CLARKONOMICS: I go to a particular bagel shop that has a big sign in the window advertising bagels for 99 cents. The funny thing is they ring up at $1.05 at the register because the shop put through a 6% price increase across the board. But the marketing people don’t know what the pricing people are doing so the erroneous sign stands!
Then recently I got one of my favorite fast food lunches and it was up 21 cents from the last time I bought it. Wherever we turn, we’re seeing price increases, either as out-and-out increases or by manufacturers trying to shrink the product size on us while keeping the price the same.
It’s inflation at work, plain and simple.
This inflation is exactly what the Federal Reserve had hoped and worked to make happen, because the opposite of inflation, which is deflation, can be very dangerous. If we have deflation, people are afraid to buy anything today because they’re worried it will be cheaper next year. That can become a self-fulfilling prophecy. Deflation is often a hallmark of economic depression, though it doesn’t always have to be. Still, the dangers of economic stagnation through deflation are clear.
So the Federal Reserve was busy pumping money into the economy by basically running the printing presses and printing up more dollars to avert this kind of scenario. They were trying to reflate the economy. Now some people are worried they did it too well and it will create serious inflation.
I’m not scared of that as a longer-term trend because, let’s face it, you’re never a sitting duck even when costs do rise. There are always ways to stretch a buck, particularly in the supermarket. Here are some of my favorite strategies:
- Stock up on 6 weeks’ worth of non-perishables at a time when they go on sale.
- Substitute brands when one brand is on sale and another one isn’t.
- Shop at Aldi and shave 40% off your grocery budget. The warehouse clubs provide some similar savings opportunities too.
As for the possibility of severe inflation, galloping inflation or even the dreaded hyperinflation, I just don’t see anything in the cards that leads me to believe we’re going anywhere in that direction.