How People Can Better Fight Inflation

Taken from the Minor Issues Podcast

People can’t stop the Federal Reserve from inflating the money supply, nor can we prevent them from adding more fuel to their fire.

We can only fight the fire started by the arsonists at the Fed from spreading further into our lives.

In this article, I want to review the ways that people fight the Fed’s fire—higher prices everywhere and the reasons why everyone should be actively fighting against inflation.

These techniques require some thinking, choosing, and acting, which isn’t a pleasant thing to do. Budgeting helps us set a pattern in life, and the Fed’s inflation disrupts our “pattern” in a bad way.

Most people will respond that they are not willing to do those things, or that they can’t do those things. I would encourage you to listen and think them over. You might come up with workarounds or even better ideas. Send me your ideas.

Other people will respond that they already do these things, and a few people might even respond that is the way we have always done things.

In fact, most people have already had to make some adjustments because of the Fed’s inflation, which is why people consider it to be one of the worst problems they face. They were forced to adjust their lives in a bad way because of rising prices and stagnant incomes.

I would argue that it is better to take preemptive measures to fight inflation now rather than HAVE TO passively respond when the Fed tightens your belt. The passive/desperate response is typically confused and not your best alternative. You are likely not going to make the best decisions when the pressure is on, and you may turn to credit cards. You tend to “blame life” when your ire should be reserved for the Fed itself. These suggestions are offered because they might be better for you to consider in terms of economics, personal psychology, and health.

Steps to consider:

  1. Increase your income. Your labor is in demand, and maybe someone other than your current employer has a better offer for you in terms of wages, benefits, and risk. Like many things on my list, this may not apply to you or may not be something you “want” to do. Keep track of your responses.
  2. You may be able to increase your hours of work. Many employers are seeking extra workers. Maybe your boss would consider more hours of work, preferably at “overtime” rates.
  3. Increase your workplace skills. You may be able to move up with your current employer, increase your skills for a better type of job, or develop a new skill where you can earn money in your spare time.
  4. Work that you can do for yourself instead of hiring someone else is more important when you consider you are paying with after-tax income. You may have to earn $1,000 to pay someone $680 to paint your fence. If you take care of your own yard, clean your own house, fix your own stuff, you save lots of money. You don’t need an expensive gym membership.
  5. Cut your spending. This is a big one that will be divided up into several categories. Every expenditure category can be reduced eventually. You may not be able to reduce your car or house expenditure today, but you can start thinking about it today and start to develop your alternatives.
  6. Housing: it is hard to reduce housing expenses, but it’s a big one. What would be more efficient for your family in terms of size, number of bedrooms, rent or own? Most households actually have multiple unused rooms which means higher mortgages, rents, and power bills.
  7. Although it is fraught with dangers, consider renting space or sharing apartment expenses with a trustworthy friend or relative. I told you people would balk at some of these suggestions.
  8. How about that storage unit? That, in effect, is a part of “housing expense” that many could do without or do without in some other way. There are twenty-five million storage units in this country!
  9. Electric power is a big expense for heating and cooling. Adjust your thermostat a couple of degrees and your clothing as well. In summer, use fans and a dehumidifier in wetter climates and fans and humidifiers in dry climates.
  10. Try to eliminate alcohol, tobacco, and other goods with high taxes, such as reducing the amount of gasoline you use by walking, carpooling, and making multistep trips. Not only are you saving money and getting healthier, but you are also starving the beast that is trying to ruin your family’s life.
  11. Food is a big expense. Many Americans have already downsized from restaurants to fast food joints to save money. But fast food has also gone up in price. The Street reports that fast food items have increased roughly 100 percent since covid. Consider fixing more of your meals at home so you are not paying for the higher cost of labor and minimum wage law
  12. Plus, you are developing your home “survival” skills. I’m not talking great skills here, just making a peanut butter and jelly sandwich, for example. Using Kroger store brand prices, I calculate you can make a standard peanut butter and jelly sandwich for fifty cents, which comes in at almost four hundred calories. Add a glass of milk and a piece of fruit or a handful of nuts for a healthy, quick, and cheap meal. The “keto” version of peanut butter and jelly that I make all by myself is closer to $1.50.
  13. Multiply these savings by cutting your calories. Most Americans, including those in “poverty,” are overweight, and the best overall thing we can do for our health is to go on a calorie restricted diet of around 90 percent of the calories we usually consume.
  14. Now that you have changed where and what you eat, try buying larger sizes. In my peanut butter example above, the one-pound jar is 15 percent more expensive per ounce than the forty-ounce jar (plus more sales taxes). The two-pack of sugar free peanut butter that I buy at Sam’s Club is less than nine dollars. If you reserve your “bulk” purchases to those items on sale that week, your savings can increase dramatically. Yes, I know some people don’t like peanut butter and others are allergic. This is just an example.
  15. There are many items that can be bought in larger quantities, but there are two qualifications. First, only buy big when you already use the product on a regular basis. And second, make sure it’s not something that will go bad. Cleaning supplies, paper goods, basic toiletries, and hygiene products, as well as salt, black pepper, and garlic powder can be considered.
  16. I’m not going to recommend that you start farming crops, raising chickens, or buying sides of beef, but perhaps picking your own strawberries for freezing, growing your favorite cooking herb, or comparing prices at a farmers’ market is up for you to try. It’s a start.
  17. Many of these suggestions require a bit of knowledge and experience to pull off correctly. However, learning is typically low cost, tax free, and can either save or earn money. Look for opportunities that interest you and that you already show an aptitude for.

A key to this process is to cut expenditures ahead of inflation, creating a cushion in your budget. The savings will not be enormous immediately but can widen over time. One part can be given over to family-style entertainment or money saving tools, another part to create a savings cushion, and a third can be used to pay down variable rate loans like credit card debts. Interest on credit card balances is often the worst family budget offender, and its elimination should be a top priority.

All of these suggestions are not original to me but come from people with some standing on such family budgetary problems. Adopting some of them will help you weather the inflationary storm and make you a more stable and better qualified opponent of the state.

Originally Posted at https://mises.org/

Mark Thornton is the Peterson-Luddy Chair in Austrian Economics and a Senior Fellow at the Mises Institute. He serves as the Book Review Editor of the Quarterly Journal of Austrian Economics. His publications include The Economics of Prohibition (1991), Tariffs, Blockades, and Inflation: The Economics of the Civil War (2004), The Quotable Mises (2005), The Bastiat Collection (2007), An Essay on Economic Theory (2010), The Bastiat Reader (2014), and The Skyscraper Curse and How Austrian Economists Predicted Every Major Crisis of the Last Century (2018).

 

 

 

 

 

 

 

 

 

 

 

 

 

In this week’s episode, Mark reviews several ways to fight the Fed’s price inflation. Adopting these strategies proactively can improve our lives economically and psychologically—and even improve our health. They can make your family less vulnerable and improve your self-confidence.

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