Dateline: 29 March 2016 AD
Our government routinely lies to us about the economy. The official Consumer Price Index (CPI) numbers are just one example. In the above video, Ed Butkowsky explains his Chapwood Index, which is a more dependable gauge of true inflation in the United States than the government's lying numbers.
With the help of friends all over the country, Butkowsky has been compiling the inflation numbers since 2011. You can see the numbers at The Chapwood Index Web Site.
If you go to that web site, you'll see that the 5-year average of price inflation across the country looks to be around 10%. That is NOT 10% over 5 years. It is an average of 10% every year.
That is considerable, especially when, for example, the government says inflation in 2015 was less than 1%.
The problem with the government lying about the reality of inflation is that the CPI number affects the Cost Of Living Adjustment (COLA) numbers used to adjust many pension, payroll, and government beneficiary payments. If the government officially declares there is inflation, then a lot of people stand to receive an increase in their income. But if the government says that there is no inflation, and there actually is inflation, then all those people have a problem making ends meet.
You probably know that already, but I learned about it today when I listened to This Excellent Interview with Ed Butkowsky at Peak Prosperity. The interview is well worth listening to.
This matter of inflation, and the true inflation we are experiencing, is incredibly important to understand. It's important to anyone who has to work for a living, and who thinks they might want to retire from working someday.
Unless you have somehow been blessed with a lot of savings, and investments that pull in a reliable percentage of income above true inflation, you may be in for a rude awakening when it comes to retirement.
But inflation is only one concern. Pension programs all over the country are facing serious troubles. This Recent Article is pretty sobering, especially if you are one of the 115,000 retirees who are facing up to a 50% cut in their pensions. Thepension crisis will become more widespread in the years ahead.
The reason I bring this up is because the reality of inflation, and the likelihood of significant pension cuts is something that's much easier to deal with if you take them seriously now, as opposed to allowing yourself to be a victim of circumstances later (along with the vast majority of other victims).
So, what can we who are not financially "set for life" do to help ourselves now, so we are not in a crisis later? Well, when Ed Butkowsky was asked what people can do in the interview (mentioned above) he said people are going to have to just keep working at their wage slave jobs to continually generate income.
I think he could have given some better advice than that, but it may be that he isn't aware of the other options....
For example, if someone eliminates debt, establishes themselves on a small section of tillable rural land, with friends or family around them (a.k.a., "community"), acquires fundamental tools of self-reliance, grows much of their own food, lives well within their means, establishes some sort of skill-or-service-based part time home business that they can operate into their retirement years, and they live well below their means, I think that someone will have much more financial resilience in the face of inflation and broken pension promises.
Think in terms of less consumption and more personal production. Think of it as "voluntary simplicity." Maybe even "voluntary poverty" (which is much nicer than involuntary poverty).
The fact is, very little is needed for a happy life. But having very little on your own piece of land, while taking care of your own basic needs, is a whole lot better than having very little in a public housing apartment in the city, or so it seems to me.
Being forewarned allows wise people to plan accordingly. Consider yourself forewarned. These are things to be seriously thinking about—and I'm seriously thinking about them.
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8 comments:
i don't care what the government say. i have my own bell wether -miracle whip.
i remember when it was 59 cents per jar in the olden days when you could watch dinosaurs grazing in the distance.
. in the last few years it has gone from a fairly steady 89 cents per jar to 3.99$ on sale for two ounces less.
to increase more than 4X in a couple of years is a dead giveaway to the rate of inflation.
i don't know why gasoline is as low as it is, although i remember it being 25 cents per gallon when i first had a car, also in the dinosaur era, but you know in your bones it has to go back up.
that is what stands between us and bankruptcy, along with the medicare which we now enjoy during pharmacy pickups.
when the meds were cash and the gas was heading toward 4$
we qere about 3 months from total meltdown when, by a miracle, gas went down.
becoming old is no fun, but thank God for medicare.
Thank you, Deborah, for the Miracle Whip insight. Very interesting!
As an addendum to this post, there is an equation called the "Rule of 70" which is used for determining when something will double. As I understand it, you simply divide the rate of increase into 70 to get the time of doubling. For example, if you have a 10% rate of price inflation, divide 10 into 70 and prices double in seven years.
With that in mind, I looked up the "official" annual inflation rate for 2015 and it was .12% (not 12%, but .12%). So with an inflation rate of .12% figured into the Rule of 70, prices will double in 583 years.
So, that's the official story. Meanwhile, in the real world, the price of Miracle Whip has increased 400% in a couple of years (thank you , Deborah).
If the economy was booming, incomes were rising, and interest rates for investments were high, such inflation would be less of a problem, but that is not the case.
All of which means we are in the midst of a slow-motion economic train wreck.
Thanks for the article (and the references) Herrick. I was pondering this very issue as I was walking at night a couple of days ago. My parents' generation (they are in their late 70's now, pre WW II) may be the last generation to be able retire as the vision of the 50s-70s had it. I am consciously working to reassess what my vision of life after my primary job (whether by choice or by decree) ends. Cultivating satisfaction with less and doing more for one's self will be very important.
My dad used to say that he "wasn't looking for ways to make more money, but on how to make less". It took me quite a while to figure out what he meant by that. There are a number of benefits to living this way...as you put it...voluntary poverty. We grew up under what many people would consider poverty circumstances, but we never lacked anything important. Now that I have my own family, we live in a similar fashion. Yet, of the important things in life, we live better than our urban counterparts making six figures a year. There is something freeing about getting out of the consumerist rat-race and living simply.
-Matt the Farmer
Herrick - i already told you in your "Delmar" post that my father always told me to save for a piece of land. but also, my husband's father who is also from my island, but moved to ontario to work told me not to wait too long before getting my piece of land and moving back here.
my hubby and i could have waited another 5yrs before retiring and he was making a small fortune then. but we saw the writing on the wall, jumped ship (left the city) and moved to the very middle of absolutely nowhere. my small pension was enough for us to live on and we saved money every month, started growing our food, canned, deydrated, froze that food AND he is a fisherman extraordinnaire!
and then lo and behold - he gets called into Lobsters R Us (seafood plant) to fix a couple of printers. then he gave his incredibly impressive resume to the owner of the plant. he's been working there almost 5 yrs and he gets paid very well. the best thing is tho - he does all of his work remotely from home and he does it when he feels like it. he goes on-site when he is unveiling a new part of what the bossman calls "the system" and here we thought he would lose his IT skills (he had 20yrs as an IT business systems analyst). he is taking their whole process from paper to what the bossman calls "automagic". and this is something that he can do until he's 100. and will do because the bossman has 13 other businesses and wants hubby to make all of them "automagic" too.
some of this is serendipity. some of it is making certain decisions at certain times. some of it is just plain hard work.
but if you take getting out of debt seriously (we did) and leave your high-falutin' houses and jobs and learn to live with less, consume less and produce more of your own food - it can be done. and like you say, with a small/partime/home business and living beneath your means - you can save money for when the crash happens. and you can do all of that and still be happy. we were very happy people back in the city - now we're darn right crazy happy.
one last thing - doesn't deb harvey always hit the nail right on the head! some of her comments blow my mind. she's brilliant and i wish she would start a blog.
your friend,
kymber
Thank you for the comments everyone.
Kymber—
That's a great story. (and your comment at "Delmar Ain't So Stupid" was a great addition to that blog post).
Now I know what it is that some people on that beautiful, wild-looking, sparsley populated island do for a living.
We have always lived"poor" sometimes we have had more money but we never spent as if we did. When times get tough, like they are now, we are prepared, we know how to live. The people living in the giant houses with the giant debt will be in such shock, they have no idea how to be poor.
We will pray off our house in two years.we have an acre, I garden, can, and if things get worse I will get chickens maybe a pig.they are technically not allowed, but if the poop his the fan all bets are off.
It's coming, times are going to get very hard.
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