Inflation on the Rise

Posted by: Henry B. | Jan 16,2008


Seems I’ve designated myself the resident writer on the recession, while Gene’s the designated writer on the election.  Of course, we’ll all here cover those issues somewhat, but this week here I’ve been trying to pound the issue home that a recession is a basic inevitability.  Even if a technical recession does not occur, the prospect of a recession is damaging enough, leading to consumer and investor uncertainty, which will lead to a…recession.  Any way you slice it, these aren’t great economic times.  

The news just keeps getting worse.  I hate to be the guy who keeps bringing up this type of information, but someone has to.  The news today is that inflation is the worst it’s been in 17 years.  This is probably the worst news that hits average consumers.  There are probably a lot of people who see news about the declining stock market or info about the Dow and think, “What do I care, I don’t really play the stock market.”  Not the greatest view on the economy, but understandable.  It just doesn’t affect them directly, even if the economy is like an ecosystem and if one part is damaged it can have a ripple effect.  

That ripple effect is what we’re seeing now.  Inflation for items like food and gas is running rampant.  These are things that affect everybody.  Even if you don’t own a car, everybody’s got to eat.  The price of gas is what’s sending food prices up: it costs more to transport the food from grower to grocery store so the prices go up.

What this means is that it’s going to be even harder to save money and pay down debt .  If you’re paying more for food today, that budget you made last year will not be nearly as accurate.  If you’re budgeting in order to both build up a nest egg and pay down debt, you’re going to have to account for this rise in inflation. You also might need to cut corners in order to bring your expenses back down again – such as cutting down on the amount or types of items you buy at the grocery store.  This is just the cold hard truth in 2008. It’s not great news, but I’ll end in a positive note: it’s not insurmountable either.

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