Friday, December 1, 2023

Inflation and hard times: we're all in this together


I've written often about inflation and its perils, most recently twice this month.  As I pointed out earlier, we're facing an effective 30% per year inflation rate as consumers, and some of us in more costly areas are staring closer to 50% in the face - and there's no relief in sight.

That's making life very difficult for many of us, including yours truly.  Kim du Toit examines his own situation, and is Not. Happy.

It’s a little sad.  I’ve always wanted to be, or at least stay in the middle class.  Screw the Commies and their lickspittles who sneer at the “bourgeoisie” and their “bourgeois values”;  I’m proud to espouse those values, if they mean things like hard work, a modest lifestyle, good education and aspirations to, well, just live comfortably.

But it seems that recently ... I’m no longer in that class.  Instead, I’m now working class.  And the realization thereof came to me as I was reading this article:

If things are hard for you and your family right now, please understand that you are not alone. Most of the country is in the exact same boat.

No kidding. We are managing — but only just — to keep our heads above water;  but it’s becoming increasingly difficult to do so.

In a desperate attempt to maintain their middle class lifestyles, millions upon millions of Americans have been taking on debt like never before, and as a result we are now facing an unprecedented consumer debt bubble.

We haven’t had to resort to that, with some very small exceptions, simply because we’ve cut back hugely on anything we consider non-essentials. But as costs of everything, especially essentials, have rocketed upwards, what that means is that we can’t pay down our small credit card debt to the extent we want, to where we can pay them off altogether.

. . .

I’m telling you because I am not the only one going through this.  I can’t help feeling that there’s an air of desperation in the air, because if I’m feeling it, there are probably thousands, maybe hundreds of thousands of people in similar circumstances to mine.

There's more at the link.  Recommended reading.

The thing is, there is no short-term political solution to this.  Re-electing President Trump won't solve the problem, because Congress and the Senate are addicted to tax-and-spend policies.  Both parties, the Republicans as much as the Democrats, are to blame for the economic mess we're in:  and we, as voters and taxpayers, bear part of the blame, because we've benefited from their tax-and-spend policies and have therefore continued to tolerate, in some cases even enthusiastically embrace them.  Some of us (take a bow, Karl Denninger among others) have seen the current mess coming for years, and warned about it, but we're "prophets without honor in our own country".  People don't want to hear about coming hard times, and have turned away from common sense.

If you want to get a very cold, uncomfortable look at where this might end up, read "The Mandibles: A Family, 2029-2047" by Lionel Shriver.

I don't know why the cover-cited Wall Street Journal review of the book found it "a provocative and very funny page-turner".  It's anything but that to me.  The book is sometimes heavy-handed in its treatment of economic issues (Ayn Rand would probably have loved it), but its analysis of where we might find ourselves in five to ten years' time is absolutely in line with historical cases such as Weimar Republic hyperinflation, of which we've spoken extensively in these pages.  I don't like the book.  It makes me feel very uncomfortable, even threatened . . . but it's far more likely to be accurate in its predictions than many of the feel-good everything's-going-to-be-fine newspaper reports and opinion columns we see all around us today.

Folks, we're all in this boat, whether we like it or not.  Some of us are feeling the pinch harder than others, but we all are to a certain extent, and that's almost certain to get worse, rather more quickly than we'd like.  We have to face facts.  We can't shy away from this any longer, or pretend it isn't happening, or cling to the hope that all we need to do is vote harder and elect the "right people" to make it go away.  Things have gone too far for such an easy fix.

  • We need to already be prepared as far as possible, and if we aren't, we need to get that way as quickly as we can.
  • We need to plan ahead for our own economic circumstances, control our spending (and limit it as far as is possible), and put our savings into something that will hold its value rather than be inflated out of existence.  With effective inflation at 30%+ every year, and interest rates on bank savings accounts paying (at most) about a sixth of that, every day that passes means we lose money.  We - my wife and I - are putting our savings into things that will hold their value and be available when we need them, like emergency food reserves and other preparations for hard times.  Sure, we have an emergency fund, but we're watching its buying power shrink almost by the day.  That's a very uncomfortable reality - and there's the threat of confiscation during a banking crisis, as we saw a few years ago.  Put not your trust in bank accounts.  What's in them can be confiscated at the stroke of a pen, and used to pay off what banks owe.  It happened in Cyprus not long ago, and legislation has already been passed enabling so-called "bank bail-ins" in most first-world economies (including ours).
  • Don't put your faith in precious metals, either.  For a start, you can't eat them.  Sure, they're a great store of value, and I own some for that reason:  but they're not my first line of defense against hard times.  Furthermore, they can always be declared illegal and confiscated by a desperate government.  They did it once before.  There's nothing stopping them from doing it again.
  • Don't trust that your retirement savings will always be there, either.  Quite apart from inflation reducing their value at breakneck speed, they, too, can be confiscated.  There have been proposals to do so for some years now.  Want to bet that, as times get harder, those proposals won't get louder and louder?  I don't.
  • Focus on the small things first.  Get out of debt.  Have enough of your basic needs (clothing, shoes, food, cleaning materials, etc.) to cater for your current situation, and put away more if you can to cope with unexpected emergencies.  Get fitter and healthier.  Be aware of potential security risks to you and yours, and prepare yourself as best you can to deal with them.  Only after you've got all of that right need you worry about the bigger picture, because there's nothing any of us as individuals can do about the bigger picture.

Friends, let's face reality, and deal with it as best we can rather than taking on more debt in a desperate attempt to maintain what used to be our standard of living.  Some will be able to afford to do that.  Most of us won't.  The sooner we face up to that, and start dealing with it, the better.



Chuck said...

Peter - one thing people seem to forget about gold/silver confiscation is that the dollar was backed by gold and therefore convertible to gold/silver (I have a $20 gold note and $1 silver note). In order for FDR and the Fed to devalue the dollar, they HAD to get it out of private hands, hence the confiscation.

Now that the dollar is not backed by anything but hopium and gold is not seen as money by TPTB, confiscation is a minimal risk and in my opinion (what little value/weight it carries) significantly overblown. A far greater risk is bail-ins and IRA confiscation/forced investment in giverment debt.

Maniac said...

My savings account is about to fall into the three-digit range, my landlady is raising my rent in a few months, and I haven't even started Christmas shopping yet. Never thought I might have to start a GoFundMe to help make ends meet, but here we are.

This movie sucks.

Xoph said...

Chuck, I disagree. I've read that BRICS is looking at metals based currency, actual money. So imagine what happens if BRICS (read the manufactured in labels on your stuff) want to be paid in gold or silver and not hopium dollars.

Peter, speed of money is approx 18 months, so even if congress changed 180 degrees it would take 18 months to even start taking effect. And as you noted we are still on course. We the people cannot change a thing. Exclude mail in ballots and Trump won all 50 states; my analysis is he had 65% of the popular vote minimum. Our votes and wishes mean nothing. Illegals aren't here to vote, they're here for chaos.

I fully expect all gold and silver to be confiscated. I expect all retirements and healthcare to be nationalized after our currency crashes. This is about control, greed and destroying Western Civilization. This makes sense if you remember the aristocracy preferred to have serfs, tied to the land and unable to leave.

Max Wiley said...

I would say that 5-10 years is the timeline for the END of whatever is happening. It is beyond doubt that it has already begun. I have dreaded each coming year since 2020, and I think that dread has been justified. The end of the lockdown and vaccine craziness notwithstanding, things are getting worse not better.
2024 is likely to be a special case, not only due to political turmoil but also financial troubles. Nearly a quarter of all US Treasuries outstanding come due next year, resulting in somewhere around 4.5X as many Treasuries needing to be auctioned as this year to roll that debt over - and the Treasury auctions have already been showing signs of cracks. On top of a projected deficit of $2 Trillion next year, we are also looking at a recession which could drastically reduce tax remittances, plus skyrocketing interest costs on the national debt are already projected to surpass $1 Trillion/year by the end of 2023 AT CURRENT INTEREST RATES. What I'm getting at is the deficit is more likely to be closer to $3 Trillion in 2024 than not and that's on top of the $8 Trillion in old debt that needs to be rolled over.
Who is going to buy $11 Trillion worth of new US Treasuries next year? China? China's real estate bubble, which will likely end up being studied in college economics courses alongside the Tulip Mania and the South Sea Bubble, is starting to unravel. Hundreds of thousands if not millions of Chinese factory workers have already been released from their contracts for the year because the factories don't have any orders. China is using their foreign currency reserves (mainly US Treasuries) to prop up their own currency. China is a negative demand in the market for Treasuries for the foreseeable future.
The demand for US dollars to settle foreign trades has been reduced by BRICS nations (and others) agreeing to settle trade in their own currencies. The "exorbitant privilege" the US dollar has enjoyed by being the world reserve currency is being reduced daily.
No matter how you cut it, the new dollars the Fed is going to have to create out of thin air next year to monetize the Treasury market are going to make the pandemic payment inflation look like a walk in the park. Severe financial conditions, if not collapse, is NOT 5-10 years in the future. You have been warned.

Dan said...

We are not "all" in this together. The 1% and the power brokers are immune to the effects of inflation. In fact inflation enriches them and expands their power. And we are almost certainly beyond the point of no return economically.

Mind your own business said...

"Folks, we're all in this boat, whether we like it or not."

Not really. This may be true among your readers. We, the hoi polloi, the plebs, the working class. But it is anything but true if you include the ruler-elite class that inhabits government and the world of finance. And this is true at the local, state, federal, and world levels.

Watch the Tucker Carlson interview of Marjorie Taylor Green. She absolutely nails it when she says that most members of Congress hate us. Doesn't matter which party. We are nothing but an annoyance and a burr under their saddles in their plans to enrich and empower themselves.

Those who self-appointed themselves commander of the lifeboat are busy calculating who they plan to throw overboard.

Anonymous said...

I just retired yesterday. I'm 72. My wife has been retired for five years on a federal government pension. We will need to cut back on some things, but I think we are better off than most. We just had the worst tragedy parents can have when our daughter died a few months ago. So my overall attitude is fatalistic with bouts of "bring it on." I see the society I grew up in being deliberately destroyed by the ruling class. I'm not an aggressive type, being libertarian, but this I will defend, as the saying goes. Or to go back further, "Here I stand. I can do no other."

Anonymous said...


FWIW - quite a read

"The Frauds Never End"

Anonymous said...

Winner winner chicken dinner!!!
Read the above again folks.

Anonymous said...

It's called tangibles investing. Buy consumables when on sale for immediate gains of that % savings, generally equal to a few years of returns of same $ invested.

For a good combo while retired or as a side hustle, also figure out something you have unique knowledge or skill in to combine deals with sweat equity -- fixing old cars or lawnmowers, rehabbing free or nearly so furniture, repairing gunsmith special guns, saving and reselling heritage garden seeds or tree starts, easy woodworking or welding projects, etc. Heck, even preparing taxes during tax season for one of the large tax companies that are always looking for seasonal workers.

Good luck!

Anonymous said...

I’ve had The Mandibles on my shelf for awhile now, but always put it off for something else. Prompted by this post, I sat down this morning to give it a read, and haven’t put it down except to prepare a few meals and help with some church Christmas decorations. I’m not sure how I feel about the book. At once, it feels perfectly obvious that this is exactly how our future plays out, but also scared that statement may in fact be true. Has me thinking that my so-called ‘wealth’ is far too dependent on a functioning system that is really just a house of cards.

Lynn said...

Yeah, I suspect that my pension coming in 2025 will get grabbed. Fidelity is distributing it for my bankrupt employer.

Ozborn said...

Bail-ins of the banking system have been a thing since the 1930s (establishment of the FDIC). The publicity edge was that the smallest deposits were protected, and the larger balances were wiped out.

Of course the 1% don't keep their wealth in banks, so this regime primarily hurt the upper-middle class.

lynn said...

Ah, you "liked” my book suggestion. I totally agree, the book is not funny at all. It is a long look at a possible 18 year apocalyptic disaster.

I am reading now that Biden's IRA (inflation reduction act) is estimated to cost $3 trillion over the next ten years. That number just takes my breath away. Biden is spending our valuable capital on the wind. Literally.