Unless you’re seriously into prepping or survivalism, you may not realize that the Church of Jesus Christ of Latter Day Saints (Mormons) are pretty serious about keeping their church members prepared. Mormons have set up a series of home storage centers around the country, just over 100 in all, that provide fellow Mormons, and others who are interested, in affordable long-term storage foods to help people prepare to build up their food supplies. And believe it or not, those home storage centers may indicate that the federal government is significantly under-reporting food inflation.
Mormon home storage centers offer only about two dozen food options, those foods that are supposed to be core staples, such as pinto beans, wheat, rice, oats, and macaroni. The foods are packaged to have a multi-decade shelf life, and they’re sold basically at cost.
Because there is no profit incentive, the price increases on foodstuffs at home storage centers could very well be a more accurate reflection and representation of how inflation is affecting food costs. And the numbers don’t look pretty.
According to the Bureau of Labor Statistics, the inflation rate for food eaten at home is currently 6.5%, or just slightly lower than the overall 7% inflation rate. That seems a little low to anyone who has had to watch prices rise at the grocery store over the past several months.
By contrast, the price increases at Mormon home storage centers indicate an actual food inflation rate of over 11%. Even worse, the foodstuffs sold at the home storage centers don’t include meat, which have seen some of the biggest price increases over the past year. So even that 11% figure may be underestimating the impact of inflation on the food spending of the average American household.
Governments Always Attempt to Understate Inflation
The fact that government inflation figures may underestimate the actual impact of inflation shouldn’t be surprising to anyone. After all, governments have every incentive to understate inflation.
When governments have to make payments that are indexed to inflation, such as Social Security payments, the incentive is to always use the lowest figure possible so as to minimize cost to the government.
Similarly, when it comes to the headline figures that the general public sees, the incentive is always to understate inflation, since otherwise the public may get angry. And so we see throughout the course of history that government agencies try to redefine or change the measurement of inflation in order to suit political goals.
One way that is done is through changes to the “basket” of goods and services that is used to calculate the inflation rate. These changes are ostensibly undertaken every so often to account for changing consumer tastes and preferences.
In a way, that makes sense. After all, 20 years ago you weren’t buying smartphones, and you may not have even had an internet connection. But making those changes also allows ample room for the government to monkey around, weighting the basket so that goods and services that haven’t risen as much in price end up being weighted more heavily than those that have.
Similarly, the government’s hedonic adjustments also can lead to understatement of inflation. If the price of steak rises so much that you stop buying it and consume ground beef instead, the government doesn’t consider that inflationary, since you’re paying the same price for ground beef as you were for steak. The fact that your money doesn’t buy what it used to doesn’t factor in at all to the government’s calculations, even though that’s one of the textbook effects of rising inflation.
Unfortunately, the government’s statistical manipulation is able to fool quite a large number of people. Unless you pay an incredible amount of attention to your spending, you may not realize the extent to which prices have risen. And if you’re not paying attention to your spending, you’re likely to get bamboozled by the government’s claims that inflation isn’t as high as it really is.
You can imagine that in Washington right now, analysts and economists are furiously looking for ways to redefine inflation, change the makeup of the basket, or find other ways to bring official inflation figures down from their current 7% figure. But with the Federal Reserve having expanded its balance sheet by nearly $5 trillion in less than two years, more than doubling its asset holdings, that’s going to be a tall order.
There’s only so much statistical manipulation that can be done before the reality of rising inflation becomes apparent. And with so much money having been created out of thin air, it seems that we should expect double digit inflation figures at some point this year. Until the Fed begins hiking interest rates and reducing the size of its balance sheet, don’t expect much relief from inflation.
Protecting Your Wealth
Protecting your assets against the ravages of inflation is going to be more important than ever, particularly if you’re retired or nearing retirement. A 7% inflation rate means that your investment portfolio has to make at least a 7% nominal gain in order for you to break even. That’s pretty aggressive for those nearing retirement, a time in which many financial advisors think a 4% nominal growth rate is perfectly adequate.
If high inflation sticks around for months or even years to come, the purchasing power of your investments could be eroded far more quickly than you ever imagined. And if you haven’t taken steps to protect yourself against that, you may find that your savings don’t buy as much as you had expected them to.
That’s why more and more investors today are turning to gold and silver to protect their assets. Gold and silver have helped protect wealth against inflation for decades, such as during the stagflation of the 1970s. And many people expect them to protect against inflation in the future as well.
If you have retirement assets that you want to protect against inflation, maybe it’s time to start thinking about buying gold and silver. With a gold IRA or silver IRA, you can invest in physical gold coins or bars while still enjoying the same tax advantages as your current 401(k) or IRA accounts. And you can even roll over or transfer funds from your existing 401(k), 403(b), TSP, IRA, or similar retirement accounts into a gold or silver IRA tax-free.
Don’t let your retirement savings fall victim to rising inflation. Call the precious metals experts at Goldco today to learn more about how gold and silver can help safeguard your dreams of a comfortable retirement.