The American middle class is struggling.  It isn’t completely obvious, especially if you just look at statistics.  But if you talk to people, you can sense it, even if they don’t directly say it.

If the middle class is struggling, you can only guess how bad it is for those who would be defined below the middle class.  There are plenty of homeless people out there, especially in the “progressive” state of California, but there are many more people who are somewhere between homeless and middle class.

The statistics are just that.  They don’t give a good picture of what is really happening.  You can look at price inflation, jobs reports, real wages, etc.  They give you some idea that times may be tough, but they don’t really paint the picture.  Also, they may not be completely accurate.

When you hear someone mention the high price of gas, they may or may not just be making conversation.  For most people, it is a real problem though.  Anyone who mentions high gas prices probably isn’t just doing it to show sympathy.  A few might do that, especially when it comes to politicians.  But most people mention it because it is a real burden.  If they have to pay an extra 20 dollars per week to fill up the car, then that is 20 dollars that can’t be saved or spent elsewhere.

The food prices are even worse.  The good news about food is that you can usually make some substitutes unless you are on a really restricted diet.  However, we consume a lot more food than we do gasoline.  So even though the hike in food prices may not be as dramatic, it is taking a bigger bite out of many people’s wallets.

Price inflation is over 8% annually right now.  That is according to the government’s own statistics.  Maybe it is more like 10%.  It will vary for each individual depending on what they consume.

If you are on a fixed income, these constant price hikes really hurt.  You are falling farther and farther behind.

When the Federal Reserve or the financial media talk about bringing inflation down, they don’t mean bringing prices back to where they were last year.  They mean slowing down the rate of price inflation so that prices go up at a slower pace.  Those on fixed incomes will keep falling farther behind.

Meanwhile, if you earn an income, many people aren’t getting salary increases of 8 or 10 percent per year.  To pay the additional taxes, most people would need a raise of greater than 10% just to break even with price inflation.  In other words, real wages are going down.  Most people can’t buy as much this year with their income as compared to last year.

Talk to people.  Talk to friends, relatives, and neighbors.  See if you get a sense of how people are doing.

It feels similar to 2007/ 2008 to me.  Times are supposed to be good.  Unemployment is low.  Housing prices keep going up.  Stocks were going up until recently.  People are eating out and shopping, or at least that is supposed to be what is happening.

Some people really may be feeling good about their situation.  They have all of this new equity built up from their primary house.  Their 401k balance may be down this year, but it is up tremendously over the last 10 years.  So some people are feeling pretty good in spite of the higher price inflation.  They just need for the good times to keep on rolling.

But the only way the Fed can get price inflation under control is by tightening its monetary policy.  These good times – one might say bubbles – are built up by easy money.  The Fed has generally had easy money since 2008, and now that is about to change.

Either the Fed follows through and tightens, or it risks really wrecking the dollar.  Maybe the Fed will start to tighten and then stop draining its balance sheet once the economy heads down.

Most families who are feeling pretty good right now are going to be in for an awakening.  The good times are about to stop.  You can feel it in the air.

I think most middle class Americans are already struggling to some degree right now, even if they don’t admit it.

It is time to go back to the basics.  Pay off debt, especially any high interest debt.  Save for a rainy day if possible.  Cut spending where it is reasonable.  Most importantly, don’t go into any new debt unless it is absolutely necessary.

Talk to people.   Open up to them and talk about how tough things are right now.  This will take their guard down.  They won’t feel embarrassed to let you know that the bills have been a bit higher lately and that times indeed are a little tough.

I think you will discover that a lot of people are hurting out there.  We don’t officially have to be in a recession for times to be difficult.  We actually need a recession in order to correct all of the malinvestment.  We need for the government and the central bank to allow the correction to take place without distorting things more.  This is what will ultimately help struggling Americans.