Inflation Highest in 17 Years

The Big Squeeze

The Consumer Price Index rose 4.1% in 2007, which was the biggest increase since a 6.1% jump in prices in 1990.

Average weekly earnings, after adjusting for inflation, dropped by 0.9% in 2007, the biggest setback since a 1.5% fall in 2005.

Economics are Boring

Let’s face it, Economics are boring.  They are boring to me.  They are boring to you.  In fact, the only people they aren’t boring to are Economists.  I don’t know any Economists personally, but I would suspect that they are very boring people.  My Economics Professor took a stab at some jokes in class, but he wasn’t headed for Comedy Central.

If you ever go to a party and start a conversation about the Economy, you will be sitting by yourself within about 10 minutes.  So, I understand if you don’t enjoy these posts and I promise to move on to a more exciting subject.

Why You Should Care

Unfortunately, the Economy is your future.  Not just the recessions and the interest rates, but more importantly, the inflation rate and the currency devaluation. If you plan to retire with a million dollars and are saving toward that goal, then you should be fully aware that a million dollars will only be worth around a couple hundred thousand in 20-30 years.  So, you really need to save around four million in order to retire a millionaire, in today’s dollars.

If you are older and closer to retirement, then you may not be so concerned.  But, you still have to consider that your retirement may last 20-30 years.  So, inflation is still a huge factor in your future.  Do you suppose rent and medical costs will only go up 2.5% per year ?

I like to use 5% as a realistic annual inflation rate in my financial planning.

Inflation and our Government’s Big Lie

The Consumer Price Index, the Core Rate of Inflation and other Government indicators are not useful in measuring inflation.  These numbers are, in my personal opinion, being purposely understated because our Goverment can’t afford to pay higher interest rate on the Treasury Bond debt.  Nor, could they afford to pay the automatic cost-of-living (COLA) increases for welfare, Social Security and other social programs.  So, retirees get squeezed, because their cost-of-living is going up much faster than their Social Security benefits.

Even scarrier than the real rate of inflation is the rapid slide of the Dollar.  Government economists like to tell us that the weak Dollar is good for the economy, because it increases exports.  But, in my opinion, this is a scam.  The weak Dollar is purely a symptom of our Government printing ever increasing amounts of money to cover their deficits.  This is simply a convenient way for our Government to steal from everyone who owns a Dollar.

Foreign investors have caught on and are now starting dump our Dollar.  That’s definitely not good for America because everyone’s savings are quietly being swindled by the devaluation.

The Bottom Line

American’s are getting squeezed.  High inflation, lower Dollar and lower wages.  With a recession likely ahead, our free-spending politicians have left hard-working American’s in a real bind.  No politician is going to mention this in the debates, because they have real no solution.

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