As I've said so often in these pages, the "official" rate of inflation bears little, if any, resemblance to reality. Karl Denninger drives home the point - and reminds us why it's happening. Emphasis in original except for orange highlighting, which is mine.
When I go to the grocery store the register tape -- and my Quicken -- says I'm spending a lot more money there. Not a couple of percent over the last 12 months, an obscene increase. Shelf prices are one thing, but actual paid prices are truth -- and those involve discounts, coupons, BOGOs and similar. I, like most people, buy pretty much the same things to eat. Spending over the last 12 months is in fact up more than 30%, not 2%.
Car insurance is claimed to be up about 20% -- and it is. That's real, and everyone with a car has had to pay it.
But the government also claims that health insurance has been down in price by roughly 30%. That's nonsense, and we all know it, but there it is.
. . .
The problem is that ... we "trained" Congress (and both political parties) that they can run 30% deficits and not have it show up as 8% inflation on a permanent basis. That's flat-out false.
This in turn means that either we're going to absorb about 8% inflation (no matter what the government claims), [or] spending must come down by about 30% at the federal level and that is only to stabilize prices, not return them lower, or taxes must go up by about 40% which of course is another expense in the household and reduces disposable income. The latter is politically impossible.
How does this resolve?
I don't have that answer -- but what I'm seeing on the ground is a profound decrease in consumer activity. Yes, there are places where everything is "happy time" -- but that's not the country as a whole.
WalMart has noted it, and when it hits WalMart that's the people up to perhaps the top 10% of earners.
There's more at the link.
I can't argue with a word he says. I agree that actual, boots-on-the-ground consumer inflation is presently at plus-or-minus 30% - I said the same thing last year. I won't be surprised to learn that in some areas, it's closer to 50%. We're perilously close to slipping into Weimar Republic-style hyperinflation. Many will scoff at that assertion: but they haven't studied history closely enough. The parallels are real, and not hard to see for those with unblinkered economic eyes.
The biggest single problem, as I see it, is that too many Americans - corporate as well as individual citizens - have become accustomed to living off Uncle Sam's largesse. Need money? Turn to the federal government to provide it! That's why more than half of America's families are receiving government benefits in one or more forms, and why many corporations are utterly dependent on government spending for their very existence. Just how long would Lockheed Martin, or Archer Daniels Midland, or Halliburton, be able to continue to operate without the billions upon billions of dollars of government money they rake in every year? How many industries are subsidized to the tune of billions more dollars because they spend millions on lobbying the government to do their bidding? The US government is - and has been for a very long time - in bed with Big Business, and that's not going to change unless and until we throw out almost every Congressional representative and Senator and start over again. If you think that's likely to happen, I have this bridge in Brooklyn, NYC I'd like to sell you. It's a real bargain! Cash only, please, and in small bills.
If we cut off this cornucopia of government largesse, we could solve our economic problems - and inflation - in short order. However, to do so would involve short-term national pain that would make the Great Depression look like a minor economic hiccup. That's why it's never going to happen voluntarily. Nevertheless, if we get our own version of Weimar hyperinflation, it may be forced upon us, as the only way to get out of the economic hole we've dug for ourselves. Not a happy thought.
That's one reason - and a big one - why I've built up our emergency reserves and supplies as best I can (not nearly as much as I'd like to, but as far as I can afford). The time may come when that's all we can afford to eat. Think I'm joking? Go read the snippets I've posted from time to time about the reality, the lived experience, of Weimar hyperinflation, and think again.