Posted On: Monday - October 1st 2018 12:23PM MST
In Topics:   China  Economics  Inflation
After just having mentioned another blogger's obsession with certain topics in the introduction of the just-completed previous post, we come to one of Peak Stupidity's obsessions, inflation. As with Steve Sailer's on the intricacies of school admissions, etc, our topic also does fit in with the theme of this blog. FED-induced inflation is related to our discussion of Economics and the Global Financial Stupidity going on. However, that is not to say that some readers aren't just plain "sick of this crap". Hey, don't fret, readers, as we've got loads of various forms of stupidity just itching to be written about.
This post is coming entirely from the memory and personal experience of this blogger, but the fact is, I've been keep good track of what's been going on in the country, first as a hobby, now as a prepping-related activity. Per our commenter BernCar, and a long-distance memory for me too, the 1970's price inflation in America, though not nation-destroying hyper-inflation, was a major factor of daily life. Take 18% annual inflation, please! (That joke never gets older, nor any funnier either!) Imagine knowing that putting off buying a big-ticket item, say an appliance or a vehicle, knowing that 3 months later, the item may well be 4 or 5% higher. To put it into today's prices, because of all the inflation, that could be ANOTHER THOUSAND BUCKS! on a $22,000 small SUV with no options, were you to put it off until this Christmas. Keep in mind, it kept on going!
Though the two posts are specifically about gasoline prices, the anecdotal history here and here go hand-in-hand with a history of inflation during my lifetime. Peak Oil notwithstanding, oil, hence gasoline, have gone up in the medium term (decade-length scale) similarly to general prices. I won't go over it all again, except to state now that your blogger here had kind of an epiphany in ~ 1994. Like our renowned, apparently-newsworthy, judge-selecting psychologist problem child, I can't remember the exact date. (Of course, I'm not trying to take down a Supreme Court nominee with a felonious accusation either).
Oh yeah, back to the subject, the epiphany in the mid-90's was that, after inflation being a factor in budgeting decision-making for my whole life to-date, inflation seemed to have really gone down toward zero. During the mid-1980's, due to, as we've written, the tough-interest rate policies of FED-chair Paul Volcker, inflation tailed off. However, it was still a significant 2-5 % in those years. Yeah, maybe 2% is not significant for the purchase of extra Halloween candy for 10 years into the future(hey, a prepper's gotta prep), but the money is still being stolen. For long-term savings, you'd better believe it still matters. At the point in time though (1994, for the record), I distinctly remember exactly where I was when I thought "Hey, inflation is really about zero now. I've gotta think differently about money." and "This is cool."
Nope, Ron Paul had not eliminated the FED, unfortunately. The big lull was due to American manufacturing might being sold off to China. It had really just started in earnest. In 1995, one could easily find lots of brands of consumer items still made in America. 20 years later, it's not possible for most items of any sort. The American companies that began outsourcing their manufacturing saved so much money from the cheap labor and cheap shipping*, that they could lower prices AND make more money. They had to lower the prices significantly to get American buyers on-board with buying Chinese goods anyway.
From my recollection, the quality was better during that 2-decade-ago era. I could go to Target or K-Mart and get the same sneakers that I bought last year or equivalent, or a bike part, and not pay more. Again, I am a noticer wrt this stuff, and that's why I'm writing this. That's what got me believing in those years that inflation was finally just plain licked (I hadn't read and thought about the real cause yet). It bears repeating that this was really something else. Imagine! You could get the same thing 2 years from now at the same price! More importantly, an account in the bank, just the least-risky thing like a CD, would at least hold onto your money, hence the value of your labor.
Well, then things slowly inexorably moved toward lower-quality (or even lower) - I've got another candidate for the Cheap China-Made Crap topic key, in fact, decaying on the back-burner, as I write. Prices have risen since. After all this Chinese near-dumping for 2 decades, not many remember that Wal-Mart had a big "Buy America" policy with flags on the walls. That didn't seem to work for their business model, which is now nothing more than "Here's your cheap China-made crap - take it or leave it. Let me see what's in the bag?!"
What's happened since 1995 is that the increases in profits had to keep coming, for the American CEOs to keep their jobs and their stock options soaring. The quality had to go down, and the prices had to start going up (I'd say by 10 years back). That's where it stands today.
There's one more thing I'd like to add, explaining the word "Exports" in the post title. Personal experience and that of Chinese people tell me that inflation has been big in China too. In 10 years, pork (a staple meat for the Chinese) at the store has gone from roughly 40-50% of American prices to parity. Inflation in China has been big for most items, causing a housing bubble there possibly bigger than our Housing Bubble 2.0, for much of the same reason, the search for a "safe" place to store the value of one's labor. Why? It's due to the fact that the Chinese government arranges to peg the currency, the Yuan, to the US Dollar, in order to keep the big advantage in prices of Chinese exports to the world. Inflation is OUR biggest export TO China. As for the currency peg, I really believe the Chinese government could cut that out, and their economy could do well without us and the Euro. market.
It's been only 25 years ago since the US elites decided to ignite the economy of China, at the expense of American industry. I don't think the Chinese have much of a memory or any gratefulness left about it either. Ask one, and you'll find him too proud or ignorant about this history. It doesn't matter at this point. They are what they are, and we are what we are, economically, in 2018.
* Think just a couple of thousand in TODAY's money, maybe down near $1500 back then, to ship > 2,500 ft3 or > 50,000 lb. of stuff across the ocean from China to an American west-coast port.