The Dow dropped 100 points today on Friday the 13th. The speculated causes were the high inflation numbers and the economic woes in Europe reminded everyone that deficit spending can’t go on forever. The dollar strengthened and commodity prices fell. But, it was little consolation to nervous investors.
The Affects of Inflation on Consumers
According to the Labor Department, the Consumer Price Index (CPI) rose 0.4% in April and 3.2% in the past year. This is the biggest year-over-year increase since October of 2008. However, it is well known the CPI has been modified to understate inflation. The website ShadowStats.com uses the 1990 CPI, which calculates inflation above 6% and rising quickly.
The Federal Reserve is playing a dangerous game by manipulating the interest rates, especially while they are easing. The new CPI may allow the Fed to claim inflation is under control, but consumers know better. Prices of critical staples, such as food and gasoline are putting a strain on family budgets and crowding out spending for other items.
My Top 10 List
10. The Dollar is so low Parker Brothers is considering replacing the currency in the Monopoly game with Chinese Won.
9. Toilet paper has become so expensive that the Sears catalog is making a comeback.
8. Gold and other precious metals have soared to dizzying new highs. Unfortunately, they are barely keeping pace with inflation.
7. Medical costs are so high aromatherapy is now considered an elective procedure.
6. Billionaire hedge fund manager Raj Rajaratnam has been found guilty of insider trading that netted over $63 million in illegal gains. He claims he was just trying to pay off his student loans.
5. Groceries have become so expensive it’s hard for many families to put food on the table. The Chief Economist’s response, “Let them eat iPads”.
4. Congress is scrambling to raise the debt ceiling, so the government can continue to operate. Unfortunately, Goldman Sachs refuses to approve the new credit limit.
3. The U.S. Mint is having trouble printing money fast enough to cover the deficits. So, they have engaged Groupon to help the government cut back on spending.
2. Reality TV shows are struggling with payroll, so they started voting off the Idol contestants with talent. Survivor has slashed their wardrobe costs by making contestants appear in their underwear.
1. Gas prices are so high it costs more to fill the tank than to buy an SUV. In other news, three refineries have closed down due to mysterious fires.
The Bottom Line
The bottom line is that inflation is no joke. It’s the government’s sneaky little way of stealing from everyone who owns a dollar. When it comes to investing in assets, I recommend keeping it real.
“If Americans ever allow banks to control the issue of their currency, first by inflation and then by deflation, the banks will deprive the people of all property until their children will wake up homeless.”
Thomas Jefferson – 3rd President of the United States