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Monday, February 11, 2008

Bagel policy indicators

At a bagel place in northern New Jersey, this morning: A sign apologizing to customers because prices have gone up and they haven't yet been able to print new menus; plus, some letters tacked on a bulletin board from suppliers apologizing to the bagel place that the suppliers' prices have gone up; and one of these suppliers' letters was pointing to ethanol's effect on food prices.

Implications:
1. The New Keynesians have a point about the importance of "menu costs."
2. Inflation is not going lower anytime soon.
3. Government-backed ethanol has worrisome agricultural effects.

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