Inflation, Inflation, Who’s Got the Inflation

According to government statistics, the inflation rate in the United States is holding steady at a pretty low value. The argument goes that deflation is bad, but a zero rate is also bad, so a low rate of inflation is desirable, as long as things like wages keep pace with it. Indeed, it is supposed to indicate general economic growth and an upward trend and the promise of a chicken (Tofurky) in every pot. Without inflation, we’d be sliding deep into a recession and who knows where we could go from there[1. Sounds of bitter laughter are heard.]. So yay, inflation!

As we all know in actuality, wages never pace inflation. It can take years for wages to catch up and by the time they do, inflation has already jumped away. Yet, the government is so confident that we are not experiencing inflation right now that cost of living increases for many people on government benefits have not been put through. You don’t need more money in benefits, the argument goes, because there’s no inflation. This cynical approach, of course, ignores the fact that government benefits are already insufficient, so an increase might actually make them workable for beneficiaries if there was no inflation, and I’m sure that the denial of cost of living increases has nothing to do with a rising desperation to meet a budget shortfall.

Like many people in the United States, I play a bit of a game of chicken with inflation rates. For example, when I took out my student loans, I did so because I needed to in order to attend college, and also because I counted on the fact that by the time I repaid them, they would be worth a lot less. The amount I took out when I went to college wouldn’t seem so large by the time I paid it back. Likewise, people take out mortgage loans with a long term because they know that what feels like a medium to large mortgage payment now may not seem like such a big deal in 20 years.

What consumers do on an individual level, the government does on a larger level. Inflation is a key part of the economy. I really don’t need to lecture anyone on this because we’re all aware of the ways in which it impacts us, at both a large and small level. And we’ve all seen the consequences of runaway inflation in nations with economies which have spun out of control; when a wheelbarrow full of currency won’t buy a loaf of bread, for example.

So we all accept that inflation exists, and that some of us benefit from it even as it causes problems like decreasing purchasing power for people with wages or benefits which become frozen. The question isn’t really “is there inflation,” but “how much inflation is there,” and here’s where the government and I disagree. The government says the inflation rate is low. I am not so sure.

Because if it’s low, how come the same amount of money is buying less? That’s kind of the key feature of inflation, is that as it starts to rise, purchasing power declines because people making the same amount are faced with goods and services with prices which are rising. Thus, a buck doesn’t go as far. In theory, this is the point where a wage increase is supposed to kick in so that things level out again, although in actuality this is not always the case.

Looking back over grocery bills for the last few months, I can see definite increases. Looking back even further into my register, I can’t break bills down by item cost, but I can see how much I generally spend on groceries in a given period, like a month or a week. I can also look at overall spending and see a definite upward trend which exceeds the stated inflation rate in any given accounting period; even though my habits are essentially static, I am spending more money to cover the essentials.

And here’s the thing: I’m eating much less right now than I was, say, two years ago. But I am paying more for food. A lot more. The only reasonable way in which I can explain this, given that my dietary habits have not really skewed upwards, is that the cost of food must be increasing. Why would the cost of food go up? Because inflation is driving it up, as every step of the production process costs more and these costs are passed on to me, the consumer. Likewise, the cost of my utilities is on a steady rise, and I can look at high bills and compare them with the same bill a year previously and see, for example, that I used less energy on the higher bill, which tells me that per unit costs for energy are also rising.

But the government says there is no alarming inflationary trend. So, how am I to reconcile my experiences as a consumer with the government numbers? The government has a much larger sampling pool than I do for its data, so it presumably reflects trends across the United States, as opposed to just in Fort Bragg. The only way I can think of that I would be experiencing inflation at an accelerated rate while the national rate remains relatively low is if communities elsewhere are undergoing deflation, which could be seriously bad news bears if that’s the case.

So, my purely unscientific survey question for people living in the United States is this: Are you noticing an inflationary or deflationary trend in your community?

2 Replies to “Inflation, Inflation, Who’s Got the Inflation”

  1. Wages usually lag considerably behind inflation. If a person stays in a job ou might, might get a three percent raise. Health insurance premiums and deductibles and copays have increased again, call it eighteen percent. Congratulations, you’re now making less than you did last year. It’s not fifteen percent less but I can’t be arsed to do the actual arithmetic just now. But it’s less. And that’s with zero inflation. Throw in the three or four percent inflation macroecon people like and it’s still less. The only way you can get a significant raise is to change jobs. To change companies. If you do that though you look disloyal, not looking out for yourself.

    And.

    The reason your grocery bills keep going up and the government says inflation is almost flat? The government measure for inflation excludes food and energy. The markets for these are too volatile to measure, they say. Food prices could go up like a thing that goes way up and doesn’t come down again and the official inflation measures wouldn’t twitch. Isn’t that keen?

  2. The mill closed the week before Christmas (no bonuses, people, no job, happy holidays) and since then the city businesses have been sliding. Shops have closed, restaurants have cut staff, discretionary spending seems to be down except among the quite wealthy who continue to be untouched. At some point, the middle class will disappear and there will be such a gap between rich and poor that we will either return to feudalism or turn to anarchy.

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