Is Inflation Still Eating Into Your Finances?

Inflation may not be making headlines today like it was back when it was 9%, but it hasn’t gotten any less problematic either. At just under 5% official reported inflation according to the consumer price index (CPI), inflation remains far higher today than it has been in decades.

For many Americans, inflation remains problematic, and trying to find ways to get ahead of inflation is becoming a more popular pastime. The last thing anyone wants is to find that the value of their savings has become eaten away by inflation.

Last year, the federal government’s I-bonds became popular for a while, as they were earning over 9% interest. Unfortunately, those interest rates reset every six months, with the currently issued I-bonds earning only 4.3% interest, less than many short-term T-bills.

The government seems to think that inflation is under control, but is it? Is inflation continuing to erode your standard of living? And is there anything you can do about it?

Inflation and Prices

Traditionally the definition of inflation was understood to be an increase in the money supply, the effect of which, all other things being equal, would show up in the form of higher prices. That definition has long since been forgotten by the mainstream economic establishment, and it’s largely economists of the Austrian School who stick to the traditional definition.

Inflation today in mainstream parlance is a general increase in the price level. That allows central banks to deflect responsibility for price increases away from their accommodative monetary policy.

For instance, if Arab countries were to mount another oil embargo, prices of oil and gasoline would rise. Central bankers would call this inflationary, the price level would likely increase, and thus a supply shock unrelated to monetary policy would be deemed to be responsible for inflation. Meanwhile the central bank could continue printing money behind the curtain without anyone being the wiser.

Because the modern understanding of inflation only refers to increases in prices, we have multiple price indices which attempt to gauge how high prices are rising. Among these indices used by central banks to judge inflation are the consumer price index (CPI), the producer price index (PPI), and personal consumption expenditures (PCE). These indices also have “core” indices, in which prices for food and energy are removed.

Inflation and Your Pocketbook

According to the most recent CPI figures, the annual inflation rate today is 4.9%. And total inflation since the beginning of 2020 is about 17%. But does it feel to you like prices have only risen 17% over the past three years?

Just look at the price of gasoline, which is up over 40% from 2020. Electricity is up over 23% and natural gas is up over 33%.

Think about the cost of the food you buy too. Walking down the canned goods aisle, it seems like prices are close to 50% higher than they were a few years ago. Head to the cooler and freezer sections and it seems the same. And if the prices haven’t changed much, the sizes of those items have decreased, like ice cream that now comes in a 48 oz. size rather than the old two quarts.

You’re not the only one who’s noticing these things either. According to the Federal Reserve’s most recent study on household finances, 35% of Americans say that they’re worse off financially now than they were a year ago. That’s a jump from 20% who answered the same in the previous survey.

Americans are also beginning to spend more than they take in, and they’re increasingly turning to credit cards to do it. Total household debt is now at a record of over $17 trillion, with non-housing debt making up $4.66 trillion of that, or nearly 77% higher than it was in 2008.

Because of their worsening financial situation, fewer Americans are feeling comfortable about retirement too, with only 31% of Americans stating that their retirement plans are on track. Are you one of them, or are you one of the nearly 70% who still don’t have things figured out?

Keeping Retirement on Track

High inflation combined with a worsening outlook for the economy has many Americans feeling pessimistic about the future. And if the economy ends up falling into recession this year, you would have to imagine that a lot more than 35% of Americans will end up saying that they’re worse off than a year ago. But it’s not inevitable that recession or financial crisis will destroy your finances.

Many people watched in horror in 2008 as markets plummeted more than 50%, and more than a few people watched their investments collapse. Years and years of savings and investment disappeared in a matter of months. And even after the recovery began, it was slow and inconsistent.

Meanwhile, gold and silver were on a tear. Gold was up 25% during the same time period markets were down, and both gold and silver went on to record tremendous growth over the years following the crisis.

Many people remember how well gold and silver fared back then, and they’re looking to protect themselves today with gold and silver. Some are choosing to do that by starting a gold IRA or silver IRA, protecting their existing assets in tax-advantaged retirement accounts with these precious metals IRAs. Others are making cash purchases of gold and silver, hoping to benefit if the prices of gold and silver take off during a recession.

Regardless of how you want to buy gold or silver, Goldco has options available for you. We’ve helped thousands of customers over the years benefit from gold and silver, and we can help you too. If you’re worried about the toll inflation is taking on your hard-earned savings, call Goldco today to learn more about how gold and silver can help protect your financial well-being.