How To Secure Your Finances Today From The Fed's Inflation Failure
The Fed doesn't have inflation under control.
You're told that inflation is under control and is under 3%. You're told that the Federal Reserve is getting close to reaching its 2% inflation target.
What utter nonsense!
When you go to the grocery store, pay your rent, pay for insurance, or fill up your gas tank, you experience reality. Prices have skyrocketed over the past five years.
Homeownership is more difficult than ever. Homeownership is becoming out of reach for young people.
I live in Montana. The cost of living is skyrocketing. The average home in Montana now sells for around $550,000.
The Montana Free Press found that nearly:
"3 in 4 Montanans were concerned about being able to afford housing in the state over the next five years."
The government and the Federal Reserve don't want to solve the inflation crisis because it benefits those closest to the money printer to become wealthier.
Here's how to secure your finances today from the Fed's inflation failure.
The Inflation Lie: How You're Being Robbed Blind
The inflation numbers that the Federal Reserve cites, which are then repeated by the government and mainstream media, rob you blind.
Problems With The CPI And CPE
The official inflation numbers from the CPI use averages and trimming strategies. These strategies massage the numbers, presenting a more favorable economic picture.
The PCE, which the Federal Reserve prefers, follows a chained index. The Federal Reserve's chained index substitutes the cheaper good that Americans are purchasing more of for the more expensive good. If Americans were buying bananas to mash instead of eggs, when eggs were really expensive, the chained index would not measure the egg prices in the index. Inflation would look better in the PCE than it really was, even though people were complaining about the cost of eggs.
When the data looks better, it sends a message to the government and Wall Street that the economy is fantastic. The government can continue spending. The stock market can continue to reach all-time highs. The Federal Reserve can lower rates for banks.
The Inflation Deception
This inflation deception allows politicians, central bankers, and Wall Street to pretend everything is fine. They then use skewed data to tell Main Street that everything is fine.
Even Jim Cramer, CNBC's notoriously bullish market commentator, recently had an on-air meltdown demanding immediate rate cuts. He dropped the F-bomb. He later apologized to his audience for swearing.
His desperate plea reveals the dirty secret: the entire financial system is addicted to cheap money. Wall Street can't function without artificially low interest rates. Low interest rates mean further destroying the purchasing power of Main Street. Cramer's panic shows how fragile this house of cards really is.
Alternative Inflation Measurements
Shadow Stats uses the government's old inflation formula. The government no longer uses this formula. The current ShadowStats shows the real inflation rate to be around 10%.
Independent measures like the Chapwood Index are reporting real inflation to be between 10% to 15%.
These alternative inflation measurements present a more accurate estimate of the real inflation rate. The actual inflation rate is what you experience when you go grocery shopping, pay insurance, and pay rent that continue to increase.
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Why The Fed Won't Save You
The Federal Reserve has no interest in stopping inflation. Inflation helps the people who own appreciating assets, from real estate to stocks, to become wealthier. Those closest to the fed become the most affluent. This is known as the Cantillon Effect.
Russia's central bank demonstrates how to actually fight inflation. The Kyiv Independent reports that the Russian Central Bank recently lowered its rates from 20% to 18%.
Russia doesn't have the high levels of debt that the United States has. Russia's central bank can take aggressive action to stabilize prices.
Paul Volcker And High Interest Rates
Federal Reserve History writes:
"As a result of the new focus and the restrictive targets set for the money supply, the federal funds rate reached a record high of 20 percent in late 1980. Inflation peaked at 11.6 percent in March of the same year."
Paul Volcker was able to use high-interest rates in the United States in the 1980s. The United States government didn't have the massive debt that it has now.
The Federal Reserve Is Stuck
The Fed won't take similar action because the entire U.S. financial system depends on cheap debt. The government owes $36 trillion. The government can't afford higher interest payments. Big banks make billions from low-rate loans and credit card debt. Wall Street needs cheap money to keep stock prices inflated.
The Federal Reserve creates a perverse incentive structure where the people in charge would rather slowly bleed Main Street dry. The Federal Reserve doesn't want to stop the gravy train that increases the value of appreciating assets for those who own them.
They'll keep telling you inflation is transitory, under control, or blame anything else while your standard of living steadily declines. Runaway inflation benefits debtors (like the government) at the expense of savers and wage earners.
How Inflation Steals Your Future
The damage from inflation compounds year after year. Inflation compounds in ways most people don't immediately notice.
Your $10,000 in your savings account loses $800 to $1,500 in purchasing power annually based on real inflation numbers.
Your paycheck buys fewer groceries, fills fewer gas tanks, and covers smaller portions of your bills with each passing month.
Retirement planning becomes impossible. The financial goalposts keep moving.
What looks like adequate savings today will be woefully insufficient in 10 years, 20 years, and 30 years.
Younger generations face particularly bleak prospects. Home ownership moves further out of reach. Wages remain stagnant. Your salary fails to keep pace with rising costs.
This isn't an accident. The financial system depends on perpetual inflation through debt monetization to function.
Banks need borrowers. Governments need to devalue their debts. Wall Street wants stocks to go higher to attract more investors to the stock market. The mainstream media can tell you that everything's fine by looking at the stock market while ignoring Main Street.
Key Point: You're not just fighting rising costs. You're fighting the entire modern financial structure.
How To Fight Back And Protect Your Wealth
There are steps that you can take to build and protect your wealth.
Invest Aggressively In Inflation-Proof Assets
The worst thing you can do is leave money sitting in a savings account.
The S&P 500 has historically returned between 7% to 10% annually. That is on par with the low end of the inflation rate.
Index Funds
Low-cost index funds like VOO or SPY provide simple, diversified exposure to the market.
Dividend Stocks
Dividend stocks like SCHD, MO, or O pay you cash while you wait for capital appreciation. You can reinvest the dividends. Or you can use the dividends to buy more stocks.
Commodities
For more inflation-resistant plays, consider commodities like gold (GLD), energy stocks (XLE), or Chevron (CVX). Commodities often rise when the dollar weakens.
Key Point: Get your money working harder for you because inflation erodes its purchasing power.
Build Multiple Income Streams Through Side Hustles
Relying on a single paycheck is dangerous. Inflation is built into the system. You continue losing purchasing power, relying on one paycheck.
Start A Side Hustle
The great thing about the internet is that it provides you with opportunities to make money outside of a traditional job.
Freelancing
Freelancing skills like accounting, copywriting, digital marketing, graphic design, or programming can pay $50 to $150 an hour on platforms like Upwork or Fiverr. It all depends on your experience, work portfolio, and how you pitch yourself to potential clients.
You can work as a virtual assistant. You'll need to be skilled at Microsoft Office, writing and responding to emails, and scheduling basic social media posts. You can earn $25 to $45 an hour as a virtual assistant.
Gig Economy
Gig economy work provides flexible income opportunities for when you want to make more money. You can earn $15 to $25 an hour as a food delivery driver for Grubhub or Uber Eats. You can make between $20 to $30 an hour walking dogs on Rover.
Depending on the side hustle, you can raise your rates as you gain more experience to deal with inflation. A side hustle puts you directly in control of setting your own prices.
Launch A Business That Thrives In Inflationary Times
Business ownership provides the ultimate inflation protection because you control pricing.
Always In-Demand Businesses
Service businesses like accounting, digital marketing, lawn care, cleaning, or pressure washing have low startup costs and high demand. People always need these services.
E-Commerce
E-commerce platforms like Amazon, Shopify, and Gumroad allow you to sell products with relatively little upfront investment. Digital products such as printables, ebooks, and digital courses provide infinite scalability.
Inflation And Businesses
Inflation actually benefits many businesses by allowing them to raise prices. Unlike employees stuck waiting for annual reviews, business owners can adjust immediately to changing costs.
Entrepreneurial Mindset
The most successful entrepreneurs view inflation as an opportunity. Entrepreneurs work to develop more income streams to deal with rising costs.
Key Point: You need to invest in the stock market, create multiple income streams, and have an entrepreneurial mindset to achieve financial success today.
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The Bottom Line: Take Control Or Get Left Behind
The harsh reality is that no one is coming to save you from inflation. The government benefits from inflation. Banks profit from inflation. Wall Street loves inflation. The mainstream media tells Main Street that everything is fine based on Wall Street.
Waiting for some politician, central banker, or talking head to fix a problem will only result in you becoming poorer.
Your best defense is attacking inflation by:
Investing aggressively in assets that outpace inflation.
Developing multiple income streams.
Building businesses that can adjust to changing economic conditions.
Take control of your financial future today, or continue watching inflation quietly steal your purchasing power. Financial education and entrepreneurial action are necessary for surviving and thriving in this economy.
Disclaimer: This content is for educational, entertainment, and informational purposes only. This is not business, financial, investment, or any advice. I write online about topics that interest me. I make mistakes just like everyone else. Always conduct your own research and consult a professional before making decisions regarding health, life, finances, investments, taxes, or legal matters.
More people should be talking about this. The costs of my basket of *essential* expenses is inflating at a much higher rate than CPI. The following expenses have increased by double digit percentages this year (and health care premiums are expected to increase by double digit expenses next year): car insurance (increased despite no changes to coverage, no claims, and no tickets); property taxes (proposed double digit tax increase later deferred for one year by the town after reassessment caused consternation and a near riot on Facebook); food (I do not track detailed items, but examples include beef, chicken, eggs and other essentials); energy (heating, cooling, electricity); and health care premiums (proposed double digit increase).
Employers use CPI as the basis for pay increases. Prior raises have been 2.5%, slightly lower than the "official" rate of inflation per CPI (which is an inaccurate measure for my expenses) and well below the cost increases on my essential expenses. The loss of purchasing power is tangible and consumers need to be vigilant about where they spend their money in this environment. Especially single people, as you suggest, who do not have the economies of scale that come from a dual-income couple sharing a residence.
The aforementioned expenses would be equivalent to the low end of Maslow's hierarchy of needs. Food, shelter, energy, health care and auto insurance premiums are essential items. One could also argue that wi-fi and cell phones are essential in today's increasingly digitally dependent environment.
The best a citizen can do is shop around for better rates, but there is no avoiding these expenses. Substitution is an option for some items, like food, but not an option for health care premiums. Our "competitive" markets are increasingly oligopolies, which reduced consumer choice and increases the pricing power of these companies. The car insurance premium expense is a particularly annoying example. These insurers pay top dollar to advertise during the Superbowl or other major sports events and employ highly visible spokespeople and star athletes (such as Kansas City Chiefs quarterback Patrick Mahomes and his coaches and teammates, for example). The consumer pays for this in their premiums.
Companies also use stealth price increases to drive growth on consumer products by keeping the price the same while cutting the amount of product delivered. Remember when a beverage used to be 12 ounces (now 11.2)? This stealth inflation is sneaky but pervasive.
Loss of purchasing power due to inflation is indeed one of the largest threats to the consumer economy. Your suggestions are good ones.