I went to the grocery store today. There were two products in particular in which I noticed price changes.
The first was organic honey. I believe the price went from $5.99 to $6.99. I had bought it at the previous price just a few weeks ago.
Now, one dollar doesn’t seem like much, and it really isn’t. But a one-dollar increase on 6 dollars is 17 percent. Imagine if the price of everything went up 17% over the course of one year, let alone just a few weeks.
It’s not like I will pay that extra one dollar one time. I buy honey every couple of weeks. I might end up paying an extra 20 to 25 dollars per year from this one increase alone. And that is assuming it won’t go up any more.
I also bought a 20-pack of breadless chicken wings, which I don’t get too often. The previous price (probably from a few months ago) was $12.99. They are now $14.99 for the same size package. That is a 2-dollar increase or 15%.
To be fair, there were many things I bought where I did not notice a price increase from other recent purchases. But some of those things had already had price increases earlier in the year.
This is very anecdotal, but I expect others see the same thing. Price inflation can be very subtle, until it’s not. All of a sudden, you are asking how in the world your grocery bill hit $200.
The government’s own numbers are showing a pickup in price inflation, although they may be understated. What really matters though is what people are actually experiencing.
As I previously pointed out, price inflation is running near 7%, but most people in corporate America aren’t going to see a 7% or more annual increase unless it is associated with a promotion and more responsibility. I’m sure there are a few exceptions to that, but many people will see a nominal wage increase with a real wage decline due to the decline in purchasing power.
Middle class America has already been through the wringer, especially in 2020 and 2021 with lockdowns, vaccine mandates, and all of the other crazy restrictions. Now we get to contend with much higher prices and a likely decline in living standards, at least in the short run.
The good news is that more people are recognizing the problem of inflation and government spending. I think a substantial minority of the population knows that the Fed is somehow at least partially culpable in all of this.
The Fed may finally be forced to stop creating money out of thin air and supporting the financial markets. While this may be bad news for people holding stocks and certain other assets, it will be positive if it means that the Fed will have to stop its monetary inflation, at least for a while. Perhaps we will see a major correction and a reallocation of resources more in accordance with consumer demands.
If the Fed doesn’t do more damage, we could see a correction in prices once consumer demand goes down. The correction will be painful, and perhaps quite severe, but we need to have a reallocation of resources, and we need for a proper market interest rate that encourages real savings.
This is ultimately what will lift the living standards for middle class America.
The current spending and inflation is unsustainable. Something has to give at some point. It may feel like a boom time to a lot of people, but I believe there is a lot of struggle that is being overlooked. The stock market doesn’t reflect the state of middle class America.
The stock market also won’t necessarily reflect the state of middle class America when it starts crashing.