Wednesday, September 18, 2013

Are You Sure There's No Inflation ?

Consequently, in inflation our dollars buy less.  (Graphic:  )

   I don't think the present government machine understands money very well.  They geared up for Quantitative Easing thinking that printing more money would be beneficial in some way, not really understanding that more paper money chasing the same or less in terms of available goods and services doesn't buy more goods and services, but makes the paper money worth less.  As one of my favorite songs says, it's "turning our currency into fried rice". (I placed the song below in case your wondering about the song, to which I am referring.)   But today, I wanted to address their assertion that "Inflation is flat".  Perhaps the way the government assesses inflation, without gasoline or food calculated, inflation less than my perception, but this is not the government's blog, or at least they haven't seized it just yet. This is my blog, and we're going to speak anecdotally as to how my family and I are looking at inflation.  My thinking is that my family is probably not that different from your own, at least in terms of observing some trends.

             In 2008, we were doing fairly well.  My husband had been an engineer at the same company for twenty plus years.  I worked part time as a college instructor, and occasionally a semester full time if this was needed by my employer.   Because we are careful with money and have a lot of kids, and sent money toward the principle of our mortgage, a significant portion of our mortgage was paid down. It was structured as a 30 year fixed rate with a reasonable rate, but not the 2 or 3% that was written sometimes in those years. We had a good credit rating, for the most part, impeded a little by our not using credit very readily. With four children at the time, big expenses were coming for which we had a limited amount saved. Two of our kids were already in universities, and two were a few years from the launch sequence which would allow them to go.  The two in college went using a combination of our savings, a little help from my father, working themselves, and student loans.  Our electricity with six people in our fairly large home ran about $160.00 monthly.   Taxes were paid with our mortgage, and our monthly insurance wasn't very high.    Our car insurance, even though we paid for our kids insurance so long as they were still in college.   We ate a healthy diet. We didn't eat a lot of prepared foods, but we bought things like frozen chicken breasts, roasts, and low fat hamburger at Sam's Club and then would split the large packages and freeze them. We bought large amounts of fruit and vegetables and would freeze things we could.  We would make our own "convenience foods" by making pizza, chicken and rice, lasagnas of different types, Shepherd's Pie made with ground beef or occasionally turkey,  stuffed peppers, our own MSG-free hamburger helper, and we would freeze these for quick meals.  My husband would do this, as would I, and occasionally the kids would make six quiches of different types and freeze these.  We used a fair amount of gasoline because our kids commuted to college (sometimes together depending upon the semester) and my husband and I worked in two fairly distant cities as we live on a farm.   Animal feed for alpacas, ducks, chickens and dogs wasn't expensive.  The chicken and duck feed was purchased from a local feed store, along with the best alpaca food from the zoo line.  The dog food came from Sam's Club.  We had a landline phone with extras that permitted us to call coast to coast and moderate speed internet with the landline, and this was not expensive.  My husband had a Verizon cellular phone he needed for work and travel but the rest of us had Tracfones and we bought minutes month to month. We called only to communicate something specific, and the kids paid for their own, and so this wasn't a large expense.  We also don't pay the fortune it is to have a trash pickup.   Once a week, someone here gathers up the trash from the containers, places it on a short trailer attached to one of our farm trucks and drives it to the transfer station, where it's sorted, recycled, or sent to a final dump. Being in-county we pay nothing for this other than our transportation.  We had no payments on cars or trucks.  We did have to pay for a few professional licenses annually, dog licenses, car registrations, and personal property tax for cars, trailers, etc.   All in all, we were not saving a great deal, but we were alright, could eat well and educate our kids. The plan was that our kids would be launched while we were both fairly young, and we would then save an entire one salary for retirement.
            The one area in which we experienced some money stress was health care.  Our kids and myself over the years had some health challenges.  One child developed Type I juvenile autoimmune diabetes and was on an insulin pump.  There were 3-6 month endocrinology visits and expensive labwork.   Although my husband's insurance covered most things, the copays on physicians visits, labs, and insulin pump supplies were expensive.  Then fees for our child with Crohn's disease and the others with allergies added to the expenses.  Prescription drugs also cost money.   We have never had dental insurance.  Rather than taking our family to the dentist every six months, we have had to settle for a trip annually. We have been lucky that in our cases, this has been adequate. Even with the employer paying all our health care premiums, our copays and the remaining health care costs after insurance are our largest single household expense. (Including any essential medications via prescription.)

           Basically, we had enough money to do everything we needed to do, with health care costs straining us sometimes.  We took a couple of brief vacations away for a few days at a time, and my husband and I did take a month long missions trip.  Other than that, we have never ever had a family vacation.  Special food needs for our diabetic, Crohn's, and allergic kids made travel without food from our own kitchen very difficult if not unsafe.  Besides, they really loved the farm and their friends, and weren't stuck on going away very much.
            It was 2008 in which things began to change financially.  My husband continued to make the same salary, and just like many companies, raises were suspended.  There was no talk of layoffs, and for this we were grateful.   Our youngest son Daniel died suddenly, and other than the initial expense of a funeral, this left us doing fewer things away than we had before.  I took a sabbatical from my job and found that the expenses for clothing, commuting and gasoline were a wash. My job cost me as much as it brought our family after taxes.  Afterward, gasoline spiked up and our family stopped shopping.  If we really needed something, we would search the internet and buy it.  When we did go out, we saw fewer and fewer people on the roads, and all of the restaurants within 25 miles closed.

        In 2009, our family chose to adopt a teen boy as Daniel had always felt that each family should adopt an older child in need of a home.  We added a new mouth to feed, but he liked to cook !  He adapted to our family, and although we miss our son Daniel very much, we are reminded of the great joy of having him here by having James, a year older here with some similar likes and dislikes.

       As the years passed from 2008 to 2013, more and more of our friends and acquaintances developed financial problems. Some of them lost homes. Many of them sold cars, recreational vehicles, boats, and possessions.  Some of their kids came home from college due to financial challenges.  Two of our kids graduated from universities with honors. One took more than a year to find a job, because nothing is available,and the other has never found one.  He works on his own business, simply because there is nothing else.  Their friends all have exactly the same jobs they had while in college as pizza makers, pizza delivery people, fast food managers, etc. One of our sons is now in university, and the son we adopted would ordinarily be ready to go to college next year.

       In essence, we have two fewer family members to pay for than we did in 2008.  The property taxes here have not changed, yet the homeowner's insurance has increased over 40%.  When I shopped with seven other competing companies I found that most of them would not take us despite the fact that in 25 years of having a home we have never once claimed for anything.  Several of them say they have paid such large claims due to varietal disasters that they may be getting out of the homeowner's business entirely.  One insurer who would take a farm on acreage wanted even more than we currently pay, for less coverage than we presently have. Personal property tax, vehicle registrations, dog licenses, professional licenses have all risen sharply since then.  In addition, there is no mail delivery in our region. Customers must go the the post office some distance away to pick up mail.  (And over the years they keep closing these post offices.) We not only have to drive a distance, but we are charged an ever increasing box fee, even though the post office has been saved the costs of delivering to us.  Diesel fuel and gasoline remain higher than they were in 2008.  Cellular phone costs and internet have risen. We abandoned Tracfone about a year ago when we began to have technical difficulties and their customer service knew nothing about anything.  Now we pay for a higher costs but have a more reliable carrier.

        We don't buy a lot of clothing or shoes. We tend to buy something of good quality, protect it, use it wisely and get our money's worth.  When we need something, it is either purchased through the internet or from an upper end consignment shop.  We purchase gifts, often books, from or other inexpensive sources. We have been very lucky using Craigslist.  We do most of our own car maintenance and repair using parts from the internet.  On the rare occasion that we use a dealer or auto repair, costs have risen dramatically.

        We have not been able to save or add to a retirement account in some time. We also notice that the banks we use have all increased their fees substantially.

        We were audited by the federal government last year and this grew our annual accountants fees. I have not included this in the regular budget, because we hope the higher fee is a one time expense.
         In reworking our basic budget which we do annually to spot trends and make adjustments, we find our basic expenses to be up greater than 40% while we are doing about the same things.   This does not include rises in prescription medication, and medical care. Including dental and medical, our expenses from 2008 would be up 70% with fewer family members included because two of them grew up.

        If our experience is representative of other families, then no wonder people are abandoning animals in droves, abandoning homes, and not adopting available children very often.  No wonder family stress appears at an all time high and domestic calls for police are up a high percentage.

       The US Middle Class has been under attack for some time, but it is not possible to have all these rises in costs without some very undesirable effects over all.  Jobs are not easier to get than they were. Many homes sit for sale for years.  Some bank owned homes sell for a fraction of their county assessed value.  People are stalled. They don't find jobs, they move in with family, and lives stop.  New marriages don't start, babies aren't born, savings don't begin, people die without ever retiring. All of these things also contribute to a sluggish economy.   People simply aren't doing anything but trying to survive.

        All the while, television, economic forecasters, and most especially The White House tells us that inflation is contained, and not occurring.  It sounds like an Emperor's new clothes moment to me.

The Voters:         Cris Zalles, Lee Levin, Derek Cintron,  Alex Garcia


Gorges Smythe said...

You've described the situation very well. I remember going to a couple John Birch meetings when I was a teenager. They were saying that the ultimate goal of the "powers that be" is to return us all to serfdom (slavery for all practical purposes). Of course everyone called them kooks and paid them no mind. They WERE kooks, but they were right on THAT issue!

BBC said...

When I moved here in 98 it was to take up a very basic life and I've become a damn good bum and still get by just fine on my income of less than a grand a month. Folks don't really need all they think they do.

lotta joy said...

Well...they finally came after you. Got to stop talking about the Emperor and doubting what he says. I never did like a man with skinny wrists. Oh oh....I did it now.

JaneofVirginia said...

The emporer is not only without clothes, he has no ideas and skinny wrists !

JaneofVirginia said...

I remember hearing that and thinking they were crazy extremists. My Dad was a member of the John Birch Society and often joked that he made their membership look like flaming reds ! In a sense I am glad my Dad did not live to see the country as it is now.

Jocelyn said...

I enjoyed your post. I just wrote a similar one myself. We are in the "just trying to survive" category as well. It's sad that it's coming to this, and I don't think we've all hit bottom yet.

JaneofVirginia said...

Thanks for your post, Jocelyn. No, I don't think we have hit the bottom yet either. I know a lot of older people whose homes are paid off but who can no longer afford homeowners insurance. It frightens me to think that people don't have it, or that someday I might be in a position to need to drop it also. Of course, there are a lot of other fears in there too.

JaneofVirginia said...

I think that alone, I probably could live on a thousand a month, and I think as I age, I will have to. Of course a large family would have to operate on more. I think most people don't need smart phones, cable tv, or unlimited internet. Of course, I have never had a smart phone, never had cable tv and I only have the internet because my daughter and my husband occasionally work from home and need it for meetings etc.