Record inflation already has Americans paying more for grocery staples, but even higher prices are most likely ahead. According to the American Farm Bureau, some fertilizer prices have risen 300% since September 2020. Fertilizer is an essential component of all most all food supply chains, especially meat. Every business exists to make a profit, so supply and production costs will flow to the consumer. Food inflation since 2020 equals 17.2%. Eventually, consumers will feel another sting in food prices, as the growth in production costs is significantly more than the current increased prices paid by consumers.
36% of all corn grown is to feed livestock. 95% of crops grown to feed animals are corn and corn requires more fertilizer than other crops like soybeans. The wildcard is that 28% of all fertilizer comes from Russia or Ukraine.
The July monthly CPI (Consumer Price Index) pulled back from the June high of 9.1 to 8.5%. However, food was 10.9% higher than in July 2021. The food-at-home index (groceries) was 13.1% higher, and the food-away-from-home index (restaurants and snacks) was 7.6%. Although politicians are touting 8.5% inflation as a victory, it is still unacceptably high and climbing quickly. The decreased number is not a relief for American families. Instead, it means inflation isn’t climbing as quickly as in June. According to Joint Economic Committee Republicans, inflation has already forced Americans to pay an extra $717 per month or $8,607 total since August 2021.
Can Inflation Numbers be Believed?
High inflation is government and politician kryptonite. People usually vote their pocketbooks which are terrible for incumbents during high inflation. The government gives a COLA (cost of living allowance) to social security recipients, military personnel, and government employees in different situations. The government determines the COLA by the official monthly CPI statistics from the Bureau of Labor and Statistics. The government has a genuine interest in low inflation numbers.
At various times, the government has redefined how data is measured to lower the number the BLS reports. The website ShadowStats.com compares modern data measurements against previously utilized methods. The chart's blue line represents what inflation would look like if measured the same way as in 1980. The red line represents modern inflation measurement. The media repeatedly reports “highest inflation in 40 years." AP News here. And Politico here. Saying we are experiencing the highest inflation in 40 years is true but misleading. The statistic is reached by comparing the red line to the blue line. However, comparing the blue line to the blue line and the economy has been experiencing the worst inflation since they began recording inflation data before the Great Depression. No matter what the actual inflation number is, everyone except politicians agree things are bad. Food prices are highly likely to get worse.
An Allegory About Inflation
A young girl lives in the desert. Every day she needs to wake up before dawn to avoid the heat of the day and walk five miles to get water for her family. She brings a large cistern to carry the water. Over time, the cistern becomes worn and starts developing small cracks. As she walks back every day, a little water leaks out. Her friend sees the water falling out daily and tells her to change her cistern. For whatever reason, she does not change her cistern for a better one without cracks. Eventually, the cracks become small holes, and she loses significantly more water than before. She has less water for her family every day than the day before. Still, she doesn't replace her cistern. Eventually, the holes become so large that she arrives home with almost no water. Despite her friend’s good advice to get a new cistern and seeing herself she doesn’t have much water left, she still doesn’t replace her cistern.
The story may sound silly, but sadly, not replacing the cistern is how most people handle their finances. The girl should have replaced her cistern, but she didn’t do anything to fix her situation. Water symbolizes value/wealth. The cistern is how value/wealth is stored. The holes are inflation. Her journey is the work necessary to get value/wealth.
Most people choose a cistern made of dollars that only leaks value and worsen over time. Some people become stubborn and say they won’t change their cistern even though their friend tells them it is leaking. The point of every inflation article you read on this blog is like a friend telling you the cistern is leaking, and it is time to change it. Don’t let high inflation leak your wealth before you get it home. Precious metals are a better cistern to carry and store value/wealth for your family.
Why not exchange your leaking cistern for a better one today?
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