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The Cumulative Inflation Dilemma

The media and the Fed seem to have declared victory over inflation this week. If this is your first experience with inflationary periods like this, then odds are you are not as old as I am.

If one thinks that the inflationary cycle has peaked, then you were not around for what happened to the Federal Reserve in 1978. The idea was that the rate of inflation was starting to fade as oil prices and food prices declined. There were still a great deal of labor unrest, but in the end the rate of change had subsided.

Fast forward to September of 2023. The media promotes the theory that although inflation is higher than the Fed’s target it is not that bad. Here is you mainstream media headline to highlight that idea just three days ago from CBS News:

U.S. inflation moderated in September, but is still too hot for Fed


Here is the Atlanta Federal Reserve’s Sticky CPI tracking for September with data back to just before the Pandemic:

While the trend is down, the cumulative impacts of this recent inflationary episode is still being felt by the American consumer. If one uses the somewhat debatable data collection techniques and reporting of the Bureau of Labor Statistics, it portrays a far different story. Even if the inflation data is far short of reality.

For example, one of the most expensive items the media economic cheerleaders wants everyone to ignore is the cost of food. Unfortunately for them most Americans still go grocery shopping and the immediate impact of higher food prices on the consumer. The chart below is based on the BLS’s own indexing to 1982 dollars and illustrates the sustained, persistent cost of cumulative inflationary pressure:

Thus the idea that “prices are coming down” is a relative or political concept, not an economic reality.

Breaking it down into several expense categories consumers deal with provides a much clearer picture of the pressure put on the average American citizen.

For example, the basic protein complex is not displaying a “moderating” picture for people who wish to eat:

It’s not much better for pets either:

Thankfully, if one believes the BLS bureaucrats, people do not eat bread, cereals or other grain based foods, right?

The heck with eating. Nobody really cares about that because everyone said the inflation data is only important if one excludes food and energy.

Speaking of energy:

Unfortunately people ignore the constant piling on of inflationary pressures on the citizens and still attempt to focus on the “feel good” aspects of the data. The “hey, eggs came down last month” media propaganda is useless when one’s homeowner insurance doubles, auto insurance shoots up 25%, or medical insurance is slated to be increased by 20% or more.

The truth is cumulative inflation over the decades has destroyed any wage or salary increases for more than 80% of the population. Just since the Pandemic era, it was devastating for the average family as the Inflation Calculator demonstrates using the BLS website.

If your wages only increased by $10 per week since then but inflation is up 19.31% you’re falling further behind. But wait until you get to be old like some of us to see the real problem. Since the last inflationary episode in 1981, the US dollar’s purchasing power has declined by a frightening pace.

This is not sustainable however it has to be. The US government can not allow for a deflationary episode to reduce prices for homes, cars, or consumer goods.

Because then and only then would the risk of default on our national debt become a reality. Hence, buckle up for even more inflation at higher and faster rates for longer in the years to come.

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