Monday, May 30, 2011
America is getting poorer...
Do you ever have the feeling that there are holes in your pockets? These days our money seems to slip through our hands faster than ever. The Federal Reserve keeps telling us that the rate of inflation in 2011 is "close to zero", and this is causing confusion for many Americans because they are making just as much money as they did in previous years but it doesn't seem to go nearly as far. So what in the world is going on out there? Well, sadly, the truth is that we really don't even know what the government considers "inflation" to be anymore. The way that the U.S. government calculates inflation has changed an astounding 24 times since 1978. You see, it is always politically beneficial to have a low inflation rate, so recent administrations have been changing the formula constantly in an attempt to look good. But these days most Americans know something is up. All they have to do is stop at a gas station, go shopping for food or open up their bills. The reality is that inflation in 2011 is about as bad as we saw back in the 1970s, it is just that the government is much less honest about it now.
Many years ago Kenny Rogers released a song that contained the following lyrics....
You got to know when to hold em, know when to fold em
Know when to walk away and know when to run
You never count your money when you’re sitting at the table
There’ll be time for counting when the dealer’s done
Well, the U.S. middle class has been dealt a losing hand, but in the game of life you just can't fold.
Over the past 3 decades, the average household income for the bottom 80 percent of Americans has been remarkably flat. In fact, over the past several years we have actually seen median household income decline several times. If you do not know about how the U.S. middle class is being ripped to shreds, just read this article. Without a doubt, America is getting poorer.
Well, not the top 1 percent, but the vast majority of the rest of us sure are.
Meanwhile, prices have started to rise with a vengeance.
According to an article in the Daily Mail, a Memorial Day cookout will cost you 29 percent more this year than it did last year.
That doesn't sound good.
Will it be 29 percent more expensive again next year?
Perhaps some of us will just have to stop having Memorial Day cookouts because we can't afford them anymore.
The price of gas is also digging into our paychecks big time.
A gallon of gas costs about a dollar more than it did a year ago, but we can't avoid buying gas. All of us have got to get to work and drive to the store.
Sadly, each time the price of gasoline goes up 50 cents it takes about $70 billion out of the U.S. economy (on a yearly basis).
A recent article in USA Today described the kind of impact these high gas prices are having on average American families....
For every $10 the typical household earns before taxes, almost a full dollar now goes toward gas, a 40 percent bigger bite than normal.
Households spent an average of $369 on gas last month. In April 2009, they spent just $201.
But don't worry, according to Ben Bernanke we barely have any inflation at all in 2011.
Some companies are trying to avoid raising their prices by reducing their package sizes. A recent article posted on Marketwatch entitled "Inflation diet: same price, less product" explored this phenomenon in detail. Millions of Americans are going to the supermarket and are finding that many of their favorite products are now 10 or 20 percent smaller and yet they are paying the same price as before.
Another thing that is happening is that product quality is going down. Have you noticed how things just don't seem to be made the way that they used to? This is not a coincidence.