As a parent with kids, I really don't know how folks are getting by with the prices of everything. I know folks who keep eating out, buying new vehicles, and even building new houses and I'm left scratching my head wondering how they afford all of this.
I'm not saving nearly as much as I was years ago and I think my "lifestyle" has decreased post COVID (few vacations, eating out is a treat, gifts are for birthdays/holidays). Is everyone swimming in debt?
There is a _LOT_ of debt being added, household debt is up to something like 17 trillion dollars from like under 10 trillion pre pandemic.
IMHO vehicles are huge drivers of debt. There are almost no cars under $30k now, and the average sale price of new cars is pushing up near $50k. This is for bog standard stuff like Hondas and Fords, not luxury cars. Used cars are incredibly expensive too. People are financing cars for well over 5 years now--I've heard of people on 6 and 7 year loans now just to make monthly payments possible. It's nuts.
I don't know how most people are doing it. For me it's because the asset bubble has inflated my stock income. I suspect a lot of folks who owned homes, stocks and other assets are feeling the wealth effect. For the rest of society, I don't know why they're not in the streets with pitchforks.
Same. I make decent money and used to save thousands per month. Now I'm lucky to stash away high hundreds a month, but any expense like new brakes wipes that out.
I wonder how in the world everyone else is getting by. Maybe we're all just smiling and pretending here...
401K early withdrawals are up almost 40% YoY and credit card debt is also up massively. If interest rate increases do lead to eventual job losses things will get ugly fast
real estate is the thing to watch, if even a small number job losses happen people will have no choice but to sell even if they want to keep their low interest rate(home prices have stayed relatively flat because everybody is staying put, so low inventory on paper). Interest rate increases have resulted in significantly lower buying power, so home prices will have to drop. Forced sales will cause others to rush for the exit and cause even further price drops
> I know folks who keep eating out, buying new vehicles, and even building new houses and I'm left scratching my head wondering how they afford all of this.
You can never judge people's financial situations from their spending habits.
Someone in my extended family spent years living large, buying new cars, building new houses, and wearing nice clothes. They had a family business and always said that the business wad doing well. Several years later the husband died unexpectedly. His wife was suddenly struggling to make ends meet, despite nothing actually changing with their "business".
As we later discovered, they were experts at amassing debt. The business wasn't really successful but they had used every possible angle to get more lines of credit, debt, "investments", and loans. They had even made a habit of "buying" supplies from vendors with Net 30 terms, reselling them, and then never paying the vendors back. They moved from state to state to scam new vendors every time they were blacklisted by the all of their local vendors.
That's an extreme example, but it highlights how appearances can differ so much from reality. More commonly, I think a lot of people just never learned how to save anything at all. I know an alarming number of people in their 30s who still haven't bothered saving anything more than the $1-10K they have in their checking account at a given time. When the number goes up, they spend it back down. You could have the same net income as these people but never achieve their level of lifestyle spending because you're doing some savings.
On the other end of the spectrum, many people are actually doing well. Wages are up (contrary to what you see on social media) and people's investments have done very well in recent years. Many of my friends are doing quite well for themselves by simply getting working a little harder to get jobs that pay a little above average and then carefully budgeting and investing over the long haul. Do this for a couple decades with some careful attention paid to where you live and the job you get and it's not hard to get a rather comfortable financial position by 40, especially in tech.
It's death by a thousand cuts. New backpack for the oldest, new shoes for the youngest, oil change for the wife's car, leaf guards for the gutters so they don't clog the French drain I had to have installed due to my living room flooding. Dog has to get shots or heartworm meds... Choose the month and there is guaranteed to be $250 - $2000 in incidentals as a homeowner with kids. Wife's student loans kick in next month, $750 a month. It's crippling and I am lucky enough to do fairly well financially. I'm complaining but I'm aware that millions have it way worse than I do.
> As a parent with kids, I really don't know how folks are getting by with the prices of everything. I know folks who keep eating out, buying new vehicles, and even building new houses and I'm left scratching my head wondering how they afford all of this.
I hear you perfectly. What I did a while ago was to fully embrace a more frugal lifestyle where attention and time are the most valued. So consumption went to a minimum and all that. Now after prices jumped up we’re where we started and despite being frugal we’re left with a lot less. It is quite unsettling to be honest…
I think a lot of people get into a mindset that a 25 year mortgage is meant to be paid off in 25 years, so that mindset guides their entire frame of reference for how large a lifestyle to adopt. I’m not saying to rush through a mortgage. Do whatever you want. But consider not getting into a situation where you’re somehow struggling even though you’re one of the lucky few who can afford to even own a home.
When times get tough they’re no more secure than those who make less.
I’ve seen this with many peers who have Teslas and 1.5M homes who are now struggling despite such an income.
> I really don't know how folks are getting by with the prices of everything
There is a lot of regional variation in production [1] and income [2][3]. On the whole, real disposable income and savings rates are up [4].
But someone in the midwest (income up, annualized, 7 to 11% Q4 '22 to Q1 '23) or Florida (7.9%) is seeing a very different economic landscape than someone in California (0.7%) or Indiana (-1%) [5].
With kid moving up to public school from pre-k we'll be saving an extra 2500$/month now. And in a couple years when our younger one is old enough that'll be another 2500$/month saved so I'm feeling pretty optimistic.
SAME! I barely saved this year so far and I haven’t been splurging on anything. The car I bought before the inflation burst is now 25% more now. I make good money relatively but I still feel like we’re drowning. Every grocery run is over $200 even if don’t get meat, just the fruits alone are eye watering nowadays.
I switched from regular grocery stores to aldi/lidl/walmart. And from eating out 2-4 times a month to eating out 1-2 times.
I also switched to more staple foods like lentils and beans and rice and canned vegetables instead of fresh vegetables. And to buying ground beef on sale and freezing.
It seems kind of crazy that prices keep going up and even simple “luxuries” like a coffee while networking went from $3.5 for a small latte at my local coffee shop in 2019 is now $5.5.
I think for some people it doesn’t seem to affect them and they just pay the higher prices but base costs seem to have really gone up a lot for my family. Fortunately some big expenses are fixed (mortgage and transport) but if they had to change it would be extra rough.
Because their pay also increased. People can generally afford higher prices. Real wages have remained remarkably stable in the last few years.
The article itself says this. Somehow, it manages to spin it into bad news.
>Even though prices have soared, real earnings, which adjust for inflation, are stuck at late 2019 levels.
People can afford the same lifestyles they could a few years ago. The US weathered the outbreak of war in Europe and the worst pandemic in generations without serious economic hardship. Somehow, in CNN's view, this is a problem. Real wages haven't been stable. They haven't been resilient. No, they've been "stuck".
I have been listening to plenty of "finance gurus" (i.e. my favorite is Dave Ramsey). I see (here in EU) that young people have 1-2 credit cards. I understand that in the US the number is higher. The dream for any young (female) professional at the tender age of 25 is to own a couple of very expensive bags ("because I deserve it" using credit cards of course).
Consumerism going steady. At least in the US you have the 401k. When I begin a discussion with friends/ acquaintances on "hey guys anyone got a decent EFT? I go my VOOG and SOXX all set up but I am looking to diversify further with some water, consumer, international, etc" and they look at me as if I speak some ancient language.
So.. most save minimal, invest nothing. Paycheck-to-paycheck is a big thing in the US and it is happening in the EU now.
(and don't get me started on parents of 14yo kids buying their kids the new iPhone every darn year)
Considering China and middle east largely dumping USD transactions and debts, you will see whatever pricing you have today to double in coming 10 years (assuming Joe and very similar to Joe quality controlling America government for coming decade - mostly now fraud so elections result wont change much). Park your money away from USD (e.g. gold or Bruneian dollar) and prepare your kids for other things than America-centric such as learning to code, and learning Chinese. My nieces are even learning Russians and Koreans beside Chinese and they are in their 20s.
I think a big problem, especially with companies, is that as soon as any cost of some input touches a new price level, that price now starts to get baked into the planning. Even if it was only for a very short blip, and even if the actual average costs later go down. It gets very sticky, but only in the up direction.
Have you talked to any kind of building work contractor, insurance company, etc. lately? They've all jacked up their prices just because their supply prices touched a certain level and now they have to plan for it. And to be sure, some of them are using the cover of inflation to test how willing people are to pay more.
Inflation really is a vicious cycle. And I don't think we've in recent memory seen prices actually decrease after an inflationary cycle. Do things pegged with CPI even allow for negative inflation?
This is accurate. Once the unit price is calculated with the temporarily higher input price, they are not going to reduce the unit price for as long as possible, even if input prices go down.
And what's worse? The FED does not want negative CPI. They want slowly rising CPI. A negative CPI is deflation, something they want to absolutely avoid. They don't want prices to go down. They only want them to rise up slower.
Which leads to us humans always stuck on the hedonic treadmill. If one is relying on wages, one is absolutely fcuked in this system. The only way to keep up is to keep switching jobs to a higher pay.
What I don't understand is this 2% price target. Prices could go up 10% one year, and well call it a success if next year we "tame inflation" by only having our prices go up 2%. Why can't we target to get prices back down? For those on a fixed income, this is money we lost forever. We expect (and see) some prices go down every year (mainly electronics) and it works fine. But god forbid the price of milk goes down a bit after rising 20% in two years.
Governments are afraid of deflation (prices going down) because consumers can go into a holding pattern (stopping spending while waiting for prices to continue to decrease) which can cause the economy to stall out.
Stickiness of nominal wages means thaf deflation leads to more rapid downsizing in industries facing slowdowns (including transitoy ones), which is among the reasons that the Fed, faced with a dual mandate of price stability and promoting full employment, prefers small positive inflation. There's also reason to believe that deflation is more likely to be sticky once entrenched than inflation, because the knock-on effects produce more deflation.
> For those on a fixed income, this is money we lost forever.
Yes, that's a fundamental problem with fixed incomes and why minimum support programs don't tend to use fixed nominal benefits across time. Most people aren’t on fixed incomes, and if we tried to manage price levels around people on fixed incomes, not only would it be bad for everyone else, but it would also threaten the investments underlying the sources of those fixed incomes (which aren’t really fixed, because they can drop, including to 0.)
Deflation means a dollar tomorrow is always worth more than a dollar today meaning a rational person should strive to spend as little money today as possible. This eventually locks the entire economy up into a death spiral.
Between 2008 and 2018 milk prices went down from $3.80 a gallon to $2.90 [1]. So we're actually barely above 2008 prices in non-inflation adjusted dollars.
To your specific point about targeting negative inflation, that's deflation, which most people believe is bad for the economy. Even if there are types of "good deflation", government policy inentionally targeting deflation would almost definitely be a bad thing.
Most of the other responses are missing the point of your question. You really asking why central banks don't engage in targeting the price level, rather than price changes (=inflation). In price level targeting, they'd aim for higher (lower) inflation next year if they under-(over-)shot their target this year.
Academics and have studies the pros and cons. I don't have time to post summaries, but maybe someone else can step in:
It’s because that’s called deflation and mainstream economics predicts that it is absolutely catastrophic to the economy, at least if it is seen generally across the whole economy. Obviously, individual goods can decrease in nominal price, but general deflation is thought to lead almost immediately to depressions and recessions.
>> What I don't understand is this 2% price target.
It is statistical trickery and a headline number used to make people think things are OK. It is also a convenient number for COLA increase targets which make people think their incomes/pensions are going up (when effectively they are not on a real basis.)
Also, as you note, we re-baseline each year and dont talk about the cumulative compounded inflation e.g., over the past 5yrs.
Americans on fixed incomes (e.g., pension, social security) and those without wage elasticity (e.g., restaurant workers) are absolutely miserable right now because they are squeezed from both sides, even after modest wage increases in 2021/2022. This is not good for a Democracy.
You’re supposed to be getting raises to keep up with inflation. Inflation means rising cost of everything, including your labor. What is your source of a fixed income? Even social security has cost of living adjustments.
If it’s an annuity, you can get annuities that vary based on changes to the CPI. If you put a lot of money into a fixed annuity years ago, you did not properly hedge interest rate/inflation risk.
Some inflation is seen as good by economists because it pushes money that would sit on the sidelines into "productive" uses. It creates an incentive and a need for risk taking or stored wealth will be eaten away. That this doesn't align with most individual's goal is of no concern to those most interested in productivity and GDP growth.
People get hired off the 2% because that’s a baseline level of growth. When the economy is in deflation people will constantly get fired every year, growth basically stops, and you end up with a highly risk averse Japan-type situation.
This is a drastic oversimplification but that’s basically it
I feel blessed to work in Tech, where -- however bad the economy is -- most of us dont face absolute deprivation as those in some other industries.
That said, basic expectations of things growing up are just unreachable for many. My parents lived much more comfortable lives than I do. My grandparents even more so.
US leaders should be careful. People get upset when they have nothing to feed their children. I hope we solve these problems with sensible fiscal and monetary policy.
My parents lived much more comfortable lives... grandparents even more so...
Interesting how you stopped at "grandparents".
To be clear, absolutely not intended as any kind of attack on you or what you've written - just some thoughts passed on to me that made it easier to be grateful for that which is in my life, period:
Consider past generations - we're in "the 1%" by that metric alone. No / hardly (any "real") medicine, completely unstable food supplies, other tribes coming over the hills and killing everyone ... and, that's describing more of the "history" part of human existence, to date.* Further, a core bias of psychology is "the golden age bias".** Including feelings as simple as: when events are in the past, things can seem so "neat", "orderly", and ... "simple". Oh for one income to feed a family of four, right? But, how many had that experience - what proportion? And, that ties in with "survivor bias" etc.
Don't get me wrong, instability is a PITA. I get where you're coming from. It's not as though I don't have such thoughts. But, I can always come back to various bits of wisdom I've picked up from a myriad of sources, including a phrasing I've always liked that AFAIK is from Bill Maher:
If you think you have it tough, read history books.
That always helps me to remember that I didn't just watch my village burn to the ground due to the Mongol or European or etc. raiders, my relatives get raped and murdered, my child die of ... well, just about anything ...
... maybe some in this thread will find these ideas useful as well.
* Zooming out a bit more ... I always find it amusing walking in a park, especially - hearing the birds chirping, seeing the squirrels "frolicking" ... what passes for a pleasant "pastoral" experience for us, is filled with advertisements for sex / nasty "neighbor property line disputes" (birds chirping), animals desperately trying to find the next meal or water, etc.
> That said, basic expectations of things growing up are just unreachable for many. My parents lived much more comfortable lives than I do. My grandparents even more so.
My wife’s grandma got married as a teenager to a trucker passing by because her family couldn’t support all their kids. This was not unusual in that generation.
My spouse and I have been talking about this quite a bit lately. Even with two incomes from tech employment we are watching our budget since it feels like everything is extra expensive lately. The income gains we’ve made have only allowed us to maintain versus climb to the next level of lifestyle. It makes me wonder where we will start falling behind.
Obviously we are fortunate to not live on credit cards and have our bills paid, but it feels like we worked hard to get here to be no better off than we were.
I wonder how other folks in the middle class are making ends meet especially trying to afford a home with employers forcing RTO/RTH to HCOL in many cases.
This bout of inflation is very demoralizing. In 2020-21 home prices rose by over 30% in the area I was considering (the Monterey Bay Area). Home prices have stabilized since then, but unfortunately interest rates nearly doubled, pricing me out of the market (I tried to buy in 2021 when interest rates were low, but competition was heavy and I lost out to bidding wars). I’d have to move far outside the Bay Area (like Sacramento or Fresno) to be able to purchase a home in a safe neighborhood at current valuations and interest rates, and even then Sacramento has gotten pricey since 2020 (though still a bargain compared to the Bay Area). Food prices (both dining in and at the grocery store) have risen considerably, and my rent has consistently gone up by 8% annually. Yet my salary at my non-FAANG enterprise employer hasn’t caught up with inflation; I get the customarily low merit increases. Unfortunately switching jobs is very difficult right now due to layoffs and reduced investment in tech, not to mention I like my employer and switching jobs in an attempt to make more money means giving up the nice work environment I’m in.
While I’m able to get by, I feel that I can’t get ahead. I don’t see home prices falling anytime soon; the current high home prices are fueled by a lack of inventory caused by people not wanting to give up their 3% interest mortgages, yet if interest rates fall, demand will increase, pushing up purchase prices. The only way out is building more homes, except due to NIMBYism and geographical constraints, the only affordable new homes that are being built are in the Central Valley. I’m seeing the writing on the wall; eventually I’m going to need to make some drastic changes in my career and my location if I hope to own a home instead of being a perpetual renter.
I feel like these anecdotes make more sense with numbers. What is your combined household income? > $250k?
I mean, if this is where people are feeling pinched I agree I have no idea how the middle class is surviving
I bet wherever you are living you have a household income in the top 20% locally. I bet you’re spending a lot more on “something” than the median wage earner in your metro area.
It's always seemed extremely disingenuous to lump all price rises into a single number called "inflation". It makes "inflation" seem like some kind of magic force that just happens and can only be solved by the equally magic application of something like fiscal policy. But it's not magic, price rises are the result of active and deliberate choices by companies and countries which could be solved with actual policy changes.
Housing prices go up because there is a shortage of housing and the housing that exists is being used as investments. The solutions could be to make it easy to build more housing and also to make policy changes to encourage other ways to save money.
Energy prices go up because we've wedded ourselves to fossil fuels that are controlled by very few players who can set whatever prices they want. The solutions might be to diversify energy sources and reduce energy consumption.
Food prices go up because of energy prices and because food companies are gouging for profits. The solutions might be to reduce the dependence on fossil fuels for food production and to not allow food production to be a for profit enterprise.
The prices of other goods went up because there was a global pandemic that disrupted supply chains around the world. The solution might be to build a more resilient system for providing goods rather than one that's cut to the bones to increase profits.
There are real solutions to the problems that cause price rises but as long as we treat "inflation" as some sort of magic force in the universe those solutions will continue to be ignored in favor of magical thinking and political arguing.
I'm not a high paid tech worker like the rest of you, but I've never really considered the price of individual grocery items as a factor in buying it. If something was on sale - great, and I'd prefer that over other options. Otherwise I'd just fling stuff in my cart.
Now? I regularly don't buy things after seeing their price. It's not that we can't afford it, but I simply can't stomach the price. I'm not paying $11 for two shrinkflationed bags of "regular size" Doritos apparently on sale. An empty calorie snack like that just isn't worth it for me, and it pisses me off that they'll charge that much for what's basically a small amount of corn...and that enough people still buy it to maintain that price.
Eventually I may adjust to these new prices, but in the interim I'm regularly shocked at what things cost and it's causing me to spend less.
It’s definitely pushed me to buy basics (eg produce, pasta, protein) from Costco and cook at home more. So the silver lining is that I eat healthier, and have discovered that I enjoy cooking.
WTF is "typical" supposed to mean? It's in the source, too, which is a tweet. [edit: and apparently a personal email to CNN?]
Teacherman @jboyd33488892
Replying to @Markzandi
Is that extra $700/month a mean or a median?
Also in the replies from @David_Charts:
Hourly wage gains have exceeded inflation vs. pre-pandemic:
+20.5% wages of prod & non-supv workers
+17.4% inflation (CPI-All)
+15.5% inflation (CPI-Core, ex food & energy)
Yes, workers have more purchasing power now than in the vaunted 2019 economy.
Readit News
I'm not saving nearly as much as I was years ago and I think my "lifestyle" has decreased post COVID (few vacations, eating out is a treat, gifts are for birthdays/holidays). Is everyone swimming in debt?
IMHO vehicles are huge drivers of debt. There are almost no cars under $30k now, and the average sale price of new cars is pushing up near $50k. This is for bog standard stuff like Hondas and Fords, not luxury cars. Used cars are incredibly expensive too. People are financing cars for well over 5 years now--I've heard of people on 6 and 7 year loans now just to make monthly payments possible. It's nuts.
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I wonder how in the world everyone else is getting by. Maybe we're all just smiling and pretending here...
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real estate is the thing to watch, if even a small number job losses happen people will have no choice but to sell even if they want to keep their low interest rate(home prices have stayed relatively flat because everybody is staying put, so low inventory on paper). Interest rate increases have resulted in significantly lower buying power, so home prices will have to drop. Forced sales will cause others to rush for the exit and cause even further price drops
You can never judge people's financial situations from their spending habits.
Someone in my extended family spent years living large, buying new cars, building new houses, and wearing nice clothes. They had a family business and always said that the business wad doing well. Several years later the husband died unexpectedly. His wife was suddenly struggling to make ends meet, despite nothing actually changing with their "business".
As we later discovered, they were experts at amassing debt. The business wasn't really successful but they had used every possible angle to get more lines of credit, debt, "investments", and loans. They had even made a habit of "buying" supplies from vendors with Net 30 terms, reselling them, and then never paying the vendors back. They moved from state to state to scam new vendors every time they were blacklisted by the all of their local vendors.
That's an extreme example, but it highlights how appearances can differ so much from reality. More commonly, I think a lot of people just never learned how to save anything at all. I know an alarming number of people in their 30s who still haven't bothered saving anything more than the $1-10K they have in their checking account at a given time. When the number goes up, they spend it back down. You could have the same net income as these people but never achieve their level of lifestyle spending because you're doing some savings.
On the other end of the spectrum, many people are actually doing well. Wages are up (contrary to what you see on social media) and people's investments have done very well in recent years. Many of my friends are doing quite well for themselves by simply getting working a little harder to get jobs that pay a little above average and then carefully budgeting and investing over the long haul. Do this for a couple decades with some careful attention paid to where you live and the job you get and it's not hard to get a rather comfortable financial position by 40, especially in tech.
I hear you perfectly. What I did a while ago was to fully embrace a more frugal lifestyle where attention and time are the most valued. So consumption went to a minimum and all that. Now after prices jumped up we’re where we started and despite being frugal we’re left with a lot less. It is quite unsettling to be honest…
When times get tough they’re no more secure than those who make less.
I’ve seen this with many peers who have Teslas and 1.5M homes who are now struggling despite such an income.
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There is a lot of regional variation in production [1] and income [2][3]. On the whole, real disposable income and savings rates are up [4].
But someone in the midwest (income up, annualized, 7 to 11% Q4 '22 to Q1 '23) or Florida (7.9%) is seeing a very different economic landscape than someone in California (0.7%) or Indiana (-1%) [5].
[1] https://www.bea.gov/news/2023/gross-domestic-product-state-a...
[2] https://www.bea.gov/system/files/rpp1222b_0.png
[3] https://www.bea.gov/data/income-saving/personal-income-count...
[4] https://www.bea.gov/news/2023/personal-income-and-outlays-ju...
[5] https://www.bea.gov/news/2023/gross-domestic-product-state-a...
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I also switched to more staple foods like lentils and beans and rice and canned vegetables instead of fresh vegetables. And to buying ground beef on sale and freezing.
It seems kind of crazy that prices keep going up and even simple “luxuries” like a coffee while networking went from $3.5 for a small latte at my local coffee shop in 2019 is now $5.5.
I think for some people it doesn’t seem to affect them and they just pay the higher prices but base costs seem to have really gone up a lot for my family. Fortunately some big expenses are fixed (mortgage and transport) but if they had to change it would be extra rough.
Deleted Comment
The article itself says this. Somehow, it manages to spin it into bad news.
>Even though prices have soared, real earnings, which adjust for inflation, are stuck at late 2019 levels.
People can afford the same lifestyles they could a few years ago. The US weathered the outbreak of war in Europe and the worst pandemic in generations without serious economic hardship. Somehow, in CNN's view, this is a problem. Real wages haven't been stable. They haven't been resilient. No, they've been "stuck".
Probably
https://fred.stlouisfed.org/series/CCLACBW027SBOG
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But it’s simple numbers. They spend less than you do or make more.
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Consumerism going steady. At least in the US you have the 401k. When I begin a discussion with friends/ acquaintances on "hey guys anyone got a decent EFT? I go my VOOG and SOXX all set up but I am looking to diversify further with some water, consumer, international, etc" and they look at me as if I speak some ancient language.
So.. most save minimal, invest nothing. Paycheck-to-paycheck is a big thing in the US and it is happening in the EU now.
(and don't get me started on parents of 14yo kids buying their kids the new iPhone every darn year)
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The price of meat is going wild - on track to double this year
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Have you talked to any kind of building work contractor, insurance company, etc. lately? They've all jacked up their prices just because their supply prices touched a certain level and now they have to plan for it. And to be sure, some of them are using the cover of inflation to test how willing people are to pay more.
Inflation really is a vicious cycle. And I don't think we've in recent memory seen prices actually decrease after an inflationary cycle. Do things pegged with CPI even allow for negative inflation?
And what's worse? The FED does not want negative CPI. They want slowly rising CPI. A negative CPI is deflation, something they want to absolutely avoid. They don't want prices to go down. They only want them to rise up slower.
Which leads to us humans always stuck on the hedonic treadmill. If one is relying on wages, one is absolutely fcuked in this system. The only way to keep up is to keep switching jobs to a higher pay.
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This absolutely happens with individual goods. Egg prices are back to normal. Car prices are going down.
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> For those on a fixed income, this is money we lost forever.
Yes, that's a fundamental problem with fixed incomes and why minimum support programs don't tend to use fixed nominal benefits across time. Most people aren’t on fixed incomes, and if we tried to manage price levels around people on fixed incomes, not only would it be bad for everyone else, but it would also threaten the investments underlying the sources of those fixed incomes (which aren’t really fixed, because they can drop, including to 0.)
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To your specific point about targeting negative inflation, that's deflation, which most people believe is bad for the economy. Even if there are types of "good deflation", government policy inentionally targeting deflation would almost definitely be a bad thing.
1. https://www.usinflationcalculator.com/inflation/milk-prices-...
Academics and have studies the pros and cons. I don't have time to post summaries, but maybe someone else can step in:
https://www.stlouisfed.org/-/media/project/frbstl/stlouisfed...
https://www.ijcb.org/journal/ijcb2002_3.pdf
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It is statistical trickery and a headline number used to make people think things are OK. It is also a convenient number for COLA increase targets which make people think their incomes/pensions are going up (when effectively they are not on a real basis.)
Also, as you note, we re-baseline each year and dont talk about the cumulative compounded inflation e.g., over the past 5yrs.
Americans on fixed incomes (e.g., pension, social security) and those without wage elasticity (e.g., restaurant workers) are absolutely miserable right now because they are squeezed from both sides, even after modest wage increases in 2021/2022. This is not good for a Democracy.
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If it’s an annuity, you can get annuities that vary based on changes to the CPI. If you put a lot of money into a fixed annuity years ago, you did not properly hedge interest rate/inflation risk.
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This is a drastic oversimplification but that’s basically it
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That said, basic expectations of things growing up are just unreachable for many. My parents lived much more comfortable lives than I do. My grandparents even more so.
Recall how food inflation was a major suspected cause of the Arab Spring (https://www.pbs.org/newshour/world/world-july-dec11-food_09-...).
US leaders should be careful. People get upset when they have nothing to feed their children. I hope we solve these problems with sensible fiscal and monetary policy.
Interesting how you stopped at "grandparents".
To be clear, absolutely not intended as any kind of attack on you or what you've written - just some thoughts passed on to me that made it easier to be grateful for that which is in my life, period:
Consider past generations - we're in "the 1%" by that metric alone. No / hardly (any "real") medicine, completely unstable food supplies, other tribes coming over the hills and killing everyone ... and, that's describing more of the "history" part of human existence, to date.* Further, a core bias of psychology is "the golden age bias".** Including feelings as simple as: when events are in the past, things can seem so "neat", "orderly", and ... "simple". Oh for one income to feed a family of four, right? But, how many had that experience - what proportion? And, that ties in with "survivor bias" etc.
Don't get me wrong, instability is a PITA. I get where you're coming from. It's not as though I don't have such thoughts. But, I can always come back to various bits of wisdom I've picked up from a myriad of sources, including a phrasing I've always liked that AFAIK is from Bill Maher:
If you think you have it tough, read history books.
That always helps me to remember that I didn't just watch my village burn to the ground due to the Mongol or European or etc. raiders, my relatives get raped and murdered, my child die of ... well, just about anything ...
... maybe some in this thread will find these ideas useful as well.
* Zooming out a bit more ... I always find it amusing walking in a park, especially - hearing the birds chirping, seeing the squirrels "frolicking" ... what passes for a pleasant "pastoral" experience for us, is filled with advertisements for sex / nasty "neighbor property line disputes" (birds chirping), animals desperately trying to find the next meal or water, etc.
** https://rationalwiki.org/wiki/Good_old_days
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My wife’s grandma got married as a teenager to a trucker passing by because her family couldn’t support all their kids. This was not unusual in that generation.
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Obviously we are fortunate to not live on credit cards and have our bills paid, but it feels like we worked hard to get here to be no better off than we were.
I wonder how other folks in the middle class are making ends meet especially trying to afford a home with employers forcing RTO/RTH to HCOL in many cases.
While I’m able to get by, I feel that I can’t get ahead. I don’t see home prices falling anytime soon; the current high home prices are fueled by a lack of inventory caused by people not wanting to give up their 3% interest mortgages, yet if interest rates fall, demand will increase, pushing up purchase prices. The only way out is building more homes, except due to NIMBYism and geographical constraints, the only affordable new homes that are being built are in the Central Valley. I’m seeing the writing on the wall; eventually I’m going to need to make some drastic changes in my career and my location if I hope to own a home instead of being a perpetual renter.
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Housing prices go up because there is a shortage of housing and the housing that exists is being used as investments. The solutions could be to make it easy to build more housing and also to make policy changes to encourage other ways to save money.
Energy prices go up because we've wedded ourselves to fossil fuels that are controlled by very few players who can set whatever prices they want. The solutions might be to diversify energy sources and reduce energy consumption.
Food prices go up because of energy prices and because food companies are gouging for profits. The solutions might be to reduce the dependence on fossil fuels for food production and to not allow food production to be a for profit enterprise.
The prices of other goods went up because there was a global pandemic that disrupted supply chains around the world. The solution might be to build a more resilient system for providing goods rather than one that's cut to the bones to increase profits.
There are real solutions to the problems that cause price rises but as long as we treat "inflation" as some sort of magic force in the universe those solutions will continue to be ignored in favor of magical thinking and political arguing.
Now? I regularly don't buy things after seeing their price. It's not that we can't afford it, but I simply can't stomach the price. I'm not paying $11 for two shrinkflationed bags of "regular size" Doritos apparently on sale. An empty calorie snack like that just isn't worth it for me, and it pisses me off that they'll charge that much for what's basically a small amount of corn...and that enough people still buy it to maintain that price.
Eventually I may adjust to these new prices, but in the interim I'm regularly shocked at what things cost and it's causing me to spend less.
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