Inflation
BY PGF
2 years, 9 months ago
You don’t understand inflation until you’re in it, and then it’s too late. The Wall Street Journal cites eight or so percent, which is very low compared to actual inflation. It’s much higher; we all know that. Inflation takes years, sometimes decades, to work out and return to the historical norm (under central banking) of 3 to 4 percent annually.
Inflation is not an intellectual exercise, nor is it a mathematical obstacle. This post isn’t a rant against our rulers. We could cite causes and bible verses about a just balance and the duties of those God has placed over our country and the servitude of the debtor, but when inflation hits, none of that helps. All those commandments of God are instruction in righteousness. That having failed, here we are; now you get the lesson the hard way.
If you have debt, it will eat you alive. Preppers have warned you for years to get out of debt. When inflation hits, you have to decide; make the car payment or eat? It’s no joke.
Young families will be facing hard choices very soon. If you own a house, hang on for dear life, it will be your best asset in retirement due to inflation, but you must be out of debt. On the other hand, family comes first. If you sacrifice raising your children to maintain your lifestyle, shame on you. Almost all American families are already doing this. But that’s another topic.
Inflation can wreck your family’s future. If this keeps up, your life is about to change in drastic ways. The stress on families was tremendous in the 1970s; money fights, divorces, bankruptcies, children left to raise themselves; that’s what happened then. You may need to sit your family down and start talking with them now about the choices you could be facing.
You don’t want to look at your children and wonder where their next meal is coming from. That’s what inflation does. There are tens of millions of spoiled rotten children in America who are about to get a wake-up call if this persists. The problem is that they won’t understand why things are changing and why those they could rely upon the most will begin to tell them no, and not just about luxuries. What was every day will be a luxury. What was sufficient enough will become lean. Your children need new shoes, too bad; you can’t buy them, you don’t have the money.
We often hear about the Great Depression, but inflation is as significant, ugly, and disastrous. If you still have debt, you have to act now! A box of mac and cheese is doubling and doubling again right before our eyes. Already, putting gas in a pickup is the same as watching a $100 bill evaporate.
The only tool they have is printing money. Still, the sole remedy for inflation is time, day after day, year after year, trying to break even on payday. Of course, they could cut taxes, but it will be too late by then; half the country already doesn’t work.
If this keeps up, nobody will be the same. You will find your actual socio-economic level the hard way. Then you’ll understand debt and why God calls it slavery. When people can’t afford to buy, companies lay off employees! You can’t find a second job; your wife can’t find a job. Do you see where it goes?
Say you make $75,000 yr. You have $30,000 in car debt, a couple of credit cards and miscellaneous debt of $15,000. This is pretty average in America today. Now, watch your salary drop by 8%(current official rate) on a downward slide. That’s inflation; how can you pay your debts and feed your family with your salary dropping eight percent?
It’s shocking to see people carrying on as though this isn’t happening and as though it won’t get worse. As they say on Wall Street, the trend is your friend. That doesn’t mean that all trends are good; knowing which direction the trend is taking is the key. The direction is toward higher prices across the board. It’s not just gas. Everything takes energy to produce and transport.
If it persists and you’re stretched right now, you’ll break. If you’re only making it right now, you won’t be. If you’re ok right now, it’ll get worse. If you’re out of debt and working, perhaps major purchases should be put on hold. Everything could change tomorrow, but right now, the trend is inflationary.
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On March 13, 2022 at 11:01 pm, Dan said:
Inflation is a deliberate act by people in power….because it’s a “tax” they can impose that people don’t think is a tax.
On March 14, 2022 at 2:13 am, Georgiaboy61 said:
@ Dan
Re: “Inflation is a deliberate act by people in power….because it’s a “tax” they can impose that people don’t think is a tax.”
You beat me to the punch, good for you.
Inflation is – as Milton Friedman once said – a hidden tax. Less politely, it is a form of theft. The federal reserve and its cronies have been enriching themselves since 1913 (the year that it was founded, along with the federal income tax) at the expense of everyone else and sound money, besides.
Boom-and-bust economic cycles are not inevitable as so many believe. They happen – are caused to happen – because the big money men have learned how to profit from such swings in the economy. It’s also sort of a self-licking ice-cream cone in that such swings “prove” that the Fed itself is “necessary” and is performing a useful service to society. That’s largely a myth; they’re in business to serve themselves, and they have done so in spectacular fashion. If there are some crumbs left for the masses, well, fine – that serves the narrative, too.
It is for reasons of debasement of the currency that the big money men took us off the gold standard, too, starting with FDR and ending with Nixon. As long as the USD and its value was pegged to gold, there was no cheating if our books didn’t balance. Nixon and Kissinger wanted to start the printing presses to help fund their foreign policy initiatives, and as long as the gold standard was still even somewhat in force, they could not easily get away with doing that.
Nixon-Kissinger then pegged the USD to oil, which is the petrodollar system – which has its own problems, too, but which are the subject for another time.
The debasement of the U.S. dollar (USD) is real; the destructive power of inflation is real. Since 1913 in real (i.e., inflation-adjusted) terms, the USD has lost some 95% of its value. Since the Nixon years a half-century ago, the USD has lost 75% of its value. In the early 1970s, one could purchase a new factory-fresh Cadillac Eldorado luxury sedan for around $10,000 dollars. Today, you’ll spend four-to-five times that much. In today’s world, it is very difficult to purchase a new car – even a stripped down economy car – for 10K. Many used cars now cost that much.
Oh yes, inflation is real, and it is getting worse. Accelerating dramatically. The elites think this is no big real, but they’re fools who are playing with fire. Inflation and the economic destruction it leaves in its path are extremely destabilizing to a society. Hyper-inflation even more so.
On March 14, 2022 at 2:37 am, xtphreak said:
It’s not too late to make plans to survive.
Inexpensive food will be even more dear later, go ahead and get what you can now.
Rice & beans can be boring, but it’ll keep you alive (if you can find it. Sam’s Club didn’t have any bags of dried beans the other day. Another shortage coming?)
My Prius (2012 178,000 miles) got totaled in Sept 2021.
I bought a used 2018 Prius Prime 6 days later.
I can get to work and back on the battery (no gas) and trips home I can get 58-60mpg (if I take 2 lanes and just cruise).
I hate to think what it’ll cost to drive my Class A motor coach home after this job (90 gallon tank with diesel @ $5 or $6 a gallon?? Ouch!!!).
My home can be heated with wood, but the cooling needs upgrading.
Gotta bite the bullet and get’er done.
Now.
Cash is losing value rapidly, but you need some for immediate needs.
Think of things that hold value in tough times and invest in some instead of holding onto cash that’s losing its value.
Scary times a-comin’.
On March 14, 2022 at 6:45 am, Fred said:
“It’s also sort of a self-licking ice-cream cone in that such swings “prove” that the Fed itself is “necessary””
You got that exactly right. And not only the fed but all of government. Every politician that declares he will help you get rid of gun laws is “solving” a problem government created in the first place. It’s like that with almost everything they do.
On March 14, 2022 at 6:55 am, Bill Buppert said:
How I explained inflation to my children:
You want some more orange juice after you drink half a glass and I fill it up with water. Rinse and repeat until all you have is water and the orange juice as a factor no longer exists.
But the government will insist it is orange juice.
On March 14, 2022 at 8:45 am, The Mad Scot said:
So true, as i watch the price of gas increase day by day it seems..
We are fortunate in that last year we paid off our home and both autos as a result of an inheritance from wifes mother, who passed at 91, and amassed quite a sum, she saved and invested wisely, could rub two nickels together and create a quarter.
Other than our household opex and my business opex, we are debt free and pretty self sufficient, as one can be in a suburban enclave…
On March 14, 2022 at 9:01 am, HouseWolf said:
I agree to some extent, but not with the last statement. Now is exactly the time to make major purchases, assuming you can afford to do it, in other words without incurring debt.
Buying big ticket items is a bargain now, compared to later… after the inflation of that same item at 20, 25, or 30% annual. That new car may be $30,000 today, but the same car will be $40,000 in a year, or more.
Investment in durable tangible items is one of the only strategies that works against inflation.
On March 14, 2022 at 10:30 am, PGF said:
@housewolf, can you let CA know about Herschel’s mom, please?
A car, or anything with cost of operation that decreases in value, eventually to zero, is not an investment, it’s a liability, technically. But I get the point.
On March 14, 2022 at 11:31 am, I R A Darth Aggie said:
“Sam’s Club didn’t have any bags of dried beans the other day. Another shortage coming?”
Sam’s can be very hit and miss in terms of what it does and doesn’t have at any given time. One would think that a certain mix of frozen vegetables would be reliable, but no, of course not. It’s getting to be hurricane season, time to start grabbing canned proteins and eating down the ones from last year.
On March 14, 2022 at 7:57 pm, blake said:
One thing I would point out about setting up food storage: What one keeps on hand should reflect where they live.
For instance, canned over dried might make more sense if one lives in a desert environment.
On March 15, 2022 at 8:46 am, Drake said:
Dan – Yes, it is a very big tax within our system of progressive tax rates. The example above of the guy hard at work to make $75k might get some raises to keep up with inflation. Then all of a sudden, he’s in a higher tax bracket giving his raise back to the Feds and wondering how he has nothing to show for all the money he’s getting paid. And if he hits the AMT (alternative minimum tax), lookout – he’ll have to borrow more money to pay it.
Progressive taxes are evil – not indexing them to inflation is diabolical.