The Capitalist Investor - Episode 103

This week, Mark is joined once again by both Derek “Diamond Hands D” Gabrielsen and Luke “Cool Hands Luke” Lloyd as the three grapple with America’s ordaining inflation crisis. Join the guys and put a quarter in the swear jar for every time you use the word “transitory” when describing inflation. Here, we don’t like that t-word and we’re going to tell you why we’re throwing it away. This inflation crisis cannot be named, it cannot be ignored. It’s coming in hot and it’s burning a hole through American’s wallets. How can the country curb rising inflation rates? How long will it take to dig ourselves out of this hole? We tackle these questions and more on Episode #103 of “The Capitalist Investor.”

Outline of this Episode

  • [2:58] Inflation at the front and center
  • [4:20] The average American gets hurt the hardest
  • [5:40] Why saying “inflation is transitory” is a big lie
  • [12:40] A supply chain crisis creates textbook inflation
  • [14:50] The path we need to see inflation decrease again

We have to throw the word “transitory” away when talking about inflation

Inflation is trickling into our everyday lives –– and we can no longer ignore it. A year ago, we started talking about inflation as the world slowly began to reopen again. People left their homes to spend, but there wasn’t enough supply to spend on. As the pandemic rages, we are still talking about inflation; prices keep soaring. We are now experiencing the highest inflation rate since November 1990.

Inflation was here a year ago, and it’s still here now. By the end of October, the inflation rate grew to 6.2 percent –– a 4.8 percent increase from the beginning of the year.

As usual, the Federal Reserve is still calling this inflation crisis “transitory”, a loosely applied term that means “not permanent” while not providing any time frame or light at the end of the tunnel at all.

We know that inflation is not permanent –– but that’s not good enough. At what point does this inflation crisis change from being transitory to unrelenting? A year of inflation is vastly different than three years, or 30.

The problem is that we have been coping with inflation for over a year now. Its increasing rates are starting to look like it may be yearslong. As far as this inflation crisis goes, we’re not being told the truth. After a year of price surges, increasing household debt rates, and diminished savings –– calling this issue “transitory” is ignoring it.

We’ve decided to throw “transitory” away and instead of naming the inflation crisis, we’re going to confront it and call it what it is: a dangerous problem.

Inflation affects us all differently –– but it still affects us

Have you noticed you’re spending a little bit more on your weekly grocery trips lately? Or maybe your gas bill is going up every time you refill your tank. These are just some of the more common issues that inflation is bringing to us all –– no matter how much you make.

The truth is, inflation hurts lower income and middle income America the hardest, that’s who will continue to suffer the most during this crisis. But we all might feel it a different way. It’s about percentages and how much you’re seeing being drained from your discretionary income.

People who make $40,000 a year and those who make 12 times that amount are still more than likely spending their money on similar basic needs: groceries and gas. But the problem is that those who are making that $40,000 are going to be spending a higher percentage of their income for these purchases than those who are making more. It feeds off their discretionary income quicker. So many people are already living paycheck to paycheck –– they can’t afford to keep up with the rising rates of inflation.

There’s been a tremendous shift on how people are living and it’s putting the fate of our economy down a bad path. Making it difficult for the average American to buy their groceries or fill up their tanks will continue to push the middle class down.

The supply chain issues we’re seeing is making matters worse

You don’t have to have an economics degree to understand that basic supply chain issues lead to inflation. We’re hearing about it every day: cargo backlogs at all major seaports, a national labor shortage, international factory shutdowns, the lack of truck drivers, and more.

All of these global and national downturns are directly generating a lack of supply during a time where people have the money to spend. There’s higher demand, but fewer goods to chase –– prices are naturally going to rise.

Since prices are on the rise, less people can afford to spend as much; this is defeating the chances of people spending their money and recycling it back through the economy. Our economy depends on consistent flow; that is devastated right now and that’s why we’re all taking a hit.

There’s always a way out of inflation, but it’s not a quick fix

Recessions and downward movements in our economy are normal. They naturally come and run their course. But this inflation crisis is making matters a lot more difficult –– once again, this is the highest rate we’ve experienced in over 30 years and our country has dug itself into a deep hole that may take a long time to climb out of. But there is always a way, or ways for that matter.

In order to see inflation rates drop again, people need to contribute to the economy. We need to get people back to work again. The pandemic rattled employment rates; a lot of people lost their jobs. But as we continue to readjust and rebuild our economy, we need to rebuild our workforces.

When unemployment is down, and people are working –– they are contributing to that money flourishment that we like to see in the economy. From jobs, people make money. And that money is more likely to be spent if people know they will continue to make it.

Turning people back to work again is not as simple; we need incentives, we need to inspire people to want to work again. And when they do, the supply chain issues will start to wither away and demand will be further met.

Getting people back to work, motivating people to spend, and increasing our supply once again are just some of the moving parts to getting out of this inflation crisis. It’s been a year now, and it could take a few more to get fully out of this hole.

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