Currency Crisis! Inflation! Sovereign Defaults! Bahhhh… Who Are ‘Ya Gonna Believe, The Government Or Your Lyin’ Eyes?

Reggie Middleton's picture

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moneymutt's picture

Think about how different it was in US in 2001, housing was expensive but nothing compared to 20005/2006, our Fed budget was in surplus, the price of oil was around $25 barrel, the FAO food price index was around 90, now over 200.

The important thing to look at is how much, percentage-wise of your wages is going to each thing. So if you were paying half your income in housing and 10 percent in food, which price rise or decline makes the bigger difference? However, its not that simply, as a homeowner, you costs don't go down as price of housing goes down, your equity. As a renter, you do save money as rents have come down and a new homebuyer, you save much money compared to someone buying 5 years ago.

The other things that make a big part of a middle class families budget are health care and education. Those have gone in price for 2 decades with health insurance really spiking in last 5-10. Even when your employer pays for it, is proven it makes your wages that much smaller.

Elizabeth Warren did a good comparison of family of four from 1970 to a family of four in mid 2000s to see what was costing them. Modern family was 2 adults working while  70s family was one adult working and despite the extra income, mid2000s family got killed by cost of housing mostly and then also health care and education (and families buy some of their kids education via their housing location/costs too). In mid 2000s, food, cars, clothes, appliances,taxes etc were no more expensive or less expensive as a percentage of a middle class family budget. If course there were some extra costs to sending a second person to work, another car, taxes on their wages, daycare when kids young etc...but overall day to day shopping purchases...the discretionary things, were less a part of budget but the fixed things that every family tries to make non-negotiable, in particular housing, we a much much bigger part of budget. Hence the reason that, even before 2008 recession, middle class families had way less savings and way more bankruptcy than 1970s families.

These numbers are why since 2006 Warren was predicting the coming collapse of the middle class, again before GFC and recession, just as Reggie does, a dispassionate look at the numbers makes predicting easy.


Now we have this sticky house prices via mortgages, still high cost of health care and education and high gas prices, high food costs...ouch...does not bode well for domestic economy other ag and oil/mineral producing areas.

And in other countries, for their poor people, food is much higher than 10 percent of budget it is in US, food inflation felt even more. What does this say for emerging markets?

The thing that is really frustrating to me is the increase in food costs seem largely unhinged to fundamentals. Sure, this year there will be supply shocks, but even in years of great supply, bumper crops and demand going down, like wheat in 2008, the price went thru the roof and then dropped like a rock.Huh? We eat this stuff, it's not gold, its not diamonds, its not even stocks in our retirement portfolio, its something we need each day to continue breathing...and yet money sloshing around world can widely fluctuated its price even when fundamentals of supply and demand are steady.

statist shill's picture

To call that a model is the loosest use of the word I have seen in years. Bravo.

Lord Koos's picture

"It truly amazes me that the everyday guy and gal can be convinced that inflation is tamed "


I don't think the average person is convinced at all, anyone who does their own shopping knows what time it is.  As for those who are convinced, it seems to mostly be a media & ruling class echo chamber.

Lord Koos's picture

"It truly amazes me that the everyday guy and gal can be convinced that inflation is tamed "


I don't think the average person is convinced at all, anyone who does their own shopping knows what time it is.  As for those who are convinced, it's mostl

bernackihackie's picture

 Are you saying that Keynesian theory encourages bubbles?

DaddyO's picture



Nothing could be further from the truth, just ask my apologist Paul Krugman. He has been explaining it to the unwashed masses for quite some time. If only they would listen...

the ben bernank



Basia's picture



The financial calamity is just one piece of the puzzle.  One World Government with forced 

vaccinations (I am in the medical field and am being monitored because I did not get the

flu shot) , weather control through HAARP,  incitement of violence through the CIA, 

agenda propaganda through t.v. and movies (I get more accurate info through the internet)

and taking God out of our lives will bring us to the abyss of One World Government soon.

Reggie, you and your readers are smart.  Put all the pieces together.

aerojet's picture

"I invest more in currencies and commodes"

He buys toilets?  WTF?

Zeus Gekko's picture

Until Fox News tells them that inflation exist they won't believe it. The sheeple are intellectual midgets and only know what comes out of the TV.

williambanzai7's picture

You mean you're stupid!

stormsailor's picture

absolutely right reggie.   hopefully i will be able to read your insights here when the bubble truly bust in the usa.

lunaticfringe's picture

They are able to continue this BS because housing costs are weighted 42% of the CPI. So while housing prices tanked, everything else has shot up. Finally, I get it.

Fred Hayek's picture


Watch out for the homonyms.  I do it all the time, too.  You have "their" in the home page intro when it should be "there".

Pladizow's picture

The way to crush the middle class is to grind them between the millstones of taxation and inflation. - Lenin