The late, great Thomas Sowell said, “It is a way to take people’s wealth from them without having to openly raise taxes. Inflation is the most universal tax of all.”
There have been times in my life when I’ve wondered if I should have majored in something other than economics in college. When I was a student at UT, I started off thinking I wanted to major in accounting. What I realized was that due to the strength of the business administration curriculum at the time, even more so now, I think, the ability to take a bigger diversity of courses I was interested in was pretty limited.
I knew I was on the clock. My parents would help me pay for four years of college. That was always clear. Not five, not seven, not a day longer than four years, and I had better have a degree when that was over. If not, there would be no “extension.” And here I was with the mammoth course catalog, and the possibilities to learn new things seemed endless. History! Language! Philosophy! Sociology! There was simply no way I could learn everything I wanted to learn in those four years with the restrictions of a business degree plan.
So, I went to my counselor, who advised that if I chose to major in economics, I could still take a lot of the requisite business courses, but since the economics degree was in the college of Liberal Arts, there would be plenty of opportunity for me to study the classics, learn a language and make the most of it.
When the bottom fell out of the Texas economy in the mid-late 80s, holding a liberal arts degree didn’t exactly pay huge dividends when I first graduated. My first job as a college graduate was at a mutual funds company in Houston, making a little over a thousand dollars a month. To say that things were tight is an understatement, indeed.
It’s been a long time since those days, and I have worked hard and been fortunate and eventually grew into a successful career person. But it took years of grinding it out, making mistakes and digging out of holes personally and financially.
Fortunately, though, the economy has had its highs and lows over the past 35 years or so. My personal finances have never been subject to confiscatory levels of inflation like we are only starting to experience now. Interest rates have fluctuated, but never to the point where they were in the late 70s when I can remember hearing then candidate and future President Reagan talking about the “misery index,” which is an economic indicator that adds the interest rate and unemployment rate.
During the 1980 presidential campaign, the misery index was approaching 20%. We haven’t been anywhere close to that since, even during the financial crisis of 2008. It isn’t hard to see the road we are on today, though. As President Reagan said, “Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hitman.”
Fortunately for all of us, we haven’t felt that fear for a long time in any meaningful way. Prices have remained largely stable, and wages have remained stable or risen for most of my adult life. So, if you are financially stable, life has been pretty darned predictable from an “if I make this much, I can afford this much” perspective. Inflation for the average American has been more of a concept than reality for so long that maybe it is time to revisit its definition and impact on all of us.
Inflation is, quite simply, a rising cost of goods and services. If inflation rises faster than wages increase, people can’t afford the same amount of these goods and services as they did previously. Consumption decreases; the rate of savings decreases; production decreases because of the slowing consumption, and unemployment then increases as the need for workers decreases because of slowing consumption.
The lack of real inflation combined with interest rates kept artificially low for decades by the Fed has given our society both the privilege and the burden of becoming nonchalant, entitled and unappreciative of the impact of a significant increase in the cost of living for the average family. As I write this, the October inflation rate has hit 6.2%, the highest in 30 years.
In the past year, the cost of gasoline has increased almost 50%. Groceries are on the rise in general, with the price of meat and dairy rising almost as quickly as gasoline. These prices are increasing much more than wages, and with all the pressures on the supply chain and lack of availability of goods and services, we should not expect that to improve any time soon.
Our younger generations and those who are on the front lines of our service society are feeling a very real impact on their lives right now. This will trickle up and trickle down as those of us who may not be as financially strapped are also starting to moderate our spending and saving behaviors.
When you have an income of a thousand dollars a month and have to drive 30 or 40 miles a day to work or get the kids to school, it’s easy to see how rapidly increasing prices can create a sense of fear and desperation very quickly. That spreads through society. It creates what Jimmy Carter famously referred to as “malaise.” People become angry; they turn against each other, and they really turn against the government.
It’s easy to “rage against corporate greed” when you’re working from home in your yoga pants, surfing the web and have a more powerful computer in your pocket than NASA had when they put a man on the moon. Your car is full of cheap gas, and your belly is full of cheap and plentiful food. Start to squeeze on that ability to travel cheaply and eat well, and all of the resulting impacts that are occurring because of nonsensical government overreach, and we may start to see a great awakening among young people, who will have a very real point of reference of “how things used to be” regardless what they may have thought about their pronouns or gender equity and climate change.
It’s easy to be a socialist when your parents are capitalists, and you’ve never had to choose between filling your tank with gas or having a steak for dinner instead of a peanut butter sandwich or instant ramen. It gets a lot harder when you’re hungry, unable to do the things you want to do and are worried about your financial well-being.
Why is this happening so quickly? This is not simply “transitory” or “resulting from COVID aftereffects.” Baloney. Anyone with functioning synaptic activity can see that this is intentional; it’s cruel, and there’s a means to its end that we cannot begin to understand fully right now.
The time is long past to awake from complacency and entitlement. We are all about to undergo increasingly significant impacts on our families and our way of life. It is more important than ever to pay attention, to resist the urge to tune out “because the news is too depressing.”
That’s what they are counting on, our continued ignorance and lack of interest. We have to start paying attention and speak up. We have to remain strong together and maintain our senses of the importance of family and community – both of which have been under stealthily concealed attack for years. Buckle up, keep your powder dry, love your family and neighbors and stay in faith.
The economist John Maynard Keynes said it best, “By a continuing process of inflation, the government can confiscate, secretly and unobserved, an important part of the wealth of its citizens.”
Wealth isn’t just monetary wealth, keep in mind. Wealth is power, wealth is freedom, and wealth is happiness. Inflation robs the people of all of it.
The question we should all be asking ourselves and each other is, “Why would a government want to do that to its people?” There’s no virtue in any of the answers I can imagine. How about you?