Category: Inflation

Inflation is whipped, except that the most significant cost for a typical person remains unaffordable (the “housing affordability crisis”), with government intervention required. The latest affordability crisis (i.e., Americans not being rich enough to afford what used to be considered American life) is for cars (San Jose Mercury News):

The good news is that expert assistance has arrived:

Bay Area residents wanting — or needing — to buy a car are steering this winter into what experts call an affordability crisis.

“The price of new cars, in general, has become alarming for a lot of people,” said Brian Moody, executive editor of Autotrader.com.

Nationwide, the average monthly payment for a new vehicle in November was $753, up more than 30% from just five years ago, said Jessica Caldwell, a head analyst at Edmunds, which tracks the auto industry.

Adding to buyers’ woes is the high price of most everything else. A recent Edmunds study found 54% of people surveyed who were planning to buy a new or used car in the next year said they would have to work extra hours or take a side job to afford it. “This wasn’t an issue 10 years ago,” Caldwell said.

Prior to the November 5, 2024 election, the same newspaper said that inflation was finished. October 31, 2024:

The Netgear switch that I purchased in May 2022 (to run TP-Link Omada: like a mesh network, except that it works (alternative to UniFi), which is still working great) for $180:

I was in a conversation with some friends, one of whom is a UniFi zealot, and wanted to check the power output compared to a feeble UniFi switch. I learned that the exact same Netgear switch was still available from the same retailer in December 2024… for $250:

That’s 39 percent inflation over 2.5 years in our otherwise inflation-free economy.

How’s our four-year-old minivan doing as a collector’s item? KBB emailed a week ago to say that it was still going up in value.

Email received earlier this month about a price increase that begins today:

We are informed that we live in an era of “disinflation” (see for example, Nobel Prize winner Paul Krugman in the NYT, 2023: “How (Many) Economists Missed the Big Disinflation”). I guess disinflation doesn’t preclude disflation (inflation in the cost of whatever Disney is selling).

Now that the election is behind us, the New York Times is writing that inflation and crime are both raging in New York City. “My Restaurant Was Named One of New York City’s Best. Here’s Why It Closed.” (NYT, Dec 28, 2024): “The combination of inflation, rising crime that required us to pay for security guards and declining profits simply proved insurmountable.”

Related:

• “Inflation Is Down, Disinflation Denial Is Soaring” (New York Times, September 2023)
• “All the Good Economic News Vindicates Bidenomics” (New York Times, a month before the recent Election Nakba): A week earlier we learned that inflation has continued to decline and is now more or less at the Federal Reserve’s target of 2 percent. This success has defied the view, held by many economists just a couple of years ago, that disinflation would require years of high unemployment.
• “Biden’s Chief Economist Processes the Election With ‘Confusion, Guilt’” (New York Times, November 2024): I understand that disinflation is less satisfying to people when they want their old prices back. I get that, and I’m going to have to deal with that, but at the same time, I do not regret talking about the sharp disinflation, or the strong G.D.P. growth or the historically low unemployment rate.

We recently received a notice from my mother’s senior fortress. The basic “room and board” charge for her assisted living apartment (i.e., not the nursing care component) is going up from $8,100 per month to $8,750 per month, effective January 1, 2025. That’s an inflation rate of 8 percent.

Apparently, the average age of moving into any type of “senior dorm” is going up. From McKnights Senior Living, 2023:

the mean age of an older adult moving into assisted living is 85 (by comparison, it’s 82 for independent living and 83 for nursing homes), a finding that aligns with the results of other research.

It’s cheaper to stay in one’s existing house or apartment, even if some aides need to be hired, and there is more freedom, e.g., from coronapanic-style lockdowns. A middle-class American who did not purchase long-term care insurance (my mother has a John Hancock LTC policy and the company has been great about paying for most of what she has needed since transitioning from independent living to assisted) will have a lot of trouble accessing the necessary care. The standard path is for the old person to be wiped out financially and then Medicaid kicks in because the old person is now poor. In Florida, at least, the value of a homestead (primary residence) is excluded, but otherwise the only workaround is a Medicaid Asset Protection Trust and it must be done five years ahead of when it is needed (explained by a NY lawyer).

“Recent Immigration Surge Has Been Largest in U.S. History” (New York Times, today) quotes an economist saying the 10+ million Bidenmigrants “helped cool wage growth” (code for “lowered wages paid to native-born working-class Americans“?), so maybe the cost would have gone up more than 8 percent if the U.S. had defended its border?

Here are some pictures of my mom’s senior fortress…

The “wow” for prospective residents and their families is provided by the outdoor fountain:

(We offered her the chance to live in our guest room, but she wanted to have the opportunity to socialize with others her age.)

Chronicles of an Inflation-free Economy, #4822…

Our neighborhood HOA fee is going up 18 percent for 2025. The management fee (same firm) is going up 43 percent. Xfinity’s fee for cable TV to every household is going up 7 percent (each house must separately purchase Internet service). Xfinity’s fee for telephone/Internet service at the clubhouse is going up 70 percent to $7,000/year. Landscaping and irrigation services are going up substantially, but perhaps that reflects the landscape and systems getting older (22 years). “Janitorial” (cleaning our clubhouse/gym, mostly?) is going up 13 percent. Insurance is going up 10 percent.

From the Official Newspaper of Inflation is Transitory….

We are informed by the Biden-Harris administration and media allies (“America’s fight with inflation has been won”, noted the Guardian a few days ago) that inflation has been vanquished. I wonder if there is a significant “leftover inflation” yet to come, though, from companies and people who neglected to raise prices or who were locked into long-term agreements during the core years of Bidenflation. The guys who push buttons at container ports recently won a 62 percent raise (ABC). Boeing workers recently won a 43 percent raise (NYT). A friend who owns an expensive-yet-crummy compound of wooden structures in Vermont (and a Grenadier INEOS that he loves) and rents a cottage out was just hit with a 100 percent increase by his long-time cleaner. I myself was recently hit by a 33 percent increase by the cleaner of the Harvard Square condo that I still own and rent out via AirBnB (cleaning cost up 60 percent compared to 2019). AT&T workers recently won what might be a 30 percent wage increase (wages boosted plus health insurance contributions lowered; the union).

The above-cited increases in costs must eventually be reflected in higher prices to consumers for (a) goods that come in via container ports, (b) airline tickets, (c) vacation rentals, (d) Internet and cable TV service. And the higher costs faced by consumers should lead to demands for higher wages in a classic Jimmy Carter-era wage-price spiral (I always predict this and, until the Biden-Harris-Whoever-Has-Actually-Been-Running-The-Country administration, was always proven wrong).

Today the wise minds of the Federal Reserve who at least partially authored Bidenflation will set interest rates. Readers: Who wants to predict what they announce and, more important, what official inflation (which doesn’t include most of the stuff that you’d spend money on, e.g., buying a house) will be on July 15, 2025, by which time the rate set today might have had some effect.

My prediction for the CPI released on July 15, 2025 is 3 percent. I’ll schedule a blog post to check this! Meanwhile, if you have 100,000 Bidies to spend on a 1970s tech Land Rover Series III-style vehicle made by a British billionaire who is a tax refugee living in Monaco… the Grenadier:

The above is the web site of the SE Florida dealer and features the rocky terrain that might be encountered on Ocean Drive in Miami Beach.

Update: The Fed did the expected thing and cut its rate by 0.25 percent.

Related:

• Could our epic deficits drive inflation no matter how high the Fed raises rates? (June 2022)

Back in 2021, I ordered a 42-inch pool cue so that the youngsters could enjoy the landlord’s pool table:

They’re getting taller and we’ve moved to an 8′ table (see Buying a pool table) so they’re overdue for a longer cue. Out of curiosity, I went back to the retailer’s site and found the same American-made McDermott K97B cue. The price has gone up 40 percent to $105:

(Actually, the market-clearing price is presumably higher than $105 because the cue is out of stock whereas it was in stock for immediate shipment when I ordered back in 2021. For a proper understanding of inflation we also need to adjust for availability because an item that one must order weeks or months in advance isn’t as valuable as an item that will be delivered as soon as needed. See Is inflation already at 15-30 percent if we hold delivery time constant? (2021).)

What does the official government CPI calculator say about inflation since August 2021? The $75 item should cost $86 if the government numbers are accurate.

(The Chinese-made Vector cue that I got for myself has gone up to $126, representing inflation of roughly 17 percent. That’s reasonably consistent with China’s low inflation rate over the past three years combined with high American inflation for the retailer’s services, domestic shipping, etc.)