Taking a Bite Out of Stealth Inflation.

When I visited the local fire station in the spring, I was snared by some uniformed pre-teens, backed by beaming mothers behind a card table selling Girl Scout cookies.

I was a pushover. I walked away with a bag of Thin Mints, Lemon Chalet Creams, Do-Si-Dos, and Tagalongs.

I have to confess a lifetime addiction to Girl Scout cookies. I am also sympathetic because while growing up, I had five sisters who were Girls Scouts.

During the early eighties, one of the managing directors at Morgan Stanley's equity trading desk had a daughter in this ubiquitous youth organization.

One day, she pitched to all 200 traders on the floor, going from desk to desk with sheets of paper taking orders.

I used to buy two of everything she offered, as some of my clients preferred a few boxes of these delectable treats over lunch at the Four Seasons.

Others ordered hundreds. I later heard that the girl was the top-performing scout in the greater New York area two years running. I remember well the truck backing up to the building’s loading dock to deliver the plunder.

However, this year, when I got home and opened the boxes, I was shocked.

While the price was the same, the number of cookies had shrunk considerably. I knew it was not my waistline the scouts were concerned about. I was seeing the dastardly hand of “stealth inflation” at work.

In this highly deflationary environment, companies are loathe to raise prices.

Any attempt to pass these costs on to consumers is punished severely. So companies cut costs, quantity, and quality, instead, by shrinking the size.

I think you are seeing stealth inflation breaking out everywhere.

It is not just in food. Many products seem to be undergoing a miniaturization process while prices remain unchanged. It also extends to services, where a dollar buys you less and less. Even the president was complaining about the shrunken size of Snickers.

This is how the consumer prices index is staying in very low single digits, despite anecdotal evidence everywhere to the contrary.