American workers are trying to make their way in an economy that’s rigged against them. We made this claim many years ago. Today, for fun and for free, we revisit this assertion…starting with the latest from those doing the rigging.
This week, after a two day meeting, the Federal Open Market Committee (FOMC) released their statement. Nothing material changed. The Fed will continue to hold the federal funds rate near zero. The Fed will also continue to create at least $120 billion per month from thin air to buy Treasuries and mortgage-backed securities.
Bond yields spiked and the price of gold dropped because 13 Fed officials now plot dots that project two hikes to the federal funds rate in 2023. Fed Chair Jay Powell also mentioned the Fed is “talking about talking about” bond tapering. These technocrats likely know – though they won’t admit – they’ve already lost control.
Consumer price inflation is ‘officially’ rising at a 5 percent annualized rate. However, the ‘unofficial’ rate of consumer price inflation, as calculated using methodologies in place in 1980, is about 13 percent. This rate of inflation is remarkably destructive to household budgets.
‘Talking about talking about’ tapering and telegraphing federal funds rate increases some two years from now will do little to contain consumer price inflation. The fact is, it has already veered out of control. We expect gas prices to top $5 per gallon in California this summer. Many Americans are not prepared for sustained, unrelenting price inflation.
Here’s the hard, back of the napkin math they are facing…
Sour Grapes
A box of Hamburger Helper – including Four Cheese Lasagna and Cheesy Ranch Burger flavors – will set you back about $1.24. The pound of 80/20 grade ground beef will cost you about five bucks. A can of green beans – to balance out the protein and carbohydrates – will run about $1.79.
Mix up a pitcher of Country Time Lemonade to wash it down with…and you’ve got Monday night’s dinner covered for a family of four for about $10. But what about Tuesday? And what about breakfast and lunch?
A family of four can easily run up $1,000 per month in food costs. Yet food, in comparison to shelter, is downright cheap. Here in Long Beach it takes $2,000 per month to rent a two bedroom 1960s era infill apartment above a garage that’s in bad need of paint. Plus, the cost of utilities, phone, Wi-Fi, a car payment, and insurance, will set you back another $1,000.
So you’re looking at $48,000 a year just to cover the basics. But we all know stuff happens. There are blown transmissions. There are leaky roofs. There are new shoes for the kids. There are broken arms and other unexpected medical expenses.
The median household income in Los Angeles County is about $73,000. After paying federal and state income taxes, social security, Medicare, and state disability insurance, net pay is $53,653. Assuming no auto repairs bills, medical payments, or other unexpected costs, that leaves $5,653 – or $471 per month – for entertainment, retirement savings, and college savings.
There’s not much fat in this budget. That’s why household credit card debt is about $6,270. Moreover, you can see why consumer price inflation rising at an annualized rate of 5 percent is problematic. – READ MORE
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