Inflation or deflation, it's a scary situation - until we remember the reason for the season

 

We're all complaining about the rising cost of food and other essentials.  However, some markets are showing the opposite effect of our miserable economy.  Having soared to previously unthinkable heights, their prices are now collapsing, because nobody's buying at such inflated expectations.  The lumber (wood) market is no exception.

Lumber peaked at $1,336 per thousand board feet in late February but has settled at around $380 this week, representing a dramatic 72% decline in prices, primarily due to elevated mortgage rates, slowing housing activity, waning builder confidence, and overall mounting macroeconomic headwinds.

. . .

Framing, paneling, and plywood, types of lumber used to build a home, are well off their highs. Remember when plywood at Home Depot was fetching nearly $100 per sheet?

If you waited for the lumber bubble to deflate -- this might be the perfect time to buy.

There's more at the link.

That's great news for those planning to use a lot of lumber, but it doesn't do much for the rest of us who are struggling to make ends meet on a weekly or monthly basis.  Inflation - despite denials by the Federal Reserve and more government bureaucrats than you can shake a stick at - has been, and still is, eating away at our net worth.  As Gun Free Zone points out:

My father was a lawyer in a small firm (about 10 employees total).  My mother was a nurse.

We had a 3 bed/3 bath house, my dad drove a Chevy Suburban, my mom drove a minivan.

We road tripped to my grandparent’s house twice a year, summer and Christmas.  I never went overseas, but did vacation in Canada once.

That was the lifestyle of all my friends.  They had parents who were civil engineers, architects, accountants, one was a therapist, another was a dentist.

The federal government defines middle-class as single earners between $45,000 and $130,000 per year, family income between $65,000 and $250,000 per year.

I grew up towards the higher end of that range, but definitely within it.

We were solidly in the “professional white collar middle-class.”

Today I’m an engineer and my wife is a librarian.  Again, solidly white collar professional middle-class.  I make about the same on paper as my dad did.

Adjusted for inflation, my buying power is half of what his was in the 90s.

To buy a 3bd/3br house in California, South Florida, New England, Chicago, any major metropolitan area if going to start at half a million dollars and go up rapidly from there.

My parents bought the house I grew up in for $300K in 1995.  It just sold for $1.2M.

I can’t afford my childhood home making the same salary as my dad.

Again, more at the link.

We grew addicted to "easy money", handed out in the form of easy credit and aided and abetted by US government policy.  We forgot that what goes around, comes around:  that pumping a lot of money into an economy inevitably results in the price of goods and services going up to match the additional liquidity.  It's an invariable cause-and-effect situation.  Some businesses are doing well at the moment, because consumers can afford the higher prices for their goods.  Others, like lumber suppliers, are caught in the boom-then-bust cycle of the economy.  They made out like gangbusters a year ago.  Now they're in real danger of having to close their doors, because the lumber supplies they've built up at higher prices paid to producers can no longer be sold to consumers at a price that will cover their source costs.

As Jeffrey Tucker notes:

A world of easy money is a world without restraint in which every cockamamie ideology can ride high. The Fed was in the process of fixing this problem in 2019 but reversed course under the guise of supporting the pandemic response.

Of course, the only result of that was to prolong lockdowns: When you subsidize something, you get more of it and longer.

The right takeaway: This was all a preventable disaster. No virus and no act of nature robbed you of your money. It was the direct effect of egregious public policy. It began under the leadership of Ben Bernanke, who actually won a Nobel Prize for his efforts.

The currency regime at the Fed is now being forced into finding a fix but they are a long way from solving the problem. At the end of this, the pandemic response might end up slicing off a quarter or more from every dollar.

The only plus side is watching the puffed-up sectors of Big Tech and Big Media be cut down to size. We’re now in a position of finding out ever more about the outrages that were going on at these companies, and how they all cooperated with the government to end our privacy and speech rights.

Are people angry? If they are not, they should be.

Don’t let the major media troll you. This is a systematic pillaging taking place. I wish I could say that there is an end in sight, but I’m not seeing it yet.

More at the link.

In the midst of all this economic and fiscal gloom, it's worth reminding ourselves that the true foundations of our lives are more than merely physical, more than merely monetary.  At this Christmas season, let's remind ourselves why it exists in the first place.  Without Christ, there is no Christmas - merely another season of excess consumption.  We have enough of those.

Let's stop spending money on fripperies, and return to the foundation of our celebration.  If we get our foundations right, the rest will follow - slowly, perhaps, and painfully, but over time we'll restore equilibrium.  If we don't get the foundations right, everything we build on sand will collapse.

Peter