Inflation is Back with a Vengeance

The U.S. government is reporting the annual inflation rate at 2.3%, but independent-thinking minds don’t buy what the government is selling and, as always, it takes a little digging to discover just how out-of-control inflation has gotten. From the gas pump to basic food staples, the American consumer is struggling to keep up amid an ever-deteriorating dollar environment.

Not that any of the fat cats in Washington or on Wall Street care – they never did, and their sadistic bent is showing more than ever. For the Federal Reserve, which has been on a hawkish bender in 2018, higher inflation gives them an excuse to raise Treasury interest rates. This, in turn, lowers the value of current bondholders, many of whom are retirees and near-retirees who can’t afford to watch their scant sources of income deteriorate.

For mega-corporations, even the slightest uptick in the inflation rate is an excuse to raise prices on whatever goods they’re selling. As Nestlé Chief Executive Mark Schneider said in an analyst call, “There’s some inflationary tendencies that will help us.” And naturally, “us” doesn’t include you and me.

Courtesy of the U.S. Bureau of Labor Statistics, tradingeconomics.com

A series of higher lows and higher highs in the U.S. inflation rate has hit hardworking Americans in their wallets and pocketbooks, putting a strain on consumers whose paychecks aren’t rising – if they’re participating in the workforce at all, which is an issue in itself.

Undeterred by the plight of the American consumer, corporations are now emboldened by rising inflation to raise the prices of goods that struggling families use daily. For just a few examples, Procter & Gamble announced that it would start boosting prices on some of its biggest brands later this year; Unilever raised its products’ prices by 2.1% in Q3 of this year; and Kimberly-Clark announced that it will increase the prices of several brands, including Cottonelle bathroom tissue and Huggies diapers.

2018 has been an especially brutal year for the American middle class, rising inflation and stagnant or nonexistent wage growth delivering a one-two punch to the gut for workers:

Courtesy of the U.S. Department of Labor, Bloomberg

And to make matters worse, the paltry value of after-tax wages were eroded even further this year by gains in gasoline prices and rents:

Courtesy of the U.S. Department of Labor, Bloomberg

When the CPI, or consumer price index, was pushed to a six-year high, the Federal Reserve’s “goal” may have been met, but what about the survival goals of the struggling American middle class? Evidently, there’s a salient mismatch between the objectives of the leaders and their constituents.

Thus, while we’ve seen “asset inflation” in the stock and real-estate markets – primarily the domains of the upper class – benefiting those who can afford to invest, the have-nots are stuck with deteriorating assets: cash, bonds, and perhaps an automobile that loses value year after year.

As the devastating impact of inflation takes hold on the American consumer, the demand for goods may decrease. Logic would dictate that this would hurt corporations’ bottom lines, but no worries for them – they’ll just raise their prices, and since they’re all raising prices in tandem, consumers won’t have a choice but to cough up more of whatever cash they’ve got left.

And so it goes in our grotesquely consumerist culture: they charge more, we pay more, we complain, nothing is done about it, and the cycle repeats ad infinitum – sadly, it seems, it’s the American way.