserve's problem. If it pumps money into these industries to save them and help the economy, it could cause inflation, something it's trying to avoid. However, taking this action would reduce slack because it could create more jobs and essentially help to get airplanes and trains moving, and hotels and homes filled.

While keeping inflation low in a suffering economy is a big deal because it helps keep prices affordable, many industries and workers might want to make that trade so that everyone can get up and going again.

How do you feel about the issue? Should the Federal Reserve focus more on keeping inflation low, or instead focus on reducing slack by pumping money into the U.S. economy?

Americans who may have been rejoicing for the past several months due to low milk prices may feel disappointed to learn that they may have to pay more in the near future. Milk prices have dropped as low as $1.99 a gallon, and are averaging $2.98 nationwide as opposed to the $3.89 average it reached at its peak. However, low prices have left dairy farmers struggling and as a result, some are working towards measures to increase the price.

According to the National Milk Producers Federation, they expect to see a $12 billion loss in sales this year. This loss can be attributed to a lack of demand globally, which has in turn dropped prices for consumers. Of course, in this tough economy, consumers are thrilled to save money; however, dairy farmers are accumulating thousands in debt.

To help solve the problem for farmers, Senator Bernie Sanders has introduced a proposal to Congress seeking to boost milk prices by reducing supply. While the proposal is still working its way through Congress, analysts like Bill Glatt of Advanced Economic Solutions expect milk prices to increase as soon as next year - due to government diary purchases, cattle slaughter, and an increase in demand.

Since milk and a few other dairy products were among only a few areas where food consumers were finding relief, this increase could put a frown on a lot of faces. If you rely on a lot of milk and are truly concerned about an increase in price, here are a couple of things you can do:

• Save your money and budget - You can put money to the side or add a "milk" fund to your budget so that when prices increase, you won't be side-swiped by the cost.
• Buy now and freeze - Milk can be stored frozen at 0 degrees Fahrenheit for up to three months as long as you freeze it by the "used by" date and defrost it in the refrigerator.

Looking for ways to save on groceries is a big deal in this economy. So if an increase in milk prices could adversely affect you, consider these ways to get the most bang for your buck.

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