Category: Inflation

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.)

We visited the Pabst Mansion in Milwaukee on our way to Oshkosh. It was completed in 1892 at a cost of $250,000 for 20,000 square feet. Although we are informed that we live in an inflation-free society today, thanks to the efforts of our wise political leaders in Washington, D.C., the $250,000 back then is roughly equivalent to $8.6 million now (the official BLS calculator goes back only to 1913). So that would be $430 per square foot for a house built in two years.

Rich people had a lot of friends back then…

It was a great tour, but I didn’t learn why Pabst went from the world’s largest brewer to being a niche supplier. They didn’t advertise their allegiance to the Rainbow Flag Religion (Bud Light never recovered). Wikipedia says “Pabst’s sales reached a peak of 15.6 million US barrels (1.86 billion litres) in 1978 before they entered into a steep decline”. Today, the company is headquartered in Texas and the brewing is done by contractors.

State Farm, January 19: $936 + $884 = $1820 for six months of car insurance.

State Farm, July 20: $1049 + $1001 = $2050 for six months of insurance.

That’s a 12.6 percent increase in half a year. If we weren’t assured that we live in an inflation-free economy, we would call that “25 percent/year inflation”.

(It’s the same two cars and, ordinarily, they would be worth less every six months. Thus, the rate of increase is actually higher than 25 percent (but it is not “inflation”).)

We are informed that the Biden-Harris team has whipped inflation, e.g., from state-sponsored PBS, February 2024: “Inflation is nearly back to 2 percent.” (“inflation nearly conquered”)

What’s happened to prices since February?

Here’s the menu at the Orange County airport McDonald’s, March 13, 2024:

The same menu on July 31, 2024:

The pictures were taken 140 days apart, which is 0.38 years. In other words, to get an approximation of the annual price change we have to multiply the price change rate between the two photos by 365/140.

The Big Mac meal is $14.18, up from $13.08. That’s a rise of 8.4 percent, adjusted to an annual rate = 21.9 percent.

How about the Royale with Cheese (Deluxe, of course)? That’s up from $13.41 to $14.84, a lift of 10.6 percent. If we didn’t live in an inflation-free society, that would be an annual inflation rate of 27.8 percent.

Also on July 31, 2024, a friend who does some software consulting work decided to raise his hourly rate from $350 to $425 (a 21.4 percent increase).

Opening the mailbox in our inflation-free economy, I found the following had been forwarded from my mother’s old address in Maryland:

This is a $1 million Maryland-based umbrella policy for mom, whose underlying auto policy was canceled some years ago (my father died in 2021, shortly after receiving the second Pfizer COVID vaccine shot and stopped driving a few years before that). The increase from $133.81 to $228.44 in a year is a 71 percent annual inflation rate.

I canceled the policy because (a) it isn’t valid if the policyholder lacks underlying insurance, (b) I don’t expect mom to do a lot of physical damage with her walker, and (c) $1 million isn’t enough to cover even a tiny fraction of the damages ladled out by juries when a non-physical injury is found (see E. Jean Carroll, for example, who suffered $83 million in damage to her reputation when her veracity was questioned).

In other news from our inflation-free economy… “Nationwide says it’s dropping thousands of pet insurance policies due to inflation” (CNN):

Nationwide Pet, the country’s largest provider of pet insurance, says it is dropping about 100,000 policies between now and next summer to keep up with spiraling costs in vet care.

The move comes as other types of insurance, from homeowners to vehicles, are increasingly becoming harder to obtain for many Americans.

“Inflation in the cost of veterinary care and other factors have led to recent underwriting changes and the withdrawal of some products in some states — difficult actions that are necessary to ensure a financially sustainable future for our pet insurance line of business,” Nationwide said in an announcement last week.

I can’t figure out which 100,000 policies they’d choose to drop. If inflation in vet costs is a nationwide (so to speak) phenomenon, how does it help to pick certain policies to drop and others to keep? By breed? Age of dog?